‘No longer economically rational to build gas peakers in Australia’

There’s still a disconnect between what’s achievable and what is actually being achieved in the drive to decarbonise. Despite a boom in renewable energy generation, Australia’s government line is instead commitment to “a gas-fired recovery”. Lillian Patterson, director of energy transformation at the national Clean Energy Council, told Andy Colthorpe why economics and the environment clearly indicate that it’s time to leave fossil fuels behind.

This is an extract of an article which appeared in Vol.27 of PV Tech Power, Solar Media’s quarterly technical journal for the downstream solar industry. Every edition includes ‘Storage & Smart Power,’ a dedicated section contributed by the team at Energy-Storage.news. 

During 2020, renewable energy generation in Australia amounted to about 27.7% of the national total, with wind about a third of that, but more than 3GW of small-scale solar was installed in the year and about half as much large-scale solar capacity. Yet, despite that boom, and despite strong recognition of the potential of renewable energy by several state governments, the national federal government has been criticised for its seeming inability to form a coherent set of long-term decarbonisation goals. Indeed, the mantra during the more recent months of the COVID-19 pandemic, as other countries consider a ‘green recovery,’ Australia’s government line is instead commitment to “a gas-fired recovery”.

That commitment is a dangerous one says Lillian Patterson of the Clean Energy Council, a national trade association which recently published a study showing that battery storage can be more effective and 30% cheaper on a levelised cost of energy (LCOE) basis than new-build gas peaking plants.

“Our federal government has committed to a gas-fired recovery. They have been reticent to commit to a climate change and energy policy. This is one of the things that has been really lacking in Australia for a long time: we don’t have a long-term climate change policy that considers energy policy as well.”

The Australian Energy Market Operator (AMEO), which manages electricity and gas markets to oversee the reliable and affordable transmission of energy, has modelled that the National Electricity Market (NEM), covering the southern and eastern parts of the country will need between 26GW and 50GW of large-scale renewable energy and between 6GW and 19GW of new dispatchable resources by 2040.

The lower end of those figures is what it will take to largely retire coal power generation, but Patterson says the AEMO’s Integrated System Plan 2020 doesn’t see a role for gas to fill the gap over the next 20 years, it could be filled by a range of different types and scales of energy storage.

When it comes to peakers, the Clean Energy Council’s own analysis finds it’s no longer economically rational — or necessary — to build gas power plants for peaking capacity when batteries can be “the new clean peaker”.

Peaking plants are generally needed in the NEM after 6pm each night for an average of three to four hours as solar systems ramp down and demand hits its peak. Gas peakers are able to ramp up in about 15 minutes; on the other hand, batteries can respond accurately and near-instantaneously to signals from the grid.

“[The paper is] really highlighting that batteries, that storage is offering the services that gas is doing, but it’s a cleaner option to do that. It’s not [just] the cleaner option, it’s also a cheaper option as well,” Patterson says.

The Clean Energy Council wanted to “put in a different perspective into the conversation” about the government’s gas-fired recovery strategy. And while the study does find that, modelling a 250MW / 1,000MWh ‘battery peaker’ for the New South Wales region, it’s considerably cheaper than gas, what could become even more important is a) the future value of battery storage and b) the economic and policy risk of developing new gas facilities.

“We didn’t factor in anything to do with a carbon price, because we don’t have a carbon price in Australia, but there is a carbon risk associated with gas as well. That could be a carbon price or similar [policy] within Australia. That would obviously increase the LCOE for gas. We’re also seeing the ‘carbon border taxes’ that are being considered in places like Europe. That’s something else that needs to be considered in this as well. If we produce anything and we want to send it overseas, they’re going to recognise that we don’t have a carbon price and so therefore, the cost of that could be more expensive.”

So the cost differential would be even more significant if carbon taxes were incorporated into analysis. The national Clean Energy Regulator is currently considering the role of a ‘carbon exchange,’ effectively an exchange trading market for offsets. The other side of the coin is that the additional revenues a battery storage plant could accrue will also alter that differential further.

There is already a frequency control ancillary services (FCAS) market which large-scale batteries and virtual power plants ( VPPs) have already benefited from. In April chief rule maker, the Australian Energy Market Commission (AEMC) said it will be introducing a fast frequency response market within a couple of years that will value response times of less than six seconds: an opportunity lithium-ion batteries will be perfectly suited to take part in, where many other resources will not.

The introduction of shorter, five-minute settlement windows in the wholesale market, expected to begin this October, will also change the game. Knowing all of this, who would even want to invest in new gas peaker plants?

“Coal and gas generation have been an important part of our energy mix but we are transitioning, and in moving forward, we need diversity. We need renewables, we need solar and wind, we need energy storage — we need different types of storage. We need shorter duration battery power, we need virtual power plants (VPPs), we need longer duration pumped hydro and we need transmission because as everyone knows the sun doesn’t always shine and the wind doesn’t always blow.”

Cover image: Large-scale battery storage at Gannawarra solar farm in Victoria, Australia. Credit: Edify Energy. 

This is an extract of an article which appeared in Vol.27 of PV Tech Power, Solar Media’s quarterly technical journal for the downstream solar industry. Every edition includes ‘Storage & Smart Power,’ a dedicated section contributed by the team at Energy-Storage.news. To learn more and to subscribe, visit the homepage here.