Australian Battery Storage Market Needs Reform, Not Subsidies
Originally published on RenewEconomy.
The future of Australia’s energy storage market depends on urgent market reform – not subsidies – says the Clean Energy Council, in a new report that joins the growing chorus for Australia’s policy makers to finally respond to the challenges and opportunities of new technologies.
The CEC has also thrown its support behind proposals of offering a “buy-out” of premium solar feed-in tariffs, and to use this to provide those households with a battery storage system, particularly in Queensland where generous tariffs are due to continue for another decade.
It notes a report from Marchment Hill Consulting in March that suggested such a move could create a 960MW “virtual power plant” at no extra cost – a considerable asset in a grid facing the challenge of dealing with critical peaks in the summer heatwaves over the next few summers.
“Energy storage costs – especially battery storage – are falling,” CEC chief executive Kane Thornton said.
“There is huge potential for these technologies to change the way customers and retailers interact with the grid. However, a combination of market reform, incentives and regulatory change is needed to drive this transition, while ensuring a secure and affordable power system.”
The CEC says Australia’s energy market is outdated, fixed around rapidly ageing and redundant centralised fossil fuel technologies, and reform is needed to unlock the full benefits of energy storage as more wind and solar is built into the grid.
“There remains substantial work to do in modernising Australia’s energy rules and allowing energy storage to fully participate in the market, bringing the benefits of the technology to both the grid and consumers more broadly,” Thornton said.
“Australia currently lacks a strategic package of energy market reforms that will help to turbo-charge energy storage and tear down the barriers that stand in the way to its wider use around the country.”
The CEC, and most others in the industry, hope that the Finkel Review, due to be delivered in June, will be a circuit breaker for the policy inertia that has gripped the country over the last decade, although there are so many other reviews spinning around the industry right now it would be no surprise to see the government latch on to an outcome it found more comfortable.
Thornton says strategic reform and regulation is the most efficient way to encourage more widespread use of the energy storage over the long term, and subsidies are likely not needed. His views have been echoed by others such as ARENA boss Ivor Frischknecht, and private players in the industry.
Thornton describes energy storage as the “last major puzzle piece” of an evolved energy system because it can complement wind and solar, can boost the reliance of the energy system, can lighten loads at times of peak demand and reduce the need for new investment in poles and wires and other equipment.
It suggests that these reforms will be more important than the government incentives being offered in South Australia and Victoria, in particular, on the nation’s biggest battery storage arrays.
And the costs are falling. The report released on Tuesday: Charging forward: Policy and regulatory reforms to unlock the potential of energy story in Australia, notes that the combination of solar and storage is now cheaper than most other alternatives, including peaking gas plants.
Most of the market reforms are directed at the Australian Energy Market Commission, the rule-making body that is seen by many as a hindrance rather than a help.
The CEC wants it to implement the so-called five-minute settlement period, reform the frequency control regime, review market rules that distort investment away from network services towards poles and wires, require distribution businesses to publish better data, and lower the regulatory investment test threshold for grid upgrades.
Apart from its support of “buying out” long dated premium tariffs and exchanging these for payments in support of battery storage – a proposal once considered but put on hold by the Queensland government – it also wants state authorities to follow Victoria’s example and build other benefits into solar feed-in tariffs, and it supports a shift to demand-based tariffs.
It also wants tighter standards and regulations on battery storage technology and installations.
“Energy storage costs – especially battery storage – are falling. There is huge potential for these technologies to change the way customers and retailers interact with the grid. However, a combination of market reform, incentives and regulatory change is needed to drive this transition, while ensuring a secure and affordable power system,” Thornton said.
The policy paper recommends a total of 13 reforms across four categories to achieve this, ranging from removing regulatory barriers and rewarding the value of storage behind the meter, to protecting consumers, and changes that would allow storage to support grid security through its fast frequency response capability.
More information can be found at www.cleanenergycouncil.org.au/technologies/energy-storage.html
Reprinted with permission.
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