Energy Storage Reforms suggested by the Clean Energy Council

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In May 2017, the Clean Energy Council (CEC) released a Briefing Paper, Charging Forward: Policy and regulatory reforms to unlock the potential of energy storage in Australia (Briefing Paper).

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By Anne Wardell, Regulatory Specialist, Compliance Quarter

The purpose of the paper is to outline ‘thirteen reforms that can be introduced to accelerate the uptake of energy storage and the many benefits this technology can deliver to homes, businesses and the electricity system overall’[1]

The CEC is of the view that the National Energy Market Framework (NEMF) currently undervalues many of the benefits which effective storage can offer.

‘The Clean Energy Council has identified thirteen energy market reforms required to drive the most efficient commercial roll-out of energy storage throughout Australia while ensuring a secure and affordable national power system.

These reforms can be summarised under the following categories:

  • Level the playing field;
  • Remove regulatory barriers to storage behind the meter;
  • Recognise and reward the value of storage behind the meter; and
  • Establish standards and protect consumers’[2].

The Briefing Paper looks at the role and current status of battery storage both in Australia and internationally. It notes that energy storage technology is evolving and provides a useful graph of the cost reduction of lithium ion batteries.

It points to the reduction in the cost of battery technology making battery storage combined with solar a cheaper way to dispatch power than other alternatives.  Also, relevant to this is the speed at which a large-scale battery project can be deployed compared to other generators such as gas peaking generators.

As with any major development or reform, the co-operation of stakeholders is vitally important. In the case of energy for all of Australia the major stakeholders are the federal and state governments. The Briefing Paper states that ‘the industry believes a mix of market reform and regulation will deliver the most cost-effective way to make the most of the many benefits storage can offer the energy system’[3].  The suggested energy market reforms are referred to above in the four categories listed.

Unlocking Energy Storage – Recommendations

Level the playing field

The playing field being referred to is the investment one. The Briefing Paper asserts that the current NEM rules favour investment in poles and wires over storage. In order for investors to consider battery storage as worth investing in, the regulatory framework needs to be reformed. The Briefing Paper makes the following five recommendations in this area.

  1. Reform the current energy market settlement regime to adopt a five-minute market settlement approach that provides a more effective market signal for energy.
  2. Reform the frequency control regime to enable fast acting devices to assist with frequency control and system security support by rapidly responding to emergency frequency events with Fast Frequency Response capability.
  3. The Australian Energy Market Commission (AEMC) should review options to address electricity market rules that distort investment away from network services and towards poles and wires.
  4. Distribution businesses should publish better data on impending network constraints that could be addressed by incremental investments in on-grid energy storage. The AEMC and Australian Energy Regulator (AER) should change the requirements on distribution businesses regarding the Distribution Annual Planning Report to transition from a report-based approach to a geographic information system (GIS)-driven portal, to enable better market access and usability of data.
  5. The AEMC should significantly lower the RIT-D threshold from the current $5 million level and encourage approaches such as Ergon Energy’s ‘Optimal Incremental Pricing’, which allow for smaller increments of investment while reducing the administrative burden on distribution businesses.

Remove regulatory barriers to storage behind the meter

The Briefing Paper states that the current grid connection rules of most distribution businesses fail to recognise, and perhaps appreciate, the technical difference between solar PV and battery storage and more traditional forms of energy creation.

  1. Distribution businesses should follow Energy Queensland’s example, making it easier to obtain approval for grid connection when adding a battery to an existing solar PV system.

Recognise and reward the full value of storage behind the meter

The energy market needs to adapt to more proactive customers who are moving to install solar PV systems in their homes and at the same time increase the technology they use in their home to manage their energy use. The days of putting coins in a meter are long gone with many homes being able to use voice commands or a swipe to turn lights and appliances on or off.

Consumers are also more aware of renewable energy sources and the impact on the ecosystem of more traditional energy methods. The Briefing Paper argues that customers should be able to invest in renewable energy and be rewarded for this by trading in renewable energy certificates.

It will also have a direct impact on peak periods and reduce the need for back up systems.

  1. State and territory governments should support benefit-reflective feed-in tariffs (as adopted by the Victorian Government) in order to ensure the full value of energy storage is recognised.
  2. In states where customers continue to receive premium feed-in tariffs (PFiTs), governments should consider the feasibility of programs to allow the value of the PFiTs to be traded in exchange for a subsidy for a battery.
  3. The Australian Energy Regulator (AER) should support the transition to demand-based tariffs and empower consumers by updating its online tariff comparison tool to include demand charges.

Establish standards and protect consumers

The Briefing Paper sets out four key considerations for consumers who want to invest in good quality and safe battery systems:

  • ‘regulation of installation and training, quality and oversight of designers and installers;
  • product standards and quality assurance;
  • retailing and after-sales service; and
  • full life cycle care’[4].
  1. State government safety regulators should require that all battery installations must be performed by a qualified installer with the demonstrated competency in battery installation, such as those accredited for battery installation under the Clean Energy Council’s accreditation scheme.
  2. There should be a legally enforceable Australian Standard for the product safety of lithium-ion batteries. Until then, State government safety regulators should mandate that batteries installed in their jurisdiction be required to demonstrate compliance with best practice international product standards for battery safety, such as IEC 62619:2017.
  3. Governments that provide rebates or conduct reverse auctions for ‘behind the meter’ battery storage systems should specify tender conditions that either: require use of retailers that are signatories to the Solar Retailer Code of Conduct; or that can demonstrate compliance with standards at least as stringent as those of the Solar Retailer Code of Conduct.
  4. Industry and all levels of government should work together to develop an agreed approach toward the reuse, recycling or disposal of batteries at the end of their useful life.

[1] Clean Energy Council Briefing Paper, Charging Forward: Policy and regulatory reforms to unlock the potential of energy storage in Australia at p 1.
[2] Ibid p 2.
[3] Ibid p 9.
[4] Ibid p 18.

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