As the storage market evolves owners of behind-the-meter assets will have greater flexibility to profit than on-grid facilities, says UK entrant.
Investors in the Australian storage market take note. Busy competition to supply services from storage assets connected to the grid in front of the meter will always be matched by finite demand.
“It means you have to carefully consider how you’re putting your business case together,” says SmartestEnergy CEO Robert Owens, “and understand that’s not your only reason to exist.”
It happened in the UK, Owens says, where owners of stand-alone battery projects were hoping to reap rewards from very high volatility in frequency markets. As more storage was added to the grid, the market quickly moderated and those attractive price signals disappeared. “There wasn’t the same volatility,” Owens says. “For behind-the-meter batteries it’s a bit different, because they have another reason to exist.”
Owens spoke to EcoGeneration after his company announced it had entered into a memorandum of understanding with renewable energy fund CEP.Energy to create a 1GW battery bank in Australia. In the first stage, SmartestEnergy will manage and operate a 300-400MW virtual power plant for CEP.Energy at industrial park sites owned by the Pelligra Group.
The project with CEP.Energy will be SmartestEnergy’s first foray into the Australian market. It has retail licences in place across the NEM, Owen says, and has been picking up C&I customers since September.
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SmartestEnergy launched in the UK in 2001 to provide services to smaller generators, about the time the market there changed from a pooled to a bilateral market. “There were a lot of challenges for generators at the time,” Owen says. “We set up to provide them with the services they needed … from managing positions and balancing, their renewable certificates all the way through to access-to-market services.”
For its VPP in Australia CEP is targeting embedded networks at commercial and industrial sites within the portfolio of property developer Pelligra Group. “Traditionally more industrial processes make it easier, where there is predicted load or variability in the load you can understand and manage with a sensibly-sized battery,” Owens says. “Certainty of load helps.”
Most of the locations will see rooftop solar installed for the first time, along with storage, and others may already have PV systems installed.
The role of VPP conductor is similar to that of the tuxedoed chap who stands facing an orchestra, except in this case the audience must also be cajoled into optimal efficiency. Owen says SmartestEnergy’s role is to help optimise operations at sites included in the VPP, through peak-shaving, load shifting and so forth, and provide ancillary services, FCAS and actions in the wholesale market as opportunity arises.
The systems will be able to export, Owen says, “although they will be sized in such a way as generally they won’t need to.”
Sites will be selected against criteria that includes load, self-consumption and volatility of energy consumption, so that a decision can be made on a suitable battery capacity and expectations for value generated from a site. “The overall expectation is to manage them as a fleet,” Owens says, “so every site doesn’t necessarily have to be a diamond.”
Batteries will be critical assets in the NEM as renewables push out traditional and predictable generators, Owens says, admitting his company has timed its entrance into the Australian market to make hay while the sun shines. “With any of these new technologies, it’s normally those that can get in quickly that realise the greatest value.”
He’s seen in happen in the UK, where the prices for frequency services were “very, very high” for a while. “Of course, that attracted a lot of people in,” he says, “and that only does one thing to prices, because there is a maximum demand from the transmission system operator for those types of services.”
As the storage market grows, owners and investors will have to be cunning. Assets that operate in front of the meter may not have the same scope for proving their value as those that are behind the meter, where the avoidance of peak charges is worth a lot.
There will be success and disappointment. For consumers, however, it’s all good news.