Anna Collyer, AEMC Chair
Monash University launch of The storage imperative: powering Australia’s clean energy transition (implications for the NEM) White Paper
Thank you for the welcome, Shreejan.
I, too, acknowledge the custodians of the land on which we meet, the Wurundjeri Woi-wurrung and Bunurong/Boon Wurrung peoples of the Kulin nation.
I pay my respects to their Elders, past and present.
It is a real pleasure to speak with you today about this latest development in the research partnerships we have been progressively developing in recent years.
I am excited about where we might find ourselves in the future, but first, let me look back briefly to where we have come from and how quickly it has all changed.
Back in the late 1990s, I was a partner in my law firm with responsibility for energy clients.
It was part of my job to induct young lawyers in our practice into the idiosyncrasies of Australia’s power system.
I would tell them: electricity is an unusual product because first, supply and demand need to be balanced instantaneously and at all times, and second, you can’t store it.
And, with some exceptions, that was a fundamental truth of the grid at the time.
You could store gas in a pipeline, but electricity was either there, or it wasn’t.
Well, times change, and in our current stage of the energy transition, they change at a very rapid rate of knots.
The very existence of energy storage is a major indicator of how differently the market operates now and – even more so – into the future.
One of the famous origin stories of the Australian energy transition is that public Twitter bet, between Elon Musk and Mike Cannon-Brookes.
In a very Australian kind of scenario, a wager between two billionaires plus a ready and willing state government gave us the rapid construction of South Australia’s Big Battery.
When it was switched on in November 2017, Hornsdale was touted as the biggest lithium-ion battery in the world. Today, Hornsdale isn’t even the biggest battery in South Australia - Torrens Island currently has that honour.
But compare the 250MW at Torrens Island to the 850MW Waratah super battery currently under construction in NSW, and it’s a neat snapshot of how far we have come in a very short space of time.
What was once impossible is now essential.
AEMO wants to see 22GW of combined storage in the system by 2030 - and that’s just at utility-scale. If you’ve heard me speak before, you know how important it is to us that the role of consumer energy resources, or CER, is recognised and supported.
The consumer, as I like to say, will be our hero on the road to net zero.
At the end of 2023 around 250,000 Australian households and small businesses had installed batteries. That’s a strong number, but nothing like the 3.7 million rooftops currently sporting solar panels. There’s still a long way to go for domestic batteries to significantly soak up the glut of solar we see in the middle of many days.
Price is a major factor for most consumers, but our own research suggests 2025 is the year domestic batteries reach the affordability tipping point, so this may help.
Another path for consumers may be to share their battery with a virtual power plant. This can decrease their payback time, and it helps the sector by entering those small batteries into the utility-scale storage equation.
In whatever ways we reach Australia’s storage goals – and I am confident we will – the impact of batteries in the NEM is already upon us and only becoming more important.
So, what does that mean for us as the market’s rule-maker?
It means we are facing interesting and important problems and we need to cast our net widely for inspiration and advice.
We need to understand how storage performs in a market that continues to evolve with the growth of variable renewable energy as we all work towards a net zero emissions future.
How will battery operators behave in this new market?
How will stored-energy consumers behave?
How do we value the energy that sits there waiting to be needed?
How do we value the energy that batteries extract from a system when it’s overloaded with solar, compared to the value of batteries charging up at other times?
How will different storage providers compete with each other?
And what current market mechanisms already work for storage, and what completely new, or adapted tools do we need?
We have very recent and specific AEMC examples of the step change from the old to the new paradigm.
Our primary market modelling tool, PLEXOS, depends upon short-run marginal costs to determine the bids it assumes for modelling the wholesale market.
In recent exercises, PLEXOS has struggled to make sense of the growing battery storage participation. For the time being, we’ve included parameters to give us some answers, but this tool will benefit hugely from the kind of research that Monash has now undertaken.
Your work will help us to better understand the drivers and limitations on how storage may behave in the market.
In another example, among our stakeholders, we know of companies that are juggling a dozen different contracting models for storage.
