Unlocking the Grid

The Grid is changing

In the words of the Australian Energy Market Commission (AEMC) Australia’s electricity system is transforming. This involves the complete redesign of the electricity market to take maximum advantage of distributed energy resources such as large and small-scale solar, wind and hydro generation, battery storage. Then there is the imminent rollout of electric vehicles. Collectively, EV’s will be a large net consumer of electricity - but also able to confer benefits on the network. Much as the Tesla big battery has done for South Australia, plugged in EVs are expected to be able to play an important grid stabilisation role during natural disasters and mishaps.

These developments are part of a global process and the scale and potential of this energy transformation is such that many see it as the third industrial revolution (Rifkin 2011). These developments will deliver major economic and social changes as smart, intercommunicating devices converge with new sources of renewable energy: solar, wind and water; in an internet of energy things.

This will mean step-change efficiencies for many sectors of the economy at a time when a revolution in the world’s energy system is badly needed for the race against man-made climate change. Emissions from fossil fuel combustion continue to damage the planet’s habitable climate. The third industrial revolution needs to arrive quickly to forestall the great extinction but there are still practical problems to solve.

Provision will need to be made in this new Grid to minimise imbalances in the supply and demand for electricity across daily and seasonal cycles. Generation using solar, wind and water resources are subject to variations in sunlight, wind speed and rainfall. Demand for electricity by households and industry have their own patterns of usage and variation throughout the day. In the case of the coal and gas fuelled electricity grid these usage patterns produce well known demand peaks in evenings and mornings that must be anticipated and managed by adjusting the outputs of power stations.

Sun & wind

So, how realistic is all this and when will it happen?

According to an April 2020 recent report by Australian Energy Market Operator (AEMO), wind and solar occasionally contributes 50% of electricity to the National Energy Market. Over a recent month solar and wind’s share was 26%. AEMO concludes in the next 5 years:

  • The NEM will continue its significant transformation to world-leading levels of renewable generation. This will test the boundaries of system security and current operational experience.

  • If the recommended actions are taken to address the regional and NEM-wide challenges identified, the NEM could be operated securely with up to 75% instantaneous penetration of wind and solar.

If, however, the recommended actions are not taken, the identified operational limits will constrain the maximum instantaneous penetration of wind and solar to between 50% and 60% in the NEM. Beyond 2025, AEMO has not identified any insurmountable reasons why the NEM cannot operate securely at even higher levels of instantaneous wind and solar penetration, especially with ongoing technological advancement worldwide. Given the pace and complexity of change in the NEM, the RIS (Renewables Integration Strategy) highlights the need for flexible market and regulatory frameworks that can adapt swiftly and effectively as the power system evolves.

Future grid

Apart from the interconnecting "poles and wires" the new grid won't look much like the old.

Large, expensive and polluting coal and gas-fired power stations play a rapidly diminishing part. Quite aside from its troubling history of accidents, nuclear energy is out of the ballpark on price alone.

Solar and wind farms of all shapes and sizes predominate among energy sources, with a niche role in the foreseeable future for pumped hydro and yet-to-be-proven candidates such as biofuels, wave and tide generation.

According to an April 2020 Bloomberg New Energy Finance report cited in RenewEconomy, further cost reductions in both large scale solar PV and onshore wind projects mean that these two technologies are now the cheapest form of new build energy generation in areas that count for two thirds of the world’s population, and 85 per cent of the globe’s electricity generation.

The report further states that the latest benchmark report shows that in just the last six months the levellised cost of electricity (LCOE) for onshore wind has fallen a further nine per cent, its most significant drop in five years.

The cost of utility scale PV, already down 90 per cent over the past decade, has fallen a further 4 per cent, taking the varied wind and solar resources to an average of $US44/MWh for wind and $US50/MWh for utility scale solar.

BloombergNEF also points to the plunging costs of battery storage, down half over the last two years, which means that batteries are now the cheapest new-build technology for peaking purposes (up to two-hours of discharge duration) in gas-importing regions, like Europe, China or Japan.

Also according to RenewEconomy, BNEF says that in Australia the best LCOE is $A40/MWh for solar and for wind it is $A50/MWh. The levellised costs for a range of generation types (expressed in USD) are as follows:

  • Tracking PV $26-67 per MWh

  • Fixed-axis PV $29-80 per MWh

  • Onshore wind $32-83 per MWh

  • Combined cycle gas turbine power plant $66-96 per MWh

  • Onshore wind plus storage $50-124 per MWh

  • Fixed-axis PV plus storage $58-178 per MWh

  • Utility-scale battery (four-hour storage duration) $145-167 per MWh

  • Open cycle gas turbine power plant $146-309 per MWh

Battery storage

Grid scale battery storage is a totally new innovation that will bring big changes to the electricity sector.

At one end of the scale the innovative Tesla Hornsdale Wind Farm battery in South Australia has helped reduce the intermittency of wind generation and manage increased demand during summer when the grid is under the most strain. In its first year of operation the Tesla battery saved consumers more than $50 million by reducing spot-price volatility. It also helped provide a grid more resilient to power outages caused by natural events. In 2020 the battery's capacity was expanded to 185 MWh.

At the other end of the network, small batteries sold along with household rooftop solar panels range in capacity from around 1.2KWh to about 13KWh and used to extend the benefits of solar generation beyond sundown to cook the dinner or charge the electric vehicle. While solar panels will normally provide a return on investment over their lifetime for the average Australian household the same cannot always be said about a sizable investment in a household battery with a useful lifetime of little more than a decade.

It has to be said this calculation does depend on local conditions and also subject to ongoing technology developments. If solar panels are most productive in the north of the country and grid electricity is very expensive in South Australia or very unreliable in southwest WA, these conditions all contribue to the ROI of a household battery. But for households where the benefits of battery ownership is questionable, another option is becoming available in the form of Community Batteries.

Community batteries

Batteries of a middling size connected to the grid can be used by multiple solar households in a local community as a kind of energy "bank". Households "earn interest" on the electricity they deposit in these Community Batteries.

Depending on their size community batteries can sit on a concrete slab or hide in an electricity substation. In a trial in Melbourne's Bayside, community batteries are located on power poles as seen in the following video. Community batteries do not sit behind a customer's electricity meter so this gives a network service provider like Ausgrid the ability to use a portfolio of dispatchable power to help manage fluctuations in electricity supply and demand.

Storing power close to where it is generated and consumed also reduces the need for expensive grid infrastructure to deliver electricity over long distances. This reduces energy loss and costs across the board.

While trials of community batteries are still in progress it is believed the economies of scale and other benefits will prove cost-effective, compared to every household purchasing, installing, maintaining (and eventually replacing) their own battery. If that is the case it will reduce the cost of electricity and improve the quality of service for all consumers.

It will be interesting to watch the thinking around regulatory arrangements for innovations such as community batteries. Is there any reason, for example, why a local Council should not install a community battery in the corner of its carpark to be used for charging its fleet of electric vehicles or those of its ratepayers?

The network service provider for much of the Inner West is Ausgrid and they are currently doing trials of community batteries in three areas of Sydney. The first one was launched in Beacon Hill in 2021.