Market Review: Completed
Overview
Electricity storage is a rapidly evolving market – both in terms of new products and business models and decreasing costs. Costs are falling and are predicted to follow a similar trajectory to that followed by solar panels.
In part, this trend is being driven by factors outside of the energy sector – by the demand for ever cheaper and more efficient battery storage for consumer electronics and by advances in electric vehicles. With the recent announcement of consumer friendly home energy storage products we can expect to see costs fall further as uptake drives scale efficiencies in manufacturing.
Storage is particularly interesting for the AEMC because of its potential to touch the whole electricity sector:
- Storage can allow consumers and businesses to respond to time of use tariffs and to reduce demand charges that reflect their impact on the network. Storage can aid self-supply if consumers have solar PV.
- Storage can reduce congestion on both transmission and distribution lines and other network assets, potentially shaving the peak demand that drives a lot of network augmentation.
- Storage can provide ancillary services like frequency control, voltage support and potentially even system restart services.
- Storage assets can substitute for generation, help to integrate intermittent renewable generation and allow trading between times of higher and lower wholesale electricity prices.
- This may challenge the regulatory model, which has been built around defined roles along the supply chain.
The AEMC's project focused on three main questions. The first question is how storage will impact the supply chain. The CSIRO has looked at potential applications of storage across the supply chain and analyse which storage technologies might be best suited to the different technical requirements of each application.
The second question – addressed in our final report – is whether there are barriers and regulatory issues associated with the uptake of energy storage. Issues that were considered include:
- Are there barriers to the deployment of storage generally, for instance, connection difficulties?
- Does the regulatory framework, based as it is on defined roles and responsibilities, work with an asset that can potentially be many things to many people? What role will storage be able to play in the broader market, like ancillary services? Who gets to control it? How are the needs of regulated networks balanced with a consumer and market-led approach to technology deployment?
- What are the issues associated with networks owning and operating storage? When does network storage compete with generation? Should these assets go in the regulatory asset base or are they competitive services? Are the cost recovery frameworks and incentives “right”? Are the ring-fencing and cross ownership provisions fit for purpose?
The final question addressed in our final report, is how any identified issues should be addressed. The analysis and recommendations in the final report should be helpful to policy makers and market participants as the energy storage sector develops.