AEMC to cut red tape, boost revenue options for batteries

Solar panels and wind turbines alongside batteries

The Australian Energy Market Commission (AEMC) has announced two key steps to help batteries play a more critical role in our low-carbon future and ensure they’re rewarded for keeping the lights on.

A draft plan designed to integrate energy storage systems into the national electricity market outlines new measures to cut red tape so small batteries can earn extra income and large batteries have fewer cost and logistics hurdles to participating in the market.

And in a final ruling announced at the same time, the commission has created new markets to financially reward ultra-fast energy providers like batteries for reacting at short notice when the system needs frequency control to avoid blackouts.

“The changes we’re announcing recognise that energy is no longer a one-way transaction,” AEMC chair Anna Collyer says.

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“The energy market is moving to a future that will be increasingly reliant on storage to firm up the expanding volume of renewable energy as well as address the growing need for critical system security services as the ageing fleet of thermal generators retire. Within two decades, installed storage is expected to increase by 800 per cent—it will be central to energy flowing two ways.”

The commission’s draft energy storage plan simplifies arrangements for market players that send energy both ways. It improves how they register to participate in the market and streamlines their obligations.

By creating a universal category called an integrated resource provider, the same rules will apply to anyone who provides storage or combination energy services—whether it be batteries, pumped hydro, companies that aggregate energy from small generation and storage units, or large-scale hybrid facilities that combine different technologies behind the one connection point (like factories with solar PV and a battery).

The change will level the playing field with other market participants. Batteries for example, will no longer need to register twice (to both draw energy from the grid and send it out) as they are currently required to do.

For small customers, this will open up opportunities to earn more revenue for their home battery, because they can sign up with innovative new aggregator businesses who will pay them for using their battery at certain times. At the moment, aggregator businesses can only provide energy one way, but our changes will open up new business models for them.

“This change works in tandem with our existing proposals on distributed energy resources currently under consideration, which are designed to make home batteries a more attractive way to maximise solar investments,” Ms Collyer says.

“It’s also central to the commission’s plans to make the rules more forward-looking so that they work for technology that hasn’t been invented yet. If we make the rules more elastic to focus on what market service you offer rather than who you are, they will stay relevant in the face of rapid change and support energy innovation. And it lays important foundations for the Energy Security Board’s post 2025 market design to become operational.”

The commission’s final determination today to create a new fast frequency response market is a major step forward on power system security. This is the first of the new system services markets we are designing to deliver essential security services the system needs as the energy sector decarbonises. This new market provides a new income stream for batteries, aggregator and hybrid businesses and other fast responders like solar, wind or those offering demand management services able to react within a lightning speed of one to two seconds to stabilise system frequency so the lights stay on.

There are already frequency control ancillary services markets available, but until now, the fastest service was six seconds.

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“As our energy mix continues to change, we will need these new, ultra-fast options. They’re like an insurance policy for keeping the energy system in balance and avoiding blackouts,” Ms Collyer says.

The fast frequency response final decision announced today is the result of a rule change request from Infigen Energy and involved consultation with a wide range of stakeholders. Following feedback from stakeholders, the implementation of these markets has been brought forward to October 2023.

The draft energy storage plan is still open for consultation, with submissions due on September 16, 2021, and a final determination the following month.

This plan is the result of a rule change request from the Australian Energy Market Operator, and the result of close, ongoing dialogue with AEMO and other stakeholders.