To take stock of the twisted fortunes of Australia’s increasingly chaotic electricity predicament, the political photo opportunity provides a useful benchmark. Not long ago, wind turbines were considered the perfect prop against which a hopeful politician could signal his or her forward-thinking good intentions. Not so much today. Big banks of solar panels have become a more recent, if arguably less elegant, standby but the game is shifting again. This time to batteries and storage.
Unfortunately, there is not much to see or photograph. Tesla, Elon Musk’s company that wants to be the Apple of alternative power, electric cars and space travel, has sexed up lithium ion battery storage as much as it can in the hope it will become the next luxury consumer item for solar-equipped wealthy homeowners.
But to soften last week’s admission that South Australia was turning to gas to solve a problem of its own creation on electricity security, Premier Jay Weatherill was spruiking battery storage that looks for all the world like a container yard for frozen produce.
Malcolm Turnbull upped the ante and took a new tack completely. Above it all in the fresh alpine air of Mount Kosciuszko, the Prime Minister proposed the biggest battery he could muster, a Snowy Scheme Mark II pumped hydro plan rated at 2000 megawatts.
On paper it is possible to say Turnbull’s plan is 20 times bigger than the South Australian 10MW alternative.
But it is so much bigger than that. Whereas a lithium ion battery bank can deliver maximum power for a matter of minutes, the expanded Snowy scheme, if proved, will do so for a week.
Both products are being sold as the cure for intermittent renewables like wind, which can vary output wildly over any given period and sometimes produce virtually nothing for days on end.
To accommodate the fickle nature of nature-driven electricity supply, there has been a rush to develop new technologies to compensate. Sophisticated computer devices will adjust the flow between storage and generation in real time.
Virtual power stations are being proposed, made up of thousands of batteries spread around the suburbs in houses that can be controlled by utilities.
Industry experts say the era of battery storage, both household and utility scale, has almost arrived. Some will argue it all adds up to an expensive fix for a self-created problem.
For critics, battery power is a long, expensive way to get back to the starting point of a reliable national electricity grid, which has historically been supported by baseload generators.
And with $500 million of taxpayers’ money now on the table in South Australia, it is reasonable to ask if this could all have been avoided.
Climate change has clearly been the driver for decarbonisation of Australia’s electricity sector. And supporters say a lack of policy certainty and failure to get bipartisan support for a market mechanism to price carbon have increased the cost of action and led to market failure such as South Australia.
But policy uncertainty is not confined to Australia.
In post-Obama America the climate change-driven incentives and mandates are being unwound by President Donald Trump.
The impact of this on global action was made clear at this weekend’s meeting of G20 leaders. After weeks of arguing over how to deal with the wind-back of public funding available for climate change, the issue was left out of the official communique altogether.
But supporters of action argue disruption doesn’t take place in a linear fashion. Long periods of frustration can be unblocked in a rush that makes the once fanciful eventually seem natural. Years of behind-the-scenes work can quickly be forgotten.
For industry supporters this has been the story of battery storage. Old technology is finding a new use thanks to advances in computer management and the seemingly unstoppable disruption of national electricity markets.
Battery technology has not evolved significantly for decades.
The missing link has been economies of scale, which, for batteries, has come about with the realisation of mega-factories to cater for the anticipated boom in electric vehicles. From a minuscule base, home battery storage has started to take off.
And grid-scale battery installations are becoming a reality.
If there is a breakthrough point at which ambition finally met opportunity for grid-scale battery storage in Australia, it will probably be remembered as a series of tweets between Australian software billionaire and chief executive of Atlassian, Mike Cannon-Brookes, and US tech billionaire Elon Musk.
Cannon-Brookes challenged Tesla’s claim to be able to build a 100 megawatt-hour battery farm in South Australia within 100 days, replicating a project completed at the end of last year in Ontario, in southern California.
Cannon-Brookes was testing a boast made by Tesla at the launch of its new-generation battery packs in Australia.
Musk tweeted back saying it could be done “or it’s free”.
Asked for “mates rates”, Musk subsequently slashed the cost.
“Elon almost halved the price of what’s available at a grid-scale storage capacity, which was a very bold offer and blew up a lot of people’s models as to what was possible in this space,” Cannon-Brookes told ABC radio.
The Tesla proposal will now be judged against several competing bids as part of a desperate bid to shore up the South Australian electricity grid.
A grid-scale battery has been under investigation for South Australia for more than a year.
If it goes ahead, the proposed grid-scale system has the potential to smooth out the peaks in demand and reduce price spikes.
But to illustrate the depths of problems it faces, the South Australian government has also turned to a new state-owned gas generator, a fleet of standby diesel units and heavy state intervention to force the development of gas and a state-first policy for gas and electricity markets.
The proposed battery storage array will have access to part of $150 million in state government funding, half grant and half loans.
Batteries may further distort the market if they allow a greater take-up of renewable energy that currently goes to waste.
There is the prospect of cascading subsidies under the Renewable Energy Target if wind turbines claim additional renewable energy certificates for production sold at night that would otherwise not have found a market.
The cheap night-time electricity will go into an already heavily subsidised battery plant to be sold back to consumers at an inflated price when demand and prices are high.