This is a stark contrast to the fairly standard contract models we have used in the industry to date.
Is this almost experimental model of contracting just a stage we are going through? Or will storage prove to be the kind of product that always requires an individualistic approach to contracting? Better understanding of the economics of battery storage may also help clarify these questions.
It’s a turbulent time – but turbulence is in the nature of revolutions, and our energy revolution is no different.
Speaking of revolutions, I sometimes think of old photos from the turn of the previous century, with the Industrial Revolution still underway and a myriad of old and new transport systems all in play.
In a busy city street in the 1890s or 1900s, you’d have seen a startling array of transportation competing for street space.
There would be people pushing handcarts alongside people riding horses, as well as teams of horses pulling public buses and private carriages, and even bullocks with cargo drays. And they shared the streets with more and more mechanical transports like bicycles, electric trolleys, steam trains, and the occasional petrol car.
In some cities, like Melbourne, certain tramlines started out with horse-drawn streetcars, which then became motorised with steam engines, before being converted to run on the electric cables that won the technology race here.
Now, like that earlier transport revolution, we live in a time when many technical and economic possibilities are jostling to become the dominant way ahead.
Figuring out how to get the best outcomes while all those new factors are still emerging – which is part of my job – means roping in all the resources we can.
And this brings me back to you.
We aren’t the only energy system in the world grappling with questions about storage, but the sheer scale of Australia’s grid, and our variable renewable energy growth, mean that many issues are being faced here for the first time, globally. And, given the magnitude and complexity of change in the transition, we at the AEMC know we can’t answer every question alone.
Cooperation with researchers is essential and Monash has, in our view, been a very successful example of this cooperation.
The research behind this white paper will feed into the wide mix of considerations for us and other policymakers. This will be very helpful alongside the perspectives from our every-growing range of stakeholders, including jurisdictions, industry, consumers and market bodies.
At a bigger picture level, some of you know we are working on an MOU with Monash to continue our research relationship. We also see this process as a potential model for our connections to other institutions.
Since this work began back in 2021, we have expanded our interest in and support for academic research in many ways.
We have created what we call the ‘research@aemc’ initiative to bring together academics and policymakers effectively and in a coordinated way.
Under this banner, we have several programs of work, if any of this sounds interesting to you, please don’t hesitate to get in touch with us.
Twice a year, we host an academic ‘mini-conference’ that brings together experts and policymakers in an intimate forum on a single-focus, big-picture topic. Along with other institutions, we have had several presenters from Monash including Yolande Strengers, Gordon Leslie and Darryl Biggar.
We also hold a regular Breakfast of Champions. We invite academics to present us with early-stage research, and in turn we can share industry experience to help inform the research agenda. A win-win for both sides.
From Monash, again, we have had Gordon Leslie as a breakfast presenter, and we welcome others who may be interested.
We are setting up a postgraduate research program to bring talented PhD students into the industry. Perhaps there are even some of you in the audience today?
And finally, we are working on a broad AMEC academic partner program. We want researchers to better understand our problems and where we most need your assistance - just as Monash identified our need, back in 2021, for research exploring the economics of storage. We also want to know who in the research sector is best placed to potentially help us when we have an issue.
The energy transition in Australia and around the world offers opportunities to all of us working in the sector, that none of us might have expected at the start of our careers. Again, I remind you how very confident I was in the 1990s of the fact that electricity simply could not be stored.
Giant batteries are just one way that the energy transition has changed the work of economists, engineers, lawyers and researchers.
As Alan Finkel sometimes puts it, if we succeed in this transition it isn’t just a once-in-generation or once-in-a-century achievement. When we reach our low emissions goals, the change will be a once in human history event.
There is tremendous work being done amid the very necessary uncertainty of change. I am sure you will forgive me for saying that I find the challenges ahead even more exciting.
Congratulations on this research, Guillaume and the team, and we look forward to exploring even more of these ‘interesting’ questions in future.
Thank you.