What the US can Learn about Energy Storage from Australia

Australia is home to a battery energy storage system (BESS) that is demonstrating how to optimize a BESS asset to monetize value streams for multiple parties. In operation for one and one-half years, the project is exceeding expectations for both regulated and deregulated revenues. If trends continue, the revenue from the project will surpass the total cost of the project in another 6 months—about 2 years after project commissioning. These impressive results demonstrate how investments in BESS can be both beneficial and profitable. The secret is combining a creative business model with innovative BESS controls.

The BESS Market
BESSs are a new asset type that can provide multiple value streams for utilities. A modern BESS includes a converter, smart automation and controls, and, of course, batteries—packaged together with protections to ensure safe and robust operation. Over the past decade, lithium-ion battery costs have plummeted more than 87% according to BloombergNEF. This cost reduction is expected to drive increased growth, as more utilities consider BESS as a viable technology to address capacity constraints, or as a tool to provide grid ancillary services (voltage or frequency support). Despite these tailwinds, BESS technologies can do more to support renewables integration in the North American market; and these features will be increasingly important as more variable generation comes online.

Developing a positive cost benefit analysis for a storage project remains a challenge. The multiple use cases enabled through BESS flexibility cannot always be operationalized or may not be allowed due to regulatory constraints. For these reasons, utilities are creating new business models and contracts to get their storage projects launched. SEPA is developing a white paper documenting the multiple factors utilities consider when developing these business models. One example is monetizing the multiple value streams that a BESS project can provide, with value accruing in generation, in the transmission network, in the distribution systems, in the ancillary markets, and even for customers behind-the-meter.

The recently released National Standards Practice Manual for DERs (NSPM) discusses the factors that impact potential costs and benefits of energy storage as a distributed energy resource. Some of those factors include:

• Technological Characteristics: Impact the storage asset’s functionality, and thus the use cases it can support
• Technology Operating Profile: Impacts what benefits accrue and costs occur when the storage asset is operated in different modes (e.g, charging, discharging)
• Interconnection Location: Impacts the storage asset’s functionality based on whether the asset is located in front of or behind the customer meter
• Resource Ownership and Control: Impacts which functionalities will be prioritized, and the benefits and costs that will be realized through the storage asset

While NSPM is focused on DERs, which might imply behind-the-meter assets, the factors listed above are relevant to front-of-the-meter storage.

Innovation in Australia
The ElectraNet Dalrymple Project in South Australia offers an example of how to optimize a BESS asset to monetize multiple value streams for multiple parties. For context, most electricity in Australia is generated, bought, sold and transported in deregulated markets that match supply and demand in real time. The National Electricity Market (NEM), which is administered by the Australian Energy Market Operator (AEMO), fills this role for the east coast and southern states of Australia by facilitating the exchange of electricity between generators and retailers. Retailers then resell the electricity to businesses and households. High voltage transmission lines transport the electricity from the generators to electricity distributors, who deliver it to homes and businesses on lower voltage ‘poles and wires’.

ElectraNet is the transmission network service provider in South Australia. They own and operate the high voltage transmission system to facilitate competition of generation and security of supply.

South Australia has high penetrations of solar and wind as compared to average system demand, which creates potential system security challenges during a major disturbance. System blackout and load shedding events occuring in recent years have heightened this concern. For these reasons, ElectraNet wanted to demonstrate how energy storage can strengthen the grid and improve reliability for the lower Yorke Peninsula.

The Dalrymple ESCRI-SA Battery Project in Australia is a 30 MW / 8 MWh BESS located at ElectraNet’s Dalrymple transmission substation. It’s also the first large-scale BESS in Australia’s NEM to provide both regulated network services and competitive market services. Specifically, the project provides the following services:

• Fast frequency response (FFR) to reduce transmission constraints between South Australia and the rest of the NEM
• Reduction in unserved energy during times of loss of supply. The grid-forming inverter in the BESS enables the Lower Yorke Peninsula network to operate as a microgrid with nearby distributed solar PV and a large wind farm until supply is restored. In its first 18 months of operation, it reduced outages from almost 11 hours to about 30 minutes — a more than 95% improvement.
• Wholesale market trading of electricity and ancillary services in the NEM
• Black start from distributed resources. The grid-forming inverter in the BESS enables ElectraNet to restart the local network after an outage.

