| November 29, 2022

Unleashing Renewable Energy Storage

Australia cannot achieve 82% renewables or 43% emissions reduction by 2030 unless it unleashes substantial investment in renewable energy storage.

Renewable energy coupled with storage is the cheapest form of electricity generation and by matching renewable energy generation with storage we will deliver cheaper, cleaner and more reliable power for all Australians.

In fact, when it comes to renewable energy storage we need everything, everywhere, all at once, again and again and again.

We need household battery storage, electric vehicles as batteries on wheels, community and commercial battery storage, large-scale storage and long duration solar thermal and pumped hydro, underpinned by national, state and territory Renewable Energy Storage Targets.

We need national policy settings to ensure that we deliver renewable energy storage at the right magnitude and at the right pace.

And we need all relevant Government agencies, including the Clean Energy Finance Corporation, the Australian Renewable Energy Agency, the Clean Energy Regulator and the Northern Australia Infrastructure Facility to prioritise renewable energy storage at all scales.

As an immediate priority, the Smart Energy Council calls on all Australian Governments to agree to an Accelerating Renewable Energy Storage Scheme by the end of 2022 to fast-track investment in large-scale renewable energy storage.

In committing to a National Renewable Energy Storage Target, all Australian Governments should also commit to building a strong domestic renewable energy storage industry, from the mining of rare earths to refining, processing and value adding, assembling and manufacturing battery storage systems.

 

How much storage do we need?

The Australian Energy Market Operator (AEMO) has estimated through their Integrated System Plan that Australia needs at least 19 gigawatts of storage to be installed and operational by 2030 to meet the 82% renewables target.

There is currently 2.2 gigawatts of storage installed in the National Electricity Market, two thirds of which are pumped hydro projects and one third large-scale battery storage.

The arrival of the 100 megawatt Hornsdale Power Reserve battery storage asset in South Australia in 2017 was a game changer, representing the emergence of battery energy storage at a large scale (previously the largest assets were only at a 1-2 megawatt scale).

 

Why we need storage

Deployment of renewable energy storage is required to deliver flexible, reliable power and to enable a higher penetration of low-cost, zero emissions wind and solar energy as the aging fleet of polluting coal plants is retired.

Historically, an argument was made that investment in new gas peaking plants was required to balance the increase in variable renewables, although this was in clear contradiction to our international carbon emission obligations under the Paris Agreement. This rationale is no longer available, as large-scale battery storage now provides a lower levelised cost of capacity (LCOC) and a levelised cost of energy (LCOE) when compared to open-cycle gas turbine peakers (gas plants), according to BloombergNEF.

The commercial case for batteries relative to gas plants will continue to improve as the price of battery storage falls and the price of gas soars, as advancements are made with battery technology (such as longer life expectancy) and manufacturing processes, and as new markets are implemented to recognise more of the capabilities and services batteries can provide to support stability and function of the network.

 

Why we need government action

The current investment case for storage is complex. For large scale storage, the National Electricity Market is missing markets that would adequately value the full suite of essential services storage can provide. Finance and debt markets are still nascent and cautious of volatile revenue streams, and the integration of storage within existing network connection and system frameworks still faces barriers and delays.

While there is currently some work underway by energy market bodies, they are unable to deliver regulatory reform at the pace required to recognise the services storage delivers to the power system.

In addition, grid connection approvals mean that financing and entry dates for new projects are closely tied to the exit of existing capacity, which to date remains uncertain and changeable. This is causing significant delays to renewable energy storage projects.

Delays to the uptake of battery storage are creating consequences such as increased electricity power volatility, reliability and network stability challenges, which ultimately increase the cost to consumers. These impacts are already evident and are anticipated to significantly increase in the coming years as aging coal plants exit the system.

Governments must act quickly to intervene to repair the system to provide strategic policy direction via a multi-faceted solution for a modernised and ultimately lower cost electricity network, to defend against these repercussions. Targeted mechanisms are therefore required to bridge the gap until the regulatory and market frameworks catch up. These mechanisms will support the business case and bring forward investment in storage capacity.

