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It’s time to accelerate a system wide grid plan as the basis for energy market reform

Two significant milestones were achieved in the energy sector in the last couple of weeks.

Firstly, the commitment at the Council of Australian Governments (COAG) Energy Minister’s meeting in Hobart on 24 November 2017 to progress the design of the National Energy Guarantee (NEG) could be a policy turning point for the nation. There finally appears willingness to at least discuss the disputed and last of the 50 recommendations from the Finkel Review.

And of course, the completion milestone at the Tesla/Neoen 100 MW-battery facility in South Australia is remarkable because of the direct link to the security and reliability objectives of the NEG irrespective of how the market manages carbon emission reduction.

What makes the 100 MW-facility unique is not just the record-breaking time in which it was conceived and constructed. It isn’t the fact that it’s the largest battery in the world or the first to be completed in Australia on this scale. It’s unique because it addresses a specific technical and market need in the South Australian network and, by doing so, creates a high value option as part of the State’s Energy Plan. This plan was developed and announced in early 2017 and Aurecon has supported the government in bringing it to life.

Making comparisons between the battery and the proposed Snowy 2.0 pumped hydro scheme, or calculating how long it could power the State by itself, is just not relevant. It’s simply not what the facility is designed to do. It is not intended to store large amounts of energy across hours or days – there are other technologies, such as pumped hydro energy storage, that are probably better suited to this task.

The battery was designed to meet a pressing system need and provide short bursts of input and output to reinforce the stability and security of the network. It can rapidly discharge and charge over milliseconds to support the safe and stable operation of the grid when it’s under threat or when something unexpected happens elsewhere in the state.

Indeed, when combined with the more than 250 MW of emergency generators that were commissioned just over two weeks ago at industrial sites in the north and south of Adelaide, South Australian consumers now have a powerful response to supply/demand or grid stability events this summer.

The need for a systems grid plan

Returning to the COAG ‘consensus’: how the system actually works to deliver what we want and when – will need a detailed instruction manual. Alan Finkel recommended this instruction manual as one of the three pillars of market transformation: the need for a system grid plan.

But the fact is that right now, we don’t have a system wide grid plan. For many generators, networks and large energy users, this has made navigating the last decade of policy uncertainty incredibly challenging.

Diversifying the supply and security mix

Indeed, if in the near future every home has a means of generation or storage, we’ll have over 10 million power sources and uses. Each of the eastern states, with their unique characteristics, unique customer needs, will require a bespoke approach. Bringing it all together, will be an immense undertaking and not something that COAG simply resolves at its next meeting to make happen.

To be fair, the progress and serious intent at both state and federal level is encouraging: regions have been striving to understand their specific needs. and processes are currently underway to establish the potential for other energy and storage projects that will further diversify the supply and security mix, including pumped hydro energy storage and even hydrogen, in addition to more batteries.

Once regions establish their own energy security and reliability, additional interconnectors may also play a role in the longer term, potentially opening up vast renewable energy zones.

Of course, the role of large energy users, integral to our economic security and prosperity as the source of significant employment, will be pivotal.

A future-ready grid that drives economic prosperity and sustainable outcomes

Which brings us to the ultimate goal of the system grid plan: it is not the end, but the means. The goal is a future-ready grid that drives economic prosperity and sustainable outcomes for everyone.

Don’t risk affordability with an uncoordinated approach

The subject in all this is the customer and it cannot be forgotten that downward pressure on prices has to be a core outcome for their sake. The risk right now is that an uncoordinated approach, no matter how well intentioned, places unknown and unnecessary price exposure on customers, both immediately and over the long term, which means policy makers won’t be able to deliver on the fundamental promise of affordable power.

The grid plan must deal with the choices and the subsequent trade-offs about where to invest in a transparent way. If we are to make decisions about the type of system we want, it must be based on the system we need: sound and robust technical bases; clear visibility of technical risks; and nimble and rapid processes for scrutiny, challenge, agreement and delivery.

A big shortcoming of our current construct is that, in the time taken to identify issues and develop ways of solving them, the immediate market need and business opportunity passes us by.

Which makes the development and implementation of the SA Energy Plan, in particular the 100 MW-Tesla/Neoen battery, an amazing case study in how a Twitter exchange, and the huge public interest that followed it, unleashed one of the most agile and effective decision making processes seen for investment in Australia’s energy sector, full stop.

The agreement at COAG to further progress design on the National Energy Guarantee is indeed a pivotal moment, although it does not settle the NEG as the preferred mechanism for reducing carbon emissions. Lest anyone misunderstand the work ahead of us all: the real and arduous task, where it hasn’t already begun, starts now.

About the Authors

Paul Godden and Ben McGarry are leading Aurecon’s Specialist Technical Advisory to the South Australian Government on its Energy Plan implementation.

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