The Australian Energy Market Commission (AEMC) has unveiled its final rule designed to better integrate both small and large-scale batteries and hybrid systems into the National Electricity Market (NEM) but critics have been quick to respond, saying a decision not to exempt energy storage providers from new charges places those providers at a disadvantage.
The AEMC sparked debate earlier this year when it released its draft plan, proposing charging storage providers for drawing power, ignoring a recommendation by the Australian Electricity Market Operator (AEMO) that they should be exempted from network charges when charging or pumping.
AEMO argued it was important storage providers were not “disincentivised from connecting to the transmission network, as they generally provide a net benefit to the power system by charging at periods of low demand”.
AEMO’s request for an exemption has however been refused with the AEMC declaring energy storage participants will continue to negotiate transmission services and charges, as they currently do.
“We’re not moving the goal posts on network charges,” AEMC chair Anna Collyer said. “Energy storage participants will continue to negotiate their transmission services and charges. Our intention is for existing network agreements to remain unchanged.
“The reform maintains the existing framework to allow large grid-connected storage to choose between connecting under a negotiated agreement or the prescribed service.”
The Clean Energy Council (CEC) was among those critical of the final determination, saying it could result in energy storage providers and consumers paying twice for network charges while the added costs could impact the viability of new projects.
“Batteries and pumped hydro will now be placed at a commercial disadvantage to coal and gas generators, who do not face network charges,” said the CEC’s director of energy transformation, Christiaan Zuur. “This undermines the efforts of state and territory governments to decarbonise the power system.”
The AMEC conceded further work is needed on how network prices are set for storage and other large flexible loads, including hydrogen, to provide them with efficient operational and investment incentives to support the energy market as it transitions to more renewables.
“An important part of our final decision is that we are not suggesting that storage should automatically be paying network charges,” Collyer said. “And we agree the rules on prescribed transmission services are not designed for price responsive loads.
“However, reforms to network charges for price responsive load involve other issues we need to consider that are broader than this rule change. These issues require further stakeholder engagement and consideration of how all participants, not just storage, will play in the market.”
While disappointed that the request to exempt energy storage providers from network charges had been rejected, the CEC said the commission had made several positive changes to the original draft decision.
“We are pleased to see that the AEMC has made a few changes to help address some of the concerns raised by industry, such as trying to exclude existing storage units from facing new charges and stating that all new negotiated charges must be consistent across existing and new storage providers,” Zuur said.
“However, the devil will be in the application, and we will be observing how the network businesses apply these rules in practice.”
Included in the final rule is a new participant category, the Integrated Resource Provider (IRP), that the AEMC said will facilitate the efficient entry and operation of storage and hybrid facilities in “a flexible and technology-neutral way”.
The category accommodates a variety of participants with bi-directional energy flows that may offer and consume energy and ancillary services. This includes 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 AEMC said the proposed change will level the playing field for market participants with energy storage assets.
“This makes it simpler and easier for anyone who provides storage or a combination of energy services to enter the market,” Collyer said.
“For large batteries the rule will cut red tape, reduce costs and logistical hurdles to participate in the market. Batteries will no longer need to register twice, to both draw energy from the grid and send it out, as they currently do.”
Collyer said the package would also create opportunities for households and small business customers to earn more revenue for their home battery, because they can sign up with new aggregator businesses who will pay them for discharging power from their batteries at certain times.
The AEMC said the rule on hybrid systems would make it easier to manage electricity flows behind a connection point, allowing excess wind and solar power energy to be stored and released into the network when it’s needed.
“What this means is that the operator is not exposed to the spot market price to purchase energy from the grid and the energy being created by the solar plant is not being wasted,” Collyer said. “Some stakeholders have told us this could reduce their energy costs by around 15%.”
The majority of changes made by the final rule are due to come into effect on 3 June 2024.
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