One of the biggest challenges facing Australia as it transitions to clean energy is establishing an effective large-scale electricity storage regime.
There are a number of issues to be addressed for Australia to meet its renewable energy target – including slow approvals, social opposition and financing uncertainties, while regulatory challenges and grid integration are also hindering progress.
According to a study released by Monash University late last year, until a proper national framework is put in place and without capacity to store the energy, the country’s ambitious plan to achieve national emissions targets of 43 per cent by 2030, 82 per cent renewable energy by 2030, and net zero emissions by 2050, will simply “remain out of reach”.
The report states that electricity storage on a large scale is the perfect, and very timely, complement to sporadically available renewable energy generation as it enables the intertemporal shift of electricity production to make energy accessible when required rather than when available.
“The problem is that renewable energy must be stored to really be useful; there is too much of it when we don’t need it, and not enough when we do,” Associate Professor Guillaume Roger said. However, the analysis shows that the way electricity is currently traded, and the financial instruments that support it, are inadequate to deal with intermittent energy and storage.
According to Associate Professor Roger, “storage is very complicated to understand and operate, and the manner in which the National Energy Market (NEM) is currently operating is not conducive to efficient storage operation, nor of storage investment, and as a result Australia is stalling.”
The report notes that despite its pivotal role, the economics and operational dynamics of storage are poorly understood, creating a significant barrier to progress.
“Not understanding the economics of storage leads not only to poor operational performance of assets, it also induces insufficient incentives to invest. “Storage is the critical bottleneck of any meaningful progress in the energy transition.
“Today, a new solar farm has very little value because it produces at the wrong time of the day – the energy it generates needs to be made available later, at which time it becomes valuable.”
To address this, the report recommends a combination of simple reforms that are already in operation in other markets, such as encouraging full utilisation of storage assets, ensuring system reliability in a storage-dominated grid, and exploring the limits of revenue generation in a renewable-centric landscape.
“An important dimension of these reforms is that they do not cost much to taxpayers, unlike much of the subsidies various governments, state and federal offer now, and they can be enacted rapidly,” Associate Professor Guillaume Roger said.
Policies such as locational marginal pricing (LMP), for instance, would deliver more precise price signals on the grid, offering further opportunities for storage to take advantage of price arbitrage opportunities, while assisting in solving grid congestion and making sound location choices.
Meanwhile, although the capacity investment scheme (CIS) aimed to de-risk investments, it could unintentionally induce poor incentives for optimal asset use. “Instead, one wants to encourage full utilisation of storage assets to minimise financial burdens on taxpayers,” Monash said.
To ensure financing reliability, the university recommended developing a new approach to safeguard system reliability in a storage dominated grid, thus potentially relying on long term contracting or new procurement mechanisms.
Also, further investment in research could address future challenges such as the limits of revenue generation and market design to sustain storage investment.
“Australia can lead the way in creating a robust, efficient, and sustainable energy future, but understanding storage is the key to its success,” the report noted.
According to TBH Consulting’s director Rob Hammond, another major hurdle for the transition is the level of complexity and inconsistency of regulatory and planning processes between state jurisdictions.
For example, the planning approval process for large-scale renewable energy projects in New South Wales is significantly slower and more expensive than in other Australian states.
On average, it takes two to three times longer (or four to seven years) to bring a project online in New South Wales and can be 25 times more expensive for developers compared to Queensland.
“According to recent findings, a typical large wind project in NSW costs more than $4 million simply to apply for approval to build a 1.5 gigawatt project,” Hammond said.
“In contrast, Queensland boasts the swiftest planning approval system for a typical large project, taking only one to two years and costing just $30,000 to apply. “In NSW, average approval times range from 492 days for critical state significant infrastructure projects, including hydro and transmission, to a staggering 3,488 days for wind projects. “These delays not only affect the deployment of new renewable energy projects, such as solar (705 days average approval time) and battery storage systems (530 days average approval time) but they also impact the broader goal of reducing carbon emissions and hinder the state’s ability to meet its renewable energy and emissions.
“Prolonged approval times can also lead to increased project costs for investors due to inflation, changes in technology prices, and holding costs. This can make renewable energy projects less economically viable and deter financing in the sector over the medium to longer term.”
To streamline approvals, clean energy projects need to invest in tools to identify the most suitable locations for new projects considering wind and solar conditions, environmental sensitivities as well as the proximity of these sites to communities and existing grid infrastructure.
In this way, developers could select sites with fewer obstacles right from the start, saving time and money on costly feasibility studies and making the process clearer and more reasonable for all parties.
An integral part of managing the inherent unpredictability of renewable energy, though, is securing grid connection agreements and assessing the impact of new projects on the existing infrastructure.
“The process of securing grid connection agreements is often complex and time-consuming, and involves navigating technical, regulatory, and logistical challenges at both the pre- and post-connection stages which can take months or even years,” Hammond said.
“Unlike Europe, Australia’s eastern grid is a long line along the coast, making it more vulnerable to disruptions. “The rapid growth of renewables projected to reach 35,000 MW by 2030, necessitates innovative solutions for monitoring, co-ordinating, and aggregating these resources to ensure a secure, stable, and reliable energy supply.”
The Australian energy market operator has identified a need for more than 10,000 kilometres of new transmission lines by 2050 under the step change and progressive change scenarios.
Hammond noted that if Australia pursued more transformational scenarios, such as green energy exports, twice as much transmission would be needed and delivered at a much faster pace.
