Tesla says Australia market rules outdated, doesn’t help storage

Tesla has joined the growing chorus calling for a complete rethink of Australia’s energy market rules, saying they have been designed for old-fashioned centralised fossil fuel technologies, and do not encourage all the potential benefits of battery storage.

In its submission to the Finkel Review of Australia’s energy markets, the high profile California maker of battery storage, solar panels and electric vehicles says new technologies are facing “systemic barriers favouring legacy generation technologies”, and they should be changed.

Tesla made a dramatic intervention in Australia’s energy debate two weeks ago when it launched its Powerwall 2 domestic battery storage device, declaring that it could “solve” Australia’s energy “crisis’ by building a 100MWh to 300MWh battery storage array, something it said it could do within 100 days.

CEO Elon Musk then got involved in a public Twitter conversation with Australian software billionaire Mike Cannon-Brookes, leading to lengthy phone conversations with both prime minister Malcolm Turnbull and South Australia premier Jay Weatherill.

In the following week, both South Australia and Victoria announced tenders for 100MW of battery storage, while Turnbull announced a feasibility study into Snowy Hydro 2, a plan to build 2,000MW of pumped hydro capacity with storage of up to 150-175 hours.

In its submission to Finkel, Tesla says battery storage has multiple functions in the energy market, but few of them can be exploited because of the restrictive nature of the energy market rules.

This claims are not new. Zen Energy’s Ross Garnaut and Lyon Solar’s David Green have spoken at length of these restrictions, as have numerous other battery storage companies.

Those rules include changing the settlement period on wholesale markets from 30 minutes to 5 minutes, which Tesla says would encourage fast-response technology like battery storage, and lift the daily value of battery storage nearly five fold.

It said this reform would help transition the  Australian electricity market “into a more open and accessible model” and would “increase the value of energy storage as a physical hedge in the market for both consumers and generators of energy.”

The 5-minute rule has been proposed by one of the country’s biggest energy consumers, Sun Metals, but is being fought vigorously by most owners of coal and gas technology.

These include so-called ring-fencing rules, which prevent networks from installing battery storage behind the meter and prevent access to multiple revenue streams. “Either they are prohibited from participating through ring fencing rules or the market mechanisms do not exist to reward investment.”

It also wants competitive frequency support market for the provision of inertia to be opened up so utility-scale battery energy storage providers can compete against incumbent providers of ancillary support services.

Tesla wants regulators to ensure that energy storage for micro-grid or off-grid applications in rural and regional areas is allowed as a substitute for new poles and wires, and in urban areas where the alternative is increased network infrastructure investment.

It also wants to ensure that rules regarding installation of residential battery energy storage are not prohibitively restrictive;  as has been flagged by draft rules from Standards Australia and Queensland regulators which could make it impossible to put battery storage inside buildings.

“Battery energy storage can provide all levels of residential, industrial and commercial customers with greater control of their energy consumption and energy spend,” it says.

“Residential energy storage can provide direct benefits to customers by providing backup power during system outages as well as providing significant value to the networks because of its location directly at the customer load, allowing it to offset the need for distribution, transmission, and generation capacity.

“For large-scale industrial clients, battery energy storage can be used to reduce peak demand and peak demand charges, provide on-site back up and arbitrage time-of-use pricing, in order to reduce business energy spend.

“For vulnerable consumers in remote and regional areas, battery energy storage can displace diesel generation, or offset the need for additional grid connecting infrastructure to be established. This can often provide a higher level of service to the end customer whilst reducing the cost to provide the service.”

One model that it is pushing is the “aggregator model”, where energy storage can be used to sell electricity from a home or business into the wholesale market, or to provide grid frequency support services, or demand management.

“This approach benefits both the consumer – through access to the wholesale electricity market or alternative revenue streams, and the networks – through voltage and reactive power support.”

But it says the major barrier to aggregation is that it disrupts the current relationship between consumers, retailers and network service providers. As a result a number of legacy rules and systems need to be revisited.