The Snowy Hydro (2 gigawatts pumped hydro), and Battery of The Nation (around 600 megawatts sub-sea cable accessing multiple gigawatts of Tasmanian pumped hydro) projects are unlikely to contribute a high quantum to the 2030 target.

Industry experience suggests it will be difficult to finance and deliver Snowy Hydro 2.0 and Battery of the Nation this decade due to their scale and complexity. Investment in long-duration pumped hydro should be sustained in recognition of the long development timeframes and value this technology will play with regards to long duration storage, particularly in the next decade and beyond.

Conversely, initiatives targeting the two most deployable forms of storage, small-scale storage and large-scale storage, should be the highest priority at this moment in time.

 

Summary of renewable energy storage types

Assumptions about the potential weighting of the various storage technologies through to 2030 based on realistic policy incentives in the current political context, are listed below:

  1. Small-scale batteries

Collectively, many small-scale storage systems, located behind the meter at the household, commercial and industrial level, can act in an orchestrated way as a virtual power plant (VPP). This is otherwise known as Coordinated ‘Distributed Energy Resource (DER) storage’.

The Reputex study modelling that underpinned the Australian Government’s 82% renewable energy target assumed 8 gigawatts of household battery, which could theoretically also include bi-directional electric vehicles.

If one fifth of the current 3 million solar homes were incentivised to invest in home storage, averaging 10 kilowatt hours, this would equate to 6 gigawatt hours of capacity.

  1. Large-scale battery storage, short to mid duration

The remaining volume of storage (more than 10 gigawatts) will be dominated by large-scale battery storage, including electro-chemical cell batteries such as Lithium Ion, Vanadium-flow and lead acid.

Stand-alone and hybrid (i.e. connected to wind and solar farms) large-scale storage systems have potential to meet the remaining 10 gigawatts (or more) of storage capacity required in the next 8 years, predominantly ranging between 2 and 4 hours duration.

Large-scale battery storage also has significant potential to help augment the transmission and distribution networks, reducing costs and improving how we build new lines. This application is not accounted for in the AEMO’s Integrated System Plan, which could represent gigawatts of extra capacity required by 2030.

  1. Community batteries

Community batteries have a small but important role to play in the 2030 target. At a minimum, the community battery scheme should deliver 200 megawatt hours of storage (400 locations starting at 0.5 megawatt hours per unit).

Given batteries are scalable the upside estimate of this program could be significantly enhanced if the right tools and processes (such as streamlined permitting and access to finance) are put in place.

  1. Large-scale, long duration

Solar thermal and pumped hydro are not anticipated to have a meaningful impact on total storage capacity before 2030, but it is critically important to develop, and where appropriate pilot, these technologies well before the end of the decade.

Pumped Hydro:

There is some potential to deliver up to 2 gigawatts through Snowy Hydro 2.0 close to the end of the decade, but significant investment will be required to network upgrades to fully realise the storage capability the project will deliver.

Access to a further 600 megawatts of capacity accessing vast storage resources within Tasmania if the Marinus Link is commissioned at the end of this decade. Other pumped hydro projects currently in development promise significant volume but are unlikely to be commissioned this decade.

Solar Thermal:

A small number of projects could and should be commissioned by the end of the decade,

beginning as soon as possible, with sizable penetration of this technology not expected to ramp up until early in the following decade.

AEMO Integrated System Plan Graph showing the proportionate uptake of storage in the NEM.graph

The above graph provides one view captured within AEMO’s Integrated System Plan. If Snowy Hydro 2.0 is to be delayed it is anticipated that this volume will largely be met by large scale battery storage up until 2030.

Furthermore, the volume of storage required may increase if assumptions about the volume and pace of the delivery of transmission lines is overestimated, and if the electrification of the household and transport sector forecast is underestimated.

 

Learn more and read full report here.

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