Stakeholders in the project include:

• Australian Renewable Energy Agency (ARENA) – government agency that provided grant funding in support of the project
• ElectraNet – owner and operator of the transmission network and BESS
• AGL Energy – energy company who leases the BESS for use in the competitive wholesale markets.

Another aspect of the BESS is its ability to form a microgrid to seamlessly island the network and customers in the lower Yorke Peninsula. ElectraNet installed the BESS close to the existing 91 MW Wattle Point Wind Farm in order to coordinate operations to limit curtailment, despite a black out affecting the rest of South Australia. It also supports roughly 3.4 MW of distributed rooftop solar within the microgrid to further maximize the battery’s value. When operating as a microgrid, it is powered by 100% renewable generation.

The project parties have signed a Battery Operating Agreement (BOA) which is structured as an energy storage services agreement requiring the parties to enter an Operating Protocol for the asset. The Operating Protocol ensures the facility operates in accordance with the terms of the BOA. This agreement forms the contractual basis for AGL’s operation of the BESS, as well as the regime of payments and an availability guarantee.

BESS Controls
The BESS was designed and commissioned to provide the following services in the priority order listed below.

1. Islanded operation to enhance local reliability of supply
2. Fast Frequency Response (FFR)
3. Network support
4. Frequency Control Ancillary Services (FCAS)
5. Energy arbitrage

AGL operates the BESS and trades in the ancillary and energy markets. During a network event, where the BESS is required to respond, the system is configured to automatically switch to one of the higher priority services.

The controls and automation in the BESS’s grid-forming inverter unlock the power of the batteries for the network. This includes a unique Virtual Synchronous Machine (VSM) that produces virtual inertia to stabilize and strengthen the network. The VSM allows the BESS to behave similarly to the synchronous machines that have traditionally stabilized utility networks; in other words, it behaves like a resource with which utility engineers are already familiar. However, since it is based on power electronics and batteries, it can respond much faster than these traditional utility assets. This speed is important for integrating high-penetrations of renewable generation into a network.

The VSM can also be field tuned to meet the needs of an evolving grid—particularly as the mix of renewable generation on the network changes. With this technology, ElectraNet tuned the Dalrymple BESS to seamlessly transition the Lower Yorke Peninsula network from operation to support the South Australia network, to a microgrid, and back again. It also enables decentralized black start, enabling ElectraNet to restart their network from renewable, distributed energy resources.

Making it Work in the US
As bulk renewable energy generation and distributed energy resources continue to proliferate across the US, more solutions like the Dalrymple Project will be needed. Specifically, the regulatory and business model frameworks in the US will need to evolve to foster innovative solutions that leverage the multiple values and flexibility that batteries offer.

The Oakland Clean Energy Center Initiative in California is one early example of a domestic business model that brings together diverse value streams. The project involves multiple parties and a battery asset that will provide reliability and market services. California’s unique regulatory landscape drives the structure of the Oakland Clean Energy Center Initiative, but it offers an example of how elements of the Dalrymple project in Australia can be applied in the US.

The ElectraNet project demonstrates innovation in both business model and grid integration controls to maximize the value of battery energy storage. The design allows the project parties to optimize revenue generation from energy and ancillary services markets while also realizing value from a stable network. The project has been able to maximize renewable energy generation and reduce renewable curtailment, while also ensuring continuous power supply for customers. Given these impressive results, BESS are poised to demonstrate their value as both incredibly beneficial and profitable – not only in Australia, but also here in the US.