It is unclear whether the sale of stored energy from battery storage will also qualify for an renewable energy certificate payment.
The argument in favour of batteries is that more immediately available power will lessen the price spikes in the wholesale electricity market and deliver savings overall.
To understand the speed of the transformation taking place in the battery market it is instructive to read the results of a study by AGL, Electranet and Worsley Parsons for the Australian Renewable Energy Agency.
Published in December 2015, the study results have been blown out of the water by the Musk and Cannon-Brookes Twitter exchange.
The project examined the role of non-hydro Energy Storage Device within the South Australian transmission system.
Only one year ago, the report authors said the perception resulting from investigations was that the storage industry was immature.
“Arguably the best submissions were from Power Conversion System companies, not energy storage vendors, with submissions across a range of storage media including Lithium-ion, Sodium Sulphur and Advanced Lead Acid batteries; molten salt heat storage; hydrogen generation and storage; and a number of different flow batteries,” the report said.
A detailed business case was undertaken for a 10MW, 20MWh lithium-ion battery sited at the Dalrymple substation on the Yorke Peninsula.
The investigation found there was still a long way to go.
“To be commercially viable, this project would require an approximately 63 per cent capital contribution from ARENA or other funding sources,” the report said.
“While this was a disappointing result, the future price curves and potential for additional revenue yet to be quantified may make such an asset a commercial proposition within the next five to ten years,” it said.
Fast forward 14 months and there are a host of proponents claiming to have got grid-scale battery storage closer to financial realisation.
Speaking at a launch of Tesla’s second generation of lithium-ion battery storage products earlier this month, the company’s head of energy products, Lyndon Rive, said Tesla had grid-scale solutions to the kinds of network trouble being experienced in South Australia and elsewhere.
“With large centralised storage at substations, and solar and storage (in homes and businesses) it will be near impossible to take down the grid,” he said.
“Renewable energy has gone from being the supplementary energy source, to now becoming the primary fuel source, and fossil fuels will be the supplementary energy generation source.”
Zen Energy, headed by economist and high-profile climate change review chairman for the Rudd government Ross Garnaut, will bid against Tesla for the South Australian grid-scale battery project.
Professor Garnaut said battery storage had the potential to solve South Australia’s energy problems.
“The blackouts of the past year would not have happened if this was in place,” he told ABC radio.
“The battery in a way is the simplest part of the system. You’ve got a control system that governs the interaction of the battery with the grid, with the incoming renewable energy.”
To improve the economics of its project, Zen Energy wants the electricity market rules reformed to make it easier for batteries to compete.
At present all energy generators and users bid every five minutes to set a price, which is then averaged over half an hour.
“It makes it very difficult for a battery that can respond very quickly and it takes away some of the advantages of the battery,” Garnaut said.
The big question is whether prices can fall far enough to make renewables with battery storage competitive as a “dispatchable” rather than intermittent power.
A new study by RepuTex claims the point has been reached.
It says the rising price of gas, coupled with the falling cost of energy storage, has now “made renewable energy the cheapest source of ‘reliable’ generation in Australia.”
RepuTex said it had consulted with more than 45 electricity generators, industrial and commercial consumers and investors for the report.
It calculated the “full cost” for renewables to supply “reliable” power – including the cost of batteries, pumped hydro, or thermal storage – to determine which technologies can supply electricity at least cost, while improving security.
According to RepuTex, advances in the cost of energy storage technology, coupled with significant rises in the domestic gas price, have now made wind and solar – with storage – competitive with gas in providing system reliability in the form of instantaneous peaking or load-following generation.
“This means new renewable facilities, with storage, are the least-cost source of firm power, and able to provide energy supply even if the sun is not shining, or the wind not blowing,” the RepuTex report said.
Traditionally gas-fired generators have been the least-cost technology that could provide energy security, such as load following and peaking services; however, the rising price of gas has increased the “levelised cost of any new gas build in Australia”, Bret Harper, head of research at RepuTex, said.
“At the same time the decline in capital costs for new wind and solar projects, and improvements in storage performance, have seen renewable project costs fall,” he said.
“When we consider the ‘full cost’ of renewables to supply dispatchable power – including storage costs to ensure supply even when the wind is not blowing or the sun not shining – we find that renewables have overtaken gas as the least-cost source of new firm supply,” he said.
With generous subsidies for small-scale solar still in place, homeowners are quickly reaching the same conclusion.
A recent analysis by SunWiz has predicted exponential growth in home battery storage.
In 2016, there were 6750 battery installations, up from 500 in 2015.
SunWiz has forecast there will be at least a threefold increase in 2017, meaning one in five new PV installations would include batteries.
There is a long way still to go, however.
Carbon capture and storage, new-generation coal, reformed gas markets and even small modular nuclear reactors are still on the table as big policy options.
The Finkel review has been asked to provide a blueprint that will inevitably have to balance the ambitions of a more decentralised generation grid made up of renewables, batteries and peaking power with the security of large-scale dispatchable generation.
If nothing else, his decisions will shape what politicians will be standing next to for photo opportunities in the future.
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