MARKET AND REGULATORY UPDATE AUSTRALIAN ENERGY STORAGE ALLIANCE CONFERENCE

SUZANNE FALVI, EGM SECURITY AND RELIABILITY 12 JUNE 2019

Overview

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1. National electricity market

2. Governance of energy markets

3. Changing power system

4. AEMC reform priorities

5. Regulatory projects relevant to storage

National electricity market

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• >40,000 km of transmission lines

• ~200 TWh of electricity to businesses

and households each year

• Total electricity generating capacity of

almost 54,421 MW (as at Dec 2017)

• >$18 billion annual turnover in 2018

NEM market design

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WHOLESALE MARKET (Generators sell their power to retailers)

NATURAL MONOPOLIES

ELECTRICITY SUPPLY CHAIN

NETWORK REGULATION

RETAIL MARKET

METER

More consumers are buying and selling power

ELECTRICITY GENERATION

TRANSMISSION NETWORK

DISTRIBUTION RETAILER CONSUMERS

The rules enable the regulator to set the maximum prices network business can charge for services they provide. Prices are set every five years.

AEMC MAKES THE RULES

AUSTRALIAN ENERGY REGULATOR (AER) APPLIES THE RULES RULES

Natural Monopoly Sector Component 46.5%

Competitive Sector Component 53.5%

Based on the average NSW residential bill in 2017/2018. Source: AEMC Price Trends 2018

Council of Australian Governments (COAG) implements policy reforms of

national significance that require cooperative action by federal,

state and territory governments

COAG Energy Council is made up of the nation’s

energy ministers. They provide national leadership on energy market development which

is so important for the health of the national economy

COAG COAG Energy Council

National governments and energy policy development

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Australian Energy Market Commission

Rule maker, market developer and expert adviser

to governments

Protects consumers and achieves the right trade-off between cost,

reliability and security.

Australian Energy Regulator

Economic regulation and rules compliance

Polices the system and monitors the market.

Australian Energy Market Operator

Electricity and gas systems and market operator

Works with industry to keep the lights on.

AEMC AER AEMO

Market body roles

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Who we are

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We are the rule maker for Australian electricity and gas markets.

We also provide advice to governments.

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REGULATORY FRAMEWORKS TO FACILITATE CHANGING THE POWER SYSTEM

The generation mix is changing

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Source: AEMC analysis (MMS Database)

Synchronous generation is exiting, non-synchronous is entering

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Inst

alle

d ca

paci

ty (

MW

)

Source: AEMC Annual Report 2017/18

Distributed energy resources are increasing

11 Source: AEMC analysis

July 2009

July 2018

This is changing the shape of demand – SA demand profile (average across calendar year)

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Source: AEMC analysis

Energy storage projects – connected and in operation

As of January 2019, there are four large-scale energy storage facilities that have connected to the NEM:

• A 100 MW/129 MWh lithium-ion battery storage system at Neoen’s Hornsdale wind farm near Jamestown in South Australia. The Hornsdale Power Reserve utilises Tesla’s technology and commenced operation in December 2017.

• A 30 MW/8 MWh lithium-ion battery storage system at the Dalrymple substation on the Yorke Peninsula in South Australia. The project is owned by ElectraNet and will be operated by AGL, and commenced operation at the end of 2018.

• A 30 MW/30 MWh lithium-ion battery storage system at the junction of four major transmission lines at AusNet Services’s substation near Ballarat in Victoria. The Ballarat Energy Storage System is owned by AusNet Services and operated by Energy Australia. The battery is now registered and operating.

• A 25 MW/50 MWh lithium-ion battery co-located with the 60 MW Gannawarra solar farm near Kerang in northern Victoria. It will be jointly owned by Edify and Wirsol, and operated by Energy Australia. It is now complete and in the process of being fully commissioned.

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Utility scale battery storage services

Region Planned project

Queensland

• 20 MW/80 MWh chemical battery storage at Cape York Solar Storage project (battery and solar farm) • 100 MW chemical battery at Kaban Green Power Hub (combined with a wind farm) • 250 MW pumped storage hydro project at Kidston Gold Mine • 2 MW/4 MWh lithium-ion battery being constructed alongside a solar and wind farm at Kennedy Energy Park • 1000 MW/4000 MWh Gympie Regional Energy Hub - Stage 3 - solar farm and chemical battery storage • 1000 MW/4000 MWh Ipswich Regional Energy Hub - solar farm and chemical battery storage • 1000 MW/4000 MWh Wivenhoe Regional Energy Hub - solar farm and chemical battery storage

New South Wales

• Feasibility study recently completed into the potential expansion of the Snowy Hydro Scheme - Snowy Hydro 2.0

Victoria

• 20 MW/34 MWh chemical battery to power glasshouse at Stawell planned (battery and wind farm) • 20 MW/34 MWh chemical battery at Bulgana Green Power Hub (battery and wind farm) • 80 MW/320 MWh chemical battery storage at Nowingi Solar Storage project (battery and solar farm) • 12MW battery at Inverleigh windfarm

South Australia

• 100 MW/400 MWh chemical battery storage at Kingfisher Solar Storage project (battery and solar farm) • 100 MW/400 MWh chemical battery storage at Riverland Solar Storage project (battery and solar farm) • 25 MW/52 MWh lithium-ion battery adjacent to Lake Bonney Wind Farm • 10 MW chemical battery at Lincoln Gap Wind Farm • 21 MW chemical battery at Snowtown North Solar Farm • 6 hydrogen fuel cell buses to be built near Adelaide • 270 MW/2000 MWh pumped storage hydro project at Baroota • 230 MW pumped storage hydro project at Goat Hill • 300 MW pumped storage hydro project at Highbury • Australia’s biggest solar thermal storage plant scheduled to open in 2020 near Port Augusta • Planning is under way on the Eyre Peninsula for the largest salt water pumped hydro facility in the world

Tasmania • Feasibility study for expansion of Tasmanian hydro

Northern Territory • 5 MW/3.3 MWh chemical battery at Alice Springs

Energy storage projects – planned (current as of Jan 2019)

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AEMC priority areas of reform

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1. Generator access and transmission pricing

Shift from large geographically concentrated to small geographically dispersed generation

2. System security Services previously provided for free not necessarily provided by new generation

3. Integrating distributed energy resources

Increased adoption of small-scale solar and energy storage technologies

4. Digitalisation of energy supply Increased adoption of digital technologies

5. Aligning financial incentives with the physical needs

More variable demand and supply creating volatility

2019 Competition review looks at the solar PV and storage products being offered to customers and how these are evolving.

Embedded networks review - law and rule changes to strengthen protections and improve access to competitive retail offers for embedded network customers.

Coordination of generation and transmission investment review will reform the access and charging regimes for new connecting generators

Stand-alone power systems review – designing a new approach to regulating stand-alone power systems and microgrids owned and operated by third parties.

Electricity networks economic regulatory frameworks review is looking at ways to unlock the value of distributed energy resources

Current regulatory projects related to storage

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Demand response mechanism developing a mechanism that would allow demand to be offered into the wholesale electricity market in a transparent, scheduled manner.

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We have a unique system in Australia where anyone, any company, government, advocacy group or individual

person, can propose a change to the rules.

Collaboration is the key to success as it will deliver workable and lasting change.

Office address Level 6, 201 Elizabeth Street Sydney NSW 2000

ABN: 49 236 270 144

Postal address PO Box A2449 Sydney South NSW 1235

T (02) 8296 7800 F (02) 8296 7899