EIR Insights: Battery Industry Given Renewed Charge

This article is part of our EIR Insights series from our Energy, Infrastructure and Resources team. Stay tuned for regular updates and commentary on topical issues across the sector.

The battery storage industry in renewables has been given a major shot in the arm by the recent announcement of the Australian Energy Market Commission (AEMC) of rule changes that will incentivise renewable generators who use technology that dispatches electricity quickly to respond to changes in grid frequency.

The draft ruling published on 22 April 2021 proposes the introduction of new market ancillary services in the NEM to allow the Australian Energy Market Operator (AEMO) to procure fast frequency response to help control grid frequency following sudden and unplanned generation or power system outages. The aim of these services will be to lower the overall cost of frequency control ancillary services (FCAS) relative to expected future costs.

This has come about as a result of a rule change request proposed by Infigen Energy to introduce spot-market arrangements for fast frequency response to help efficiently manage system frequency. These new FCAS will be similar to existing services but would operate much more quickly to address the high rates of change of frequency in the system, which have come in part due to the increasing uptake of inverter-based generation in the NEM such as wind and solar PV and demand-side resources.

The introduction of these “very fast” FCAS would respond to changes in frequency in less than two seconds, rather than six seconds, which is the current fastest market. The intention is that this will make the system more economically efficient by reducing the overall costs of managing power system frequency compared to current arrangements or other arrangements to produce different types of frequency response. The draft ruling also envisages that these new spot markets will drive innovation in the provision of various combinations of essential system services from different technologies.

It is also proposed that arrangements for these new services would be the same as those for existing services, including arrangements for registration, scheduling, dispatch, pricing, settlement and cost allocation.

The announcement of the draft ruling is in keeping with AEMO’s desire to ensure system security, ie the availability of dispatchable electricity generation to respond to fluctuations in the grid. As we have highlighted in previous articles on the topic (see here and here), the ability of battery storage technologies to respond at relatively lightning speeds to meet grid demand, the continued increase globally in their use and the steady decrease in costs are all factors which the AEMC has recognised in promoting this form of technology through the proposed rule changes.

The introduction of these new ancillary services is to be welcomed as it equates to regulatory support for dispatchable renewable electricity generation which is targeted to play a fundamental role in replacing retiring coal generators over the coming years. Fast frequency response will be essential in keeping the grid stable as we move towards a high volume of renewable electricity in the grid.

For further information on the effects and long-term implications of these changes please contact Matt Baumgurtel, our Energy, Infrastructure and Resources lead Partner.

The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.