Of all the great initiatives that came out of South Australia’s energy plan on Tuesday, one thing doesn’t appear to make sense: why spend so much money on a peaking gas generator when storage options are clearly cheaper?
The big question was over these two sums: The $360 million in government monies set aside for a 250MW gas plant that might rarely be switched on, and the $20 million that treasurer Tom Koutsantonis says could be enough to get a 100MW battery storage facility built by the private sector before summer.
Surely, analysts and pundits say, spending more on battery storage is going to give a bigger and more immediate bang for the buck than the gas generator. And they won’t become a redundant asset as the gas peaker threatens to be in as little as five years time.
In theory, those sums suggest, South Australia could cause some 1.8GW of battery storage to be built for the same taxpayer funds as a gas generator. Of course, it is much, much more complex than that.
The reality is that the $150 million set aside in the new Renewable Technology Fund is probably going to support more battery storage than can be sustained under current market rules. (Indeed, some of it is earmarked for solar thermal, pumped hydro or even hydrogen).
Battery storage – in current market rules – will trade only on energy market volatility and the arbitrage between high and low prices (fill it up with cheap excess wind and solar and sell it at high, peak demand prices).
The more storage that is added, then the less volatile the market will become, and the less money that can be made.
So storage will probably not be fully economic and widespread until the overall market rules are changed and battery storage technologies can access its multiple value streams.
This will come from rule changes such as dumping the 30 minute settlement in favour of a 5 minute settlement, and the introduction of a new ancillary service market, and maybe for grid augmentation.
Then there will be nothing stopping it, although longer-dated storage such as solar thermal, pumped hydro or even hydrogen will also be needed at various points in the transition to 100 per cent renewable energy.
But it is the volatility that the South Australia government wants to kill as soon as it can. The state has always had a volatile electricity market, courtesy of its stringy network, daytime manufacturing and high air con use.
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