Article I saw in the AFR today.
Is this a niche that Redflow could fill?
Why we are lagging in large-scale batteries
Angela Macdonald-Smith (AFR)
Transgrid chief executive Paul Italiano has blamed the regulatory system for Australia's below-par performance in the deployment of utility-scale electricity storage, in stark contrast to keen consumer interest in batteries. Australia lacks any grid-scale batteries as the economic regulation rules for network companies works to dissuade investment in innovation, limiting their access to gains from the investment and so making it unviable, the head of NSWs high-voltage grid owner said yesterday.
The US, Canada, Europe and developed Asian markets such as Japan and South Korea are making use of grid-scale batteries in their networks to help with frequency control and to smooth out price spikes. US utility AES Corporation has about 160 storage projects deployed around the world, but none in Australia, Mr Italiano noted. He said part of the problem was the regulatory system for network companies that lay as a threat to the potential returns a company could make on investments outside the coverage of regulated utilities. "Innovation requires you to make more than a regulated return on a monopoly RAB [regulated asset base] asset," Mr Italiano told the RePowering NSW 2016 conference in Sydney. "So we do inadvertently create disincentives for innovation in the way our regulatory framework is structured." Mr Italiano pointed to the example of Transgrid's investment in 2013 to deploy six "reactors" used to stabilise voltage in the power supply system, moving into an area of business that lay outside the regulatory framework for monopoly infrastructure assets and on which it assumed risk.
Transgrid then used the reactors to bid into the competitive "ancillary services" market against Snowy Hydro, managing to make a "substantial margin" on the investment But the response was to modify the regulatory framework to make the investment part of those covered by economic regulation, reducing the return Transgrid could make; "The economic case that we built to make the speculative investment and do the innovation evaporated," Mr Italiano said, reiterating his view that regulations were struggling to keep up with the pace of change in the market But climate change expert Ross Garnaut had a different suggestion to help drive efficient future investment in the grid, involving taking investment decisions away from network companies altogether.
Professor Garnaut who is chairman of grid-scale battery developer ZEN Energy, said that would avoid a repetition of the unprecedented 130 per cent increase in network charges seen in NSW between 2007-08 and 2012-13. He suggested setting up a grid planning agency, housed within the electricity market rulemaker body, the Australian Energy Market Commissipn, to determine new investments. "If you have decisions on new investment whether they're replacement investment or expansion of capacity, in the hands of an authority looking at things in the public interest you can then put out to tender new investments and reduce the costs of providing them," Professor Garnaut said. He described Australia as "the big laggard in the developed world" in the use of grid-scale battery storage for frequency control and wholesale market arbitrage. "We don't yet have a large grid-scale battery. We're unique in the developed world like that," he said, noting that the US has 44 grid-scale batteries of 10-megawatt capacity or greater.
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