Everyone seems excited by batteries and their potential to completely transform our power system and market in combination with solar.
But the reality is that – just like solar panels, video recorders, computer laptops and mobile phones – they need to grow volumes if the technology is to come down the experience cost-curve to become affordable enough to achieve its potential. To do that it needs to pick off some market niches that can provide a beachhead to build up scale and experience, before a wider assault on the entire power market.
That niche already exists in Australia at a healthy size – it’s Australia’s farms and wider rural areas.
The problem is that a system of cross-subsidies established decades ago mean this market is currently blocked to anyone other than power network companies.
To explain: if you build a new house in a rural area that isn’t already connected to the power network you’re looking at a bill of tens of thousands of dollars to connect, even if you’re not all that far from the power network. This gives you a feel for the size of the cross-subsidy for rural areas who tend to pay not much more for power than city households.
This means 'solar plus batteries' with some energy efficiency improvements plus the very occasional use of a diesel generator, can be a cheaper option for such areas.
Yet are these being rolled out?
Power network companies are obliged under regulations to examine alternative options to upgrading their power networks, which are usually referred to as demand management.
So how many network upgrades have actually been deferred or cancelled because these networks found more-attractive demand management options?
Not many, is the answer.
Regulators, government policy analysts and power networks have been engaged for almost a decade in what looks like some kind of bizarre and extreme contortionist exercise to get poles and wires companies to do something different to their core business of installing poles and wires.
A rather blunt assessment of the stupidity of the current approach was provided recently by Hugh Grant, who used to be a member of the executive leadership team at the Queensland transmission operator, Powerlink.
In a damning assessment of TransGrid’s (the NSW transmission operator) demand management funding proposal to the Australian Energy Regulator, Grant noted in relation to their past efforts:
TransGrid does not appear to have implemented any actual demand reduction solutions, and does not appear to have progressed any specific opportunities from the DMPP (Demand Management and Planning Project) Plan.
Instead, TransGrid expended the allowance on various research and investigation projects, none of which were particularly innovative. The projects undertaken were predominantly focused on issues that have been investigated ad nauseam by many others over the past decade.
The network companies have been playing a ridiculous game of charades for some time now, where they apparently need to trial what they claim to be unproven demand management technologies. Yet we all know how a battery works, how a solar panel and associated inverter operates, that customers respond to prices, and that you can use telecommunications to remotely control the operation of appliances such as air conditioners and pool pumps.
In relation to Transgrid’s future plans for funding to support demand management, Grant argues:
TransGrid’s … proposal would appear to be driven by the objective of perpetuating and reinforcing barriers to demand management, rather than actually progressing the demand management opportunities that TransGrid should be pursuing now.
Finally, it appears that the WA Government may have woken up to the fact that we’ve been looking at the problem back-to-front. The regulator shouldn’t actually be asking poles and wires companies to decide whether there are better alternatives to poles and wires. Instead the regulator needs to ask poles and wires companies how much it will cost to supply poles and wires; and then ask the market directly whether they think they can do it better and cheaper.
As the former transmission business executive, Hugh Grant observes:
It is ludicrous to consider that a monopoly transmission network with a strong vested interest in progressing network options could legitimately take on the role of developing the contestible market for non-network solutions.
The WA Government’s Electricity Market Review discussion paper puts it rather more subtly,
It may … be possible to allow third parties to tender to solve particular network constraints at the lowest cost. Although Western Power tenders for third parties to deliver particular solutions, allowing third parties to tender solutions of their own, might encourage more innovative solutions to network constraints. Examples of such solutions are battery storage to solve for voltage fluctuations at the distribution substation level, or distributed generation backed up with storage to defer augmentation of distribution and even transmission infrastructure.
If the WA government follows through with such an approach it could act to lever open a market for energy storage, embedded generation and demand management that will illustrate what’s possible to the rest of Australia, and indeed a range of markets around the world.