Tesla and Neoen say big batteries are hamstrung by new rules, and that’s bad for grid security

Three of the biggest players in Australia’s battery storage market have called for changes to new rules and regulations that are preventing big battery facilities from delivering important grid stability services.

France-based Neoen, Spanish energy giant Iberdrola, and Tesla have asked for changes to the design of Retail Reliability Obligation, which they say puts limits on the ability of big batteries to deliver key services that are being asked of them, such as grid inertia, system strength and fast frequency control.

The problem lies with how the RRO rules are applied to customers with big loads – which includes batteries when they are in charge mode – but the three companies say that it doesn’t take into account why the batteries are charging, and say they may be discouraged from doing so.

“It appears this was an unintended oversight in the RRO scheme design,” the companies write in their rule change request.

“In practice …. it puts market participants with utility scale battery storage in a position where they need to choose between potentially breaching the RRO and incurring a liability for providing critical grid supporting services, or turning off the “charge” functionality … and effectively turning several grid supporting services off.”

The rule change request is just the latest in a series of frustrations for battery storage developers, battling market rules that were largely designed before Neoen and Tesla built the first big battery in South Australia in 2017.

The market rules have struggle to keep up with technology, and even though Neoen, Tesla and Iberdrola say they have been warning of the RRO impacts for several years, it was ignored and waved through under the principal of “technology neutrality.”

Other problems faced by big battery project developers include network charges on both the charging and discharging, the difficulty in pairing batteries with wind and solar plants, and the requirement that many of them install so-called “harmonic filters” to avoid disturbance to the grid.

The three companies cite the potential situation in South Australia, where the growing number of big batteries provide nearly half of all frequency control services, and all of the sub-one second very fast frequency services.

They say if a reliability event was declared, the way the rules are written now would force the battery installations to stop charging to meet their RRO obligation, and be unable to provide those services. The same would apply for network stability and inertia services that the batteries now also supply.

‘This would both increase costs to consumers (from an increase in NEM-wide FCAS prices) and create additional systems security risks due to the relative lower quality and slower performance of non-battery providers and the inability to value stack in the same way as batteries,” the companies write.

Worse, they say the rules also prevents batteries from being charged up so they can help avoid “load shedding” in a forthcoming reliability event.

“Without the ability to charge “now” to avoid unserved energy “later”, the current RRO in practice can lead to worse reliability outcomes,” they say.

They also say not changing the rules will double some frequency service costs, and increase costs throughout the market, as well as weakening grid reliability and security. But they say the problem can be fixed with a simple rule change, and urge it to be done before the end of the year.

“Tesla, Neoen and Iberdrola believe there is a clear justification for a simple rule change that will bring immediate benefits to the NEM and more accurately align with the original intention of the RRO,” the say.

“Under the scenario where no change is made, the current RRO liability definition will continue to create significant uncertainty for existing and new battery storage projects, with significant short-term implications for contracting the provision of system security services.”