Australia: Battery technology for renewable energy generation and storage drives electricity rule changes

Last Updated: 22 August 2016
Article by Dan Howard and Will Waldron

Most Read Contributor in Australia, August 2016

Proponents who want to install and operate batteries will need to keep an eye out for more regulatory changes that may come from the AEMC Integration of Energy Storage review.

The use of batteries is set to play a key role in the ongoing development of renewable energy generation, demand side management and network support. Rapid advancement in battery technology means that we are fast approaching the point where batteries are of the size and performance that will enable them to be integrated into large scale renewable developments, store and generate significant amounts and provide valuable network support.

One challenge that is being posed by a rapid uptake of battery installations, along with other "non- traditional" forms of energy storage and release, is how best to categorise these within the current regulatory environment.

In October 2015, the Australian Energy Market Commission (AEMC) published a discussion paper seeking stakeholder views on the ability of the existing regulatory framework to accommodate storage devices such as batteries, as well as any suggested solutions. As a result of this process and submissions from interested parties the AEMC produced a range of recommendations on how storage devices should be treated and accommodated within the current electricity regulatory framework.

The AEMC's Recommendations

The AEMC provided the following 10 recommendations:

  1. Services including battery storage services provided by network providers behind the meter are to be contestable and must be ring fenced from the network service providers regulated network activities.
  2. The Australian Energy Regulator should develop ring fencing guidelines that will apply to separate the network activities from storage service should include the ability of network service providers to obtain access to battery related services by contracting for them from battery owners and operators.
  3. Incentives should be considered for network service providers to substitute opex expenditure on battery storage for capex.
  4. Lead times in the AEMC planning process to be reviewed to see if they are appropriate in the face of changing technology and the increase in distributed energy resources (including increased penetration of batteries in their generation capacity).
  5. Any interested party may submit a request for a rule change to remove the ambiguity regarding the definition of generating unit and when a battery owner/operator is to be treated as a generator within the NEM.
  6. AEMO should conduct a review of the existing registration category of small generator aggregator to determine whether it is suitable for combined multiple disaggregated storage devices behind the meter for participation in the NEM.
  7. AEMO should conduct an assessment of whether technical limitations applying to small generator aggregators are suitable for those parties wishing to offer FCAS (ancillary services in the NEM).
  8. AER to review the existing network service providers basic connection services for micro embedded generators to ensure that they are clear about the ability to connect the storage system and export to the grid.
  9. AEMC will conduct a technical review of the technical standards in the NER to assess their applicability for connection of storage by a registered participant either as a generating system or a load.
  10. AEMC will conduct a review of the technical requirements that apply to the connection of micro-embedded generation to ensure they are appropriate for matters such as remote control and network service providers ability to control its network.

Why has the battery / generator distinction caused so much confusion?

Batteries have different characteristics from traditional generators in that they both store and produce electricity from an electrochemical reaction process. Accordingly, batteries can be both a consumer of electricity when they are being charged and a producer of electricity when they are being discharged.

The National Electricity Rules require a person that engages in the activity of owning, controlling or operating a generating system that is connected to a transmission or distribution system. A generating system is a system comprised of generating units that are registered with by a person (generator) on application to and with approval of AEMO.

Previously, the phrase "generating unit" was defined in Chapter 10 of the National Electricity Rules as:

"The actual generator of electricity and all the related equipment essential to its functioning as a single entity".

The traditional meaning of a generator was a device that converted mechanical energy to electrical energy; as a result, some would say that a battery, which can store and produce electricity from an electrochemical process, does not constitute a generator.

To make eligibility for registration as a Generator technology-neutral and to remove uncertainty as to the qualification of batteries, the AEMC proposed changes to the National Electricity Rules which were adopted on 26 May 2016. These changes amended the definition of "generating unit" in Chapter 10 of the National Electricity Rules to read as follows:

"The plant used in the production of electricity and all related equipment essential to its functioning as a single entity".

In addition, clause 2.2.1(b) of the National Electricity Rules which provided that a person "who otherwise supplies electricity to a transmission or distribution system" could apply for registration, was removed as it served no further purpose following the above definition change.

As a consequence, it is now clear that non-conventional producers of electricity such a batteries will also qualify as generators for the purpose of the National Electricity Rules. This allows AEMO to address applications for registration from non-conventional generation without risk that it is acting outside of its powers. The Commission is of the view that a person seeking to participate in the NEM using a storage device should be registered, however, the Commission acknowledges that there is a separate issue, which is yet to be addressed, about whether one device can be registered to perform more than one activity (for example, whether a participant can register a facility as both a market generating unit and a market load).

Being compliant under the National Electricity Rules

Due to the rapidly growing area of renewable energy generation and storage, there is an equally important need to revisit existing energy regulations to ensure that there are uniform rules and no unintended barriers to the uptake of new technology. The recent amendments to the National Electricity Rules and the AEMC review recommendations are clear steps to ensure that the advantages of battery storage and battery generation are fully available.

Depending on the proposed use of batteries in the energy supply mix, there is still potential for a proponent to require multiple registrations (ie. as load customer and as a generator). Accordingly, it is important that each use of a proposed battery is assessed for its registration requirements taking into account:

  • whether the battery will export power to the network or whether it is operating solely behind the meter;
  • the size of the battery and its generation capability;
  • whether the battery will be installed as part of a renewable generating system (eg in conjunction with solar pv); and
  • whether the battery will take power from the network.

Each of these factors will impact on the registration requirements or whether exemptions are available under the National Electricity Rules.

For proponents wishing to install and operate batteries it will be necessary to keep abreast of further regulatory changes that may come about following the AEMC recommendations from its Integration of Energy Storage review.

RELATED KNOWLEDGE

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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