Batteries are cheaper and more efficient than gas peakers at supplying bursts of energy during peak demand days, research from the CEC says.
The case for batteries as a superior source of short-term electricity supply during peak demand events has been underlined in a report from the Clean Energy Council. The research shows large-scale battery storage beats gas peaker plants based on cost, flexibility, services to the network and emissions.
According to the CEC’s paper, Battery Storage – The New, Clean Peaker, batteries are cheaper than open-cycle gas turbine plants for providing electricity peaking services.
Open-cycle gas plants can turn on quickly to meet demand spikes. The OpenNEM website shows 20 open-cycle gas facilities in the NEM capable of 5.6GW of capacity. Over the past 12 months they have supplied energy at about three times the cost of wind.
“We use gas peakers when we have peak demand periods, usually hot days, and we need that additional supply to come on,” says CEC director energy transformation and lead author of the report Lillian Patterson.
The duration of a peaker’s running time relies on how long a demand spike is; it can be a couple of minutes, half an hour, a couple of hours. “It doesn’t tend to be for long durations,” Patterson says.
Peakers bid into the market to supply electricity at times when it is most expensive simply because they are expensive to run. Operational and maintenance costs must be recouped during short bursts of activity, and owners of these plants might be viewed as the opportunistic hawks that populate any market.
Two-hour and four-hour batteries are cheaper on a levelized cost of energy and levelized cost of capacity basis, according to the CEC report.
“The key barrier for batteries has been capital cost,” the report says. “But rapid and continuing cost efficiencies driven by product innovations and manufacturing at scale are reducing this barrier, to the extent that it is no longer economically rational (or necessary) for proponents, investors or governments to build gas peaking plants in Australia.”
The CEC paper includes a comparison of capital cost and fixed and variable operations and maintenance costs: showing annual levelised cost of capacity (which includes the cost of building an asset) of $203/kW for an open-cycle gas turbine peaker compared with $119/kW for a two-hour battery and $197/kW for a four-hour battery.
Annual levelised cost of energy is $195/kW for two-hour battery, $156/kW for a four-hour battery and $234/kW for an open-cycle gas turbine peaker.
Ready for action
The report recommends batteries are a better solution for supplying short bursts of energy but the fact is that a gas peaker can make electricity whereas a battery can’t. For batteries to replace peakers, they would need to be sufficiently charged at times when the grid is stressing out.
“We are seeing increasing incidences of negative pricing or very low pricing, and we would expect that batteries would charge during those periods,” Patterson says.
“Peak demand days tend to be when it’s really hot, for example, and we would anticipate during the day when we have a lot of solar they could charge up during those periods. Peak demand tends to happen in the late evening when people come home and turn their air-conditioning on – and when that solar is coming off that’s when we anticipate batteries would come in.”
The Australian Energy Market Operator has called for between 6 and 19GW of dispatchable resources in its Integrated System Plan, to be added to the NEM by 2040. These dispatchable resources will be made up of pumped hydro, large-scale battery energy storage systems, distributed batteries, virtual power plants and other demand-side participation. The CEC says the battery capacity added over the next five years will be sufficient to replace gas peakers.
The five-minute incentive
The risks for gas peakers are increasing, the authors note, with the NEM’s move to five-minute settlement from October looming as a dampener on revenue opportunities.
The 30-minute settlement price generators are paid is the average of the six five-minute blocks. “With five-minute settlement, you’ll get paid the five-minutes at the five-minute rate,” Patterson says. So if a battery owner discharges at $14,000/MWh it will get paid that rate and not the average that includes the other five five-minute blocks that make up the 30 minutes.
This is a clear incentive for a technology that can operate in short bursts, like batteries. “It incentivises faster-operating, more flexible technologies to participate better than they can now,” she says.
Batteries can also earn revenue for providing services to the grid, such as fast frequency response, demand response, system strength, inertia and voltage stability.
The paper compares a new 250MW gas peaker with a 250MW four-hour grid-scale battery, finding that the battery provides cost savings of more than 30% while offering greater flexibility and significantly reducing emissions intensity.
“Batteries can provide a premium peaking service in periods of high demand traditionally met by peaking gas plants,” says Clean Energy Council CEO Kane Thornton. “Batteries can ramp up quickly, have near zero start-up time and provide a better frequency response.”
Since 2018, 8.9GW of large-scale battery storage has been financially committed, proposed and/or approved in Australia, the CEC says. There are 21 battery projects in or near construction around Australia, representing nearly 1.4GW of new energy storage capacity with the ability to discharge 2.7GWh. Fifteen large-scale battery storage projects have been announced this year, representing 6.6GW of capacity and $4.3 billion in investment.
“The commercial case for batteries will continue to improve as battery technology advances and new markets are established to reward the services they provide,” Thornton says. “However, long-term investment certainty remains reliant on appropriate market reforms and forward-looking policies that incentivise new, flexible technologies that are needed to complement renewables.”
The report was released as a fact sheet to “dispel a lot of the myths about batteries that are out there at the moment, particularly in light of the conversation around gas,” Patterson says. “It’s meant to speak to what batteries can do in a really concise way.”