The Australian Energy Market Commission is calling for views on changing the National Energy Rules so large-scale batteries and other storage can take their place more efficiently in the power system.

Proposals from the Australian Energy Market Operator (AEMO) include creating new categories and classifications in the rules for “bi-directional resource providers” and reviewing how obligations in the rules, including fees and charges, apply to them. They are outlined in an AEMC consultation paper released on Thursday August 20.

In assessing those proposals, the AEMC will look at how storage and hybrid businesses (that combine different technologies such as batteries, solar and wind behind one connection point) are treated under the rules. The AEMC will look at whether this creates barriers to them entering the market, increases costs and workload, or affects investment certainty or clarity for businesses.

“This is the third major arm of the work we are doing to get the grid ready for the energy storage era,” AEMC acting chair Merryn York said.

“We have already approved major reform on five-minute settlement, which will make the market more responsive and create financial incentives for fast-response energy generation like batteries to participate. We are also working on transmission access reform, which proposes financial incentives for batteries to locate where they’re needed most – to back up variable renewable generation like wind farms and solar plants.

“This third piece of work on integration is about looking at how storage enters the market, and how it can participate to best effect. The forecast influx of storage and hybrid systems means the future will look very different, so we need to look at how the rules should adapt.”

Down the cost curve

Since 2017, five large batteries have connected to the national grid. The cost of lithium ion batteries dropped by 87% between 2010 and 2019 and capital costs for grid-scale batteries are forecast to fall from $227kWh to $53kWh in the next decade.

AEMO has identified 13GW of publicly announced, maturing and committed future storage projects. While there are no grid-scale hybrid facilities live just yet, AEMO is receiving registration and connection enquiries.

The energy storage integration work intersects with work already underway by the Energy Security Board (ESB), which is looking at, among other things, small and large-scale storage as an important part of a two-sided energy market. In a truly two-sided market, energy consumers large and small both buy and supply electricity.

“The national energy rules were written when energy flowed one way: it was either supplied or consumed,” York said. “Now, energy flows in both directions. Batteries and other storage like hydro can both consume energy and supply energy to the grid. Eventually, this two-way flow of electricity will be the norm.

“The AEMC is working on the two-sided market initiative as part of our role on the ESB so we are well positioned to ensure both of these projects are in sync.”

Submissions to the AEMC consultation paper close on October 15.