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Australia’sbattery capacity set to double within months

Colin PackhamEnergy and Resourcesreporter

Feb 7, 2022 – 5.00am

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Australia’sbattery capacity will double this year as major projects come online,heightening pressure on the country’s fossil fuel power generators that arestruggling to compete against soaring renewable energy generation.

Batterycapacity in Australia during 2021 totalled about 0.4 gigawatts but it marked ayear of major construction projects beginning and much of this is expected tocome online this year, Rystad Energy data shows.

Batteriessuch as the Victorian Big Battery undercut the argument that gas is needed forgrid stability.

Withmany large-scale projects set to be operational, utility-scale battery capacitywill top 1.1 GW by the second half of 2022, Rystad expects.

Costsare declining and operators are being incentivised by energy arbitrage, whichis storing energy when it is cheap and providing it when prices are high.

“Thisis the era of the utility-scale battery, but everyone is talking abouthydrogen,” said Gero Farruggio, head of Australia and global renewables atRystad Energy.

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“Overthe last 12 months, barring COVID, hydrogen has been grabbing all theheadlines, but the reality is there has been this intense build-out ofbatteries.”

Thesurge in grid-scale battery capacity will intensify pressure on Australia’scoal power generators that are already struggling to compete against cheaperrenewable energy.

Coal –Australia’s largest energy source – has suffered from weak demand in recentmonths, as rooftop solar installation rapidly increases and, with coolertemperatures, decreased demand for things such as air conditioning.

As aresult, the Australian Energy Market Operator said, quarterly average demandfor power from the grid fell to the lowest levelfor a fourth quarter since 2005.

Wholesaleelectricity prices were at zero or below more than 16 per cent of the timeduring the last three months of last year.

Thefinancial strain has already forced some coal-powered plants to close, and manyothers have announced a timetable to follow suit. AEMO expects coal-fired powergenerators will have exited the NEM substantially by 2030 and entirely by2043, up to a decade faster in somecases than previously anticipated.

Thedecline of coal has stoked concern within some quarters about the social andeconomic impact on regional mining communities. Others have questioned thestability of Australia’s energy grid during periods when it relies heavily onrenewable sources that are intermittent in supply.

Still,renewable energy generation is expected to continue to soar, depressing demandon traditional fossil fuel sources. Low demand on the grid can require AEMO todirect plants such as gas-fired generators to come online to help keep thesystem stable.

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PrimeMinister Scott Morrison has said gas – which is far more flexible than coal insupply – will be needed to stabilise the grid.

Buthuge batteries – such as the 150 megawatt battery, which can produce one hourof energy at its maximum output, at the former Hazelwood coal-fired powerstation in Victoria – undercuts the argument that gas is needed.

“On anyfeasible cost-benefit analysis, batteries have overtaken gas turbines,” saidBruce Mountain, director of Victoria Energy Policy Centre. “Almost all theprivate sector investment has been in batteries. The one or two gas turbinesthat may be proceeding have only got there with a lot of government subsidiesand the only gas turbine is being entirely financed by the government.

“Itraises very big questions for gas, and it raises very big questions fortransmission augmentation. Why is it that we are contemplating these enormouslyexpensive transmission augmentations?”

Thegovernment’s Natural Gas Infrastructure Plan, released late last year byfederal Energy Minister Angus Taylor, envisages at least one new gas basin being brought online before 2030 to meet east coast demand.

However,the plan would require new pipeline infrastructure, in some cases involvingmore than one pipeline, to allow gas to flow to where it is needed bycustomers.

Butanalysts say new pipelines are unnecessary and the business case is “poor”.