Battery storage held back because regulators, ministers “not aware”
By Giles Parkinson on 28 February 2017
Leading battery storage developers have expressed their frustration that ignorance among regulators and energy ministers is holding the technology back, despite it being cost competitive.
They claim that Australian energy ministers and regulators are simply unaware that the technology has been deployed at scale around the world, and simply don’t appreciate what the technology can do to support the energy transition.
The lament is not a new one, but it got a public airing last week in devastating testimony at the Senate committee inquiry into the resilience of Australia’s energy markets.
And it is a particularly hot topic given the political row over blackouts and near-misses in recent months, and the frustration from battery storage developers that regulators have been slow to change rules that favour fossil fuel generators and disadvantage their technology.
Lyon Solar, which hopes to have 350MWh of battery storage in the South Australia market by the end of next financial year, told the inquiry that Australian authorities simply did not understand the potential of battery storage.
“Australia is still quite naive about batteries,” Lyon CEO David Green said. “In the discussions we have had with regulators, they were not aware that there were batteries like this are operational in other parts of the world.”
That ignorance extended to discussions with regulators and ministers as recently as November, in which Lyon Solar and its technology partner, AES Energy Storage, sought to remove a few “myths” about battery storage – the most prominent being that it hadn’t been deployed at scale.
“That has helped,” Lyon said. “I think one of those myths is: it is not happening anywhere. Well, it is happening, and the AES guys can talk about that. It has been happening for a long time. It has not happened in this market.”
These claims have great significance in Australia’s energy markets, which despite its adoption of rooftop solar in great quantities, and the high levels of renewable energy in South Australia, has been slow out of the blocks on “smart technology” such as battery storage, demand management and energy efficiency.
Energy experts blame this on the fact that the fossil fuel industry, which has been fighting policies favouring carbon pricing, renewable energy targets, energy efficiency schemes, and more recently rule changes that could encourage battery storage, has the ear of regulators and politicians.
This advice comes from the fossil fuel lobbyists, regulators, consultants and other energy executives locked in 20th century technologies, who were either not aware of new products, or had a vested interested in keeping it quiet.
Regulatory battles have been full of incidences of proposed rule changes being rejected or delayed on the assumption that battery storage was not competitive. There are even proposals to ban battery storage inside homes and garages, a recommendation that goes against all advice anywhere else in the world.
The head of AEMO recently claimed that battery storage was two decades from being competitive. One state regulator refused to consider battery storage because it didn’t think anyone would install the units. Up to 50,000 households are expected to install them this year, and up to a million by 2020.
But it is at the grid level that this blind spot is posing most frustration. Lyon says there are perhaps 20 different value streams for battery storage, including providing peak power, substituting for grid upgrades, and providing the fast response services that could have kept the lights on in recent blackouts.
The problems were alluded to in the Finkel Review, in which the Chief Scientist said that the technologies exist for the integration of high levels of renewables, but the policy measures supporting their deployment do not.
This issue is taking on added urgency given the rising cost of gas and gas generation, and the control that fossil fuel generators have over wholesale markets, a potent issue given the soaring wholesale prices in recent months, particularly in the coal dominated Queensland market.
One significant rule change, a proposal to change the settlement period on wholesale electricity market to 5 minutes from 30 minutes, to encourage more fast-response technology such as battery storage, has been further delayed.
AES Energy Storage, the US-based company whose energy portfolio is almost as big as Australia’s entire grid, has been using battery energy storage as a solution to electricity network issues for nearly 10 years, yet it said it found that Australian authorities had a number of misconceptions.
Praveen Kathpal, the vice president for global market development for AES Energy Storage, said Australian authorities appeared convinced that battery storage had not been deployed at scale, and it wasn’t cost competitive.
“AES has contracted a 100-megawatt energy storage array with an electric utility in California as an alternative to building a new gas-fired peaking plant, and we have over 400 megawatts across our portfolio in operations, construction or advanced development,” he told the Senate hearing.
“That … 100-megawatt project was selected in a competitive tender, on an economic basis, as an alternative to new gas-fired peaking generation.
“The tender incorporated in its evaluation the many benefits provided by energy storage resources, including system level fuel-costs and operating-costs reduction. This project is planned to meet the utility’s needs over the life of a 20-year performance contract.”
Lyon Solar and AES pointed out that battery storage could provide market operators, transmission networks and distribution networks with resilience by serving as a network resource, as a provider of frequency control, voltage control or other needed reliability services.
“As an example, battery energy storage can provide resilience to electricity networks through its fast response capability—that is, its ability to quickly respond to sudden power system needs by injecting power into the network,” Kathpal said. This would have been useful in the recent blackout events.
lyon solar storage
Lyon was involved in working in the early development of a small facility near Cooktown, and has since announced a major project in Lakeland in north Queensland and in South Australia, where it plans to build a 100MW solar plant with 100MWh of AES battery storage near Roxby Downs.
It also intends to announce within the next two week two further projects that will take its total planned to be completed in 2017/18 to 350MWh.
“We will announce two more projects for South Australia in the next couple of weeks, where we have been able to source the land and put in the application for network connection,” Green said.
“They will be 150 to 170 megawatts solar and 50 megawatt batteries. We have done that with no assistance and not discussing it with government. We are just getting on with that.”
Green also spoke of the need for new players in the market.
“Independence is important in this market as it enables developments to be undertaken where they are needed and connected to the network where they are needed, rather than incumbents seeking to develop in a part of the market that will shore up asset values and their portfolio in another part of the market.
“There is plenty of academic work indicating the benefits of battery storage; however, if we are going to move forward to capture these benefits, we need projects on the ground.”
Green said it had been difficult to bring the local network owner Ergon Energy on board, partly because of a lack of awareness about battery storage, and partly because of the “cultural, systematic and institutional issues that made it nearly impossible to introduce new technologies.
“When we first worked through our project in Queensland and we went to put in a network connection application for our solar-plus-battery project, there was nowhere on the application form where you could tick ‘battery.'” he said.
“It threw the system out – delaying, delaying. I think it took us two-and-a-half years to work through those issues with Ergon,that need to be addressed.”
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