When they were up they were up – have we underestimated DER

It has been a big couple of months for Distributed Energy Resources (DER), especially in relation to the policy and regulations that will play a large role in how these assets are controlled in the future.

Over the last month we have seen Energy Networks Australia release their Open Energy Network Project position paper (OpEN Paper). We have also seen the release of Access and Pricing Reform Options commissioned by ARENA and the AEMC through the Distributed Energy Resources Integration Program, and the rule change request from AEMO on establishing Technical standards for distributed energy resources. All of these reports are seeking to establish the best way forward for integrating DER into the NEM in order to ensure that DERs are optimised, actively utilised and integrated at least cost.

Interestingly, the conclusion in the OpEN appears to be contrary to the direction of the market at the moment. concluding that only under a very high DER uptake scenario would the establishment of a new distribution management framework make economic sense. We have undertaken some high level back-of-the-envelope projections based on the current trajectory for small PV systems and associated battery storage assets in the NEM and think that the NEM might already be heading for the very high DER scenario that direction (See Figure 1).

We have assumed that there will be fall in monthly PV installations between 50-75% over the next 12-18 months. If we also assume that the average PV system is ~4.5kw (roughly the historic average up to the end of 2019 and very conservative) then the expected total installed capacity is 24.45GW of small scale PV by 2030 (using 6kW the number is more like 29.1GW). As part of the cost benefit analysis the CSIRO estimated the high case of PV residential and commercial at 23GW by 2030 – suggesting that we are well on the way to achieving the high DER integration scenario. This is already significantly above AEMO’s estimates of DER installation which, in their 2019 Technical Integration of DER Report, assumed 21GW of DER (PV and batteries combined).

We also ran a projection of battery storage on this same back- of-the-envelope basis, using some Clean Energy Regulator (CER) assumptions which suggests that their battery storage figures represent ~30% of battery storage installations. In which case if each battery is at least 6kW, then we can expect to be installing ~1GW a year by 2030 and have installed 7.4GW over the next decade.

This brings our total high level DER estimate to ~32GW of small-scale PV and DER battery storage. As we have seen with the transmission network, the market is changing at an accelerated rate. By waiting to see how the market evolves for DERs to try and ensure that undue costs are not incurred by consumers, we may in our conservatism be doing just that. Creating a new DSO model will take significant time to develop and adopt and if we don’t begin early, we may risk costing consumers in the long term.

If you would like to know more about the current state of Distributed Energy Resources in the NEM and what the future might have install for DER join us at our webinar next week.