Batteries to aid renewables transition

Appearing in Australian Financial Review (Energy Future feature), 15 May 2017


Grid batteries can offer a smoother path

Power generation from wind and solar systems has been steadily increasing as a part of the national grid but for a long time the issue of variability has been a stumbling block. The problem is obvious: when the wind isn’t blowing or the sun isn’t shining, there is no power to feed into the grid. But a new solution, large-scale batteries, has emerged as a viable technology.

Large-scale battery systems are often located with renewable energy plants, either to smooth the power supplied by intermittent output or to alleviate pressures on the grid at times of high demand.

“Batteries have unique strengths that complement different attributes of pumped hydro storage and demand management, including the capacity to respond to fluctuations in price or frequency very quickly,” says Ross Garnaut, Research Professor of Economics at the University of Melbourne and the chairman of Zen Energy, a company specialising in renewable energy and storage solutions. “And grid-scale battery storage is ready for immediate deployment. Decisions made now could have large impacts in six to nine months.”

In fact, techno-entrepreneur Elon Musk, CEO of Tesla, tweeted in March that his company could build a 100 megawatt battery storage farm in South Australia within 100 days. This was not an idle promise: Tesla completed built a farm of comparable size in California last year in just 90 days, and others have been constructed even faster.

“There are scores of battery farm systems in operation in North America as well as in other countries as a means to balance increasing volumes of wind and solar energy,” says Garnaut. “What is holding development back in Australia is the regulatory framework, which actually gives generators opportunities to profit from actions that destabilise prices. Much of this is connected to the peculiar Australian practice of averaging settlement prices over half-hour periods. We need to move towards a national wholesale market that operates with a competitive spot or contract market, to take account of the stability provided by a grid battery system. This would be a market where providers respond to consumer price signals.”

Garnaut believes that reform has been hindered by the established players of the energy sector even though there is a broad recognition of the need for change in principle. In hindsight, the power problems experienced in South Australia last year might be a hidden blessing, insofar as they focused attention on the shortcomings of the existing grid system.

There are already some small-scale battery systems operating and several large-scale battery projects are in development. The first large-scale system to be rolled out is likely to be a farm planned for South Australia, on private land in the Riverland district. It is to be built by Lyon Group and Downer EDI, with backing from Mitsubishi and hedge fund Magnetar Capital. The $700 million project will involve a 330 megawatt solar farm and a 100MW battery capable of providing four hours of storage. Operation is planned to commence in December. It is touted as the largest solar-battery hybrid project in the world to date.

But the cost of grid battery systems remains an obstacle.

“At the moment, most of the battery systems operating or planned in Australia require some form of government subsidy or assistance,” says Professor Tapan Saha, an energy systems specialist from the University of Queensland. “But the prediction is that development and operating costs will come down as economies of scale emerge and the knowledge base increases. That is the pattern we have seen overseas. Costs will decline, and efficiency and operating safety will improve as well.

“But when we look at the long term we should also bear in mind power storage systems such as pumped hydro. Hydro has the advantage of a much longer operating life.”

While grid-scale battery storage is an obvious direction another option is also being explored. With domestic installation of solar systems growing, it is theoretically possible to link them together, with battery support, to create a ‘virtual power plant’ to supplement the grid. Power company AGL says it has so far signed up 175 households for a trial in Adelaide, with battery storage installed in 31. It hopes to complete a thousand installations by mid-2018, although there market design issues and technical issue to be overcome. If the problems can be overcome, the project could provide five megawatts to handle periods of peak demand.

Garnaut agrees that there is strong potential in de-aggregated systems for both generation and storage. He notes that Zen Energy is engaged in a pilot program in Adelaide, in partnership with the SA State Government and Adelaide city council.

“The energy future is about going outside the traditional parameters,” he says. “It is more likely to be a portfolio of options than a single centralised solution. It is about new thinking, to utilise new technology.”

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