Energy Spectrum Australia

Energy Spectrum Australia | Issue 10

Welcome to the tenth edition of Energy Spectrum Australia.

The below extract has been taken from our tenth edition, and if you have enjoyed reading this article and want to read more about the latest developments in the Australian energy market, please contact Ben Cerini, b.cerini@cornwall-insight.com.au for more information.

Battery benefits greatest for both grid and owners in low/medium voltage network

Distributed energy resources and residential battery storage systems have been of particular interest recently as the grid continues to require more assets to provide varying services to allow continued stable operation. Batteries provide the highest system benefits in the low voltage network, while the greatest commercial return is for batteries connected in the high or medium voltage network.

The management and integration of distributed energy resources is only becoming more prevalent with three rule change requests lodged in July 2020. To Figure 1: Identified battery storage revenue streams better understand the implications of increased DER we review the Grid vs Garage report released in December 2019 by AECOM Australia Pty (AECOM) which compares the costs and benefits of transmission connected battery energy storage systems (BESS) (Grid) to behind-the-meter residential or commercial BESS (Garage).

Services provided by BESS are wide-spread and can be harnessed to manage load peaks and Source: ARENA, AECOM voltage, provide frequency response, ensure network reliability, and manage consumer bills (see Figure 1). The myriad of value streams available to the asset may be stacked to benefit the network or BESS owner.

AECOM finds that generally pathways perform better the higher the level of electricity consumption, but not all benefits can be provided under every BESS deployment pathway – with the fewest potential benefits available from the non-controlled BESS. Commercial benefits realised include consumer tariff reductions for the garage pathways, wholesale revenue and PPA firming for grid pathways, and frequency control ancillary service (FCAS) benefits for all pathways except for non-controlled pathways.

Grid and garage BESS compete for some system benefits – including deferring base generation plant, reduced T&D power losses and transmission augmentation capex (augex) – but grid BESS generally outperforms garage pathways for commercial benefits. In some areas both pathways are not in direct competition for the procurement of services. For example, grid BESS can maximise the use of intermittent utility scale generation, and garage BESS can maximise the use of intermittent rooftop solar generation.

BESS connected to low voltage networks provide the greatest overall system benefits, primarily due to their ability to defer distribution augex. Due to low investment in low-voltage BESS in the NEM, this system benefit does not directly align with commercial benefits. In this context, BESS connected to the medium voltage network provide the greatest commercial value to date. AECOM also find that controlled garage BESS provide greater system benefits and commercial returns than non-controlled garage BESS.

The largest benefits for both the system and the owner of the asset came from controlling BESS at the commercial and residential level and connecting in the low and medium voltage network. Given that the largest, and in most cases only, revenue benefit for BESS owners was assessed as coming from FCAS, there is a risk that many commercial only projects will not get developed as a result of the volatile (and mostly unbankable) assessment of FCAS revenues. It would be advantageous to begin developing markets for FCAS swaps in the same manner as energy as this will likely assist both FCAS liable entities and batteries.

New markets are also needed at both the distribution and transmission level if BESS are to be utilized to their full potential. Considerable thought needs to be given regarding the potential for robust secondary markets to be established and traded to ensure that those revenues can better relied upon (or hedged) when securing financing. In order to incentivize the uptake of batteries in the LV network an alignment of the value to the system and revenues that could be generated by residential or commercial BESS needs to be developed as a matter of urgency to ensure that value to the NEM is not left on the table.