Energy storage in the National Electricity MarketFarhad Billimoria, Strategy and Markets Group

Australian Energy Market Operator

Storage Systems in the Electrical Sector, 8th January 2019, Santiago - Chile

Energy storage in the National Electricity Market

Agenda

1. The role of storage in the NEM

2. Current storage developments

3. Operational and system integration

4. Market dynamics

5. Conclusions

An electricity market in transition…

3

Summary

A Electricity market overview:

• Wholesale – competitive RT gross pool

• Regulated networks

• Retail – competitive, vertical integration

• Environmental – 2030 renewable target

B Transformational growth in DER with

~ 8GW of rooftop PV.

C Over 10GW of utility-scale renewable

projects committed since 2012

D Retirement of large thermal generators

~5.2GW retired since 2012-200

0

200

400

600

800

1.000

1.200

2018 2019 2020 2021 2022 2023 2024 2025

Co

ntr

ibutio

n t

o 9

0%

PO

E

min

imum

dem

an

d (

MW

)

Residential and Business Total Losses

Rooftop PV + storage (Res/Bus) Operational - as sent out

Minimum Operational Demand Projection

– South Australia

Source: AEMO

Native demand

Operational demand

The rationale for BESS in the NEM

4

High price cap and

low price floor

Growing costs of

ancillary servicesPrevalence of renewable

curtailment

0

200

400

600

800

1.000

1.200

1.400

1.600

1.800

Gen

era

tio

n (

MW

)

Time (during Q3 2017)

Wind outputWind curtailed

SA wind generation and

curtailments (Q3-2017)

-2.000

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

0 20.000 40.000

Pri

ce (

$/M

Wh

)

Quantity (MW)

Price

floor bids

Sample NEM bid stack

for Energy

Knee

point

Price

cap bids

Curtailment

of ~10% for

Q317

Annual Costs of Frequency

Control Ancillary Services

-

50

100

150

200

250

2012

2013

2014

2015

2016

2017

2018

An

nual FC

AS C

ost

s ($

m)

8x increase

Source: AEMO

Storage developments in the NEM

5

Operating Energy Storage Assets Energy storage in the NEM

A Operating ~ 1.6GW (with 180MW BESS) plus 1.7GW proposed

B Integrated System Plan: Storage ~ 21% of capacity by 2040

C Strategic projects: Snowy Hydro 2.0, Battery of the Nation

Hornsdale PR

Dalyrmple North

Ballarat BESS

Gannawarra ESS

Shoalhaven

Tumut 3

Wivenhoe Integrated System Plan – Capacity (Neutral case)

0

50

100

2018-19 2029-30 2039-40

Inst

alle

d c

ap

aci

ty (G

W)

Coal Hydro Gas

Wind Utility Solar Utility storage

Distributed storage Rooftop PV

Source: AEMO

Implementing the ‘value stack’

6

Value stack Services

EnergyMerchant arbitrage

Contracts

Ancillary

Services

Frequency response (FCAS)

Fast frequency response

Voltage control

System restart

SystemControl schemes

Grid formation

Network

Local reliability

Network voltage control

Avoided/deferred investment

Other Causer-pays mitigation

ConsumerRetail charge avoidance

Virtual power plant

Source: Electranet

BESS

Transmission

Network Provider

Integrated

Generator/Retailer

Regulated Services

• Fast frequency response

• Grid formation (island)

• Local reliability

Competitive Services

• Energy

• Frequency response

Owner

Part of regulated asset base Market based remuneration

Retailer leases BESS from

Network Provider

Operational

control

market

participation

Case study: Dalrymple Battery Project

Quality of regulation delivery

7

Accuracy and speed of regulation FCAS response

Large conventional steam turbine Hornsdale Power Reserve battery

AGC setpoint Unit MW

System implications need to be managed

8

Ramping incentives for Battery Storage

Key operational issues

A System security - incentives for digital

response from fast-ramping

technology

B System security issues with increased

non-synchronous penetration (e.g.

inertia).

C Visibility and predictability of the

flexible fleet – especially DER /

distributed storage.

D Enablement of correct service mix

0%

20%

40%

60%

80%

100%

0 1 2 3 4 5

Ou

tpu

t -

perc

en

t o

f ca

paci

ty (

%)

Minutes

Batteries under digital response

Batteries under Linear response

Digital response to

maximise energy

discharged

Impact of new technologies on frequency response markets

9

Raise FCAS 6 sec offer curve

9%

50%

16%

10%14%

1%

0%

10%

20%

30%

40%

50%

60%

Battery Coal DR Gas Hydro Other

Perc

enta

ge o

f su

pp

ly

Raise FCAS enabled by fuel type – Q3 18

Q2 2018

Q1 2018

Q4 2017

Q3 2018

0

10

20

30

40

0 100 200 300 400 500 600 700

Pri

ce (

$/M

Wh

)

Quantity

Q3 2017 Q3 2018

Adding new technologies and providers to the supply mix has altered market dynamics

Key takeaways

1. Access to value is multi-faceted → via organized and bilateral/multilateral mechanisms

2. New technologies and participants have shifted market dynamics

3. System and operational impacts need careful management

Appendix

Key regulatory developments

12

Regulatory developments affecting BESS

Completed

initiatives

Five minute settlement

Ancillary services unbundling

Reliability frameworks review

Frequency control frameworks review

Future power systems security program

Co-ordination of generation and transmission

Current

initiatives

Virtual Power Plant Demonstration Program

Emerging Generation and Energy Storage

Wholesale demand response mechanism

The Future Frequency control and reserve frameworks

Operational security frameworks

Reliability frameworks.

Source: AEMC

Battery net arbitrage value –

Queensland (2012-17)

Generation patterns

13

BESS energy dispatch - 2018 Pumped hydro energy dispatch - 2018

-120%

-100%

-80%

-60%

-40%

-20%

0%

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40%

60%

80%

12:3

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8:0

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9:3

0 p

m

11:0

0 p

m

Ch

arg

e /

Dis

charg

e (

as

pct

of

cap

aci

ty)

POE Confidence Envelope Median

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

12:3

0 a

m

2:0

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m

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m

9:3

0 p

m

11:0

0 p

mCh

arg

e /

Dis

charg

e (

as

pct

of

cap

aci

ty)

POE Confidence Envelope Median Charge-Discharge