Not all flexible resources are created equal

The energy culture wars continue unabated (pun intended) with recent news reports of how pumped hydro and/or gas peakers compare to batteries. Firstly, NSW environment minister Matt Kean reportedly argued that renewables plus “storage and demand response” are cheaper and better than traditional coal and gas. Second, Victorian Energy policy centre director Bruce mountain continues his campaign against Snowy 2.0. meanwhile University of Queensland’s Andrew Wilson penned a more technical and less politically charged analysis of how a battery responded to a recent price spike in Queensland compared to pumped hydro and gas.

A point that could easily get lost in the debate is that these technologies are not perfect substitutes for each other as they do not have the same characteristics and so can’t deliver precisely the same benefits to the grid and don’t come with precisely the same set of challenges. So, what follows is a quick primer on each.

Batteries are an enormously flexible resource. Like solar panels they are modular and hence scalable. They may get deployed in homes and businesses, on the network, in vehicles, or aggregated into large utility-scale installations. They can also respond very quickly, ramping up to their full capacity in a minute or two. This speed of response can be very useful in filling the gap when other power plants suddenly go offline.

This speed is helping batteries capture a big chunk of the frequency control market. AEMO’s latest Quarterly Energy Dynamics report shows that one battery, Neoen’s heavily subsidised Hornsdale Power Reserve, captured 17 per cent of all FCAS revenue for the quarter. Batteries are also an obvious way to arbitrage energy prices, especially as negative wholesale prices become more frequent. Their round-trip efficiency is very high, so little energy is wasted in charging and discharging.

Batteries’ speed of discharge, while useful at times is also a double edged sword. Excessive ramping – if a lot of batteries are trying to respond at the same time to a price signal, say, can be hard from AEMO to manage. This is doubly so if the individual batteries are too small to be required to register as scheduled generators, in which case AEMO won’t even have visibility of their activity.  Whether collections of aggregated smaller batteries should all be able to ramp at their maximum rate simultaneously is just one of the issues the AEMC is wrestling with in its review of the regulatory treatment of storage in the NEM. It also means batteries are unlikely to provide power over a sustained period (several hours).

Pumped hydro, by contrast, can provide energy for longer periods, depending on the size of their storage. This could be important during winter periods of still, cloudy weather, or Dunkelflaute. How important depends on one’s assumptions – a reason for Mr Mountain’s claim that Snowy 2.0 is poor value for money is that his modelling suggests the maximum gap in power from renewables plus existing hydro resources is only around 4 hours, which could plausibly be met by enough batteries.

Pumped hydro actually increased its revenue year-on-year in the last quarter according to the AEMO report, while batteries’ collective revenue fell. But the upcoming move from thirty minute settlement to five minute settlement is expected to favour batteries over both hydro and gas because if their quicker response times.

Pumped hydro has a couple of drawbacks compared to batteries. It is much less efficient, using about a third more energy to recharge (by pumping water back uphill) than when it generates power by releasing the water back downhill. The volatile spot price still creates some arbitrage opportunities despite this inefficiency. It’s also much more locationally specific, although ANU academic Andrew Blakers has argued that a modular design could be installed anywhere with a suitable change in elevation, which allows for hundreds of potential sites around the NEM. We’ve yet to see any of these modular plants get built, though.

Gas peakers of course are not storage assets. As such they can in principle run indefinitely as long as they have a fuel supply. In practice they are expected to run only at times of high prices. Newer plants like AGL’s Barker inlet are more efficient and quicker to respond than older ones, but still risk being outcompeted by batteries for short-term revenue opportunities. They also release CO2, which will become an increasing concern as Australia heads towards net zero (batteries and hydro are only as emissive as the power they need to recharge, so decarbonise along with the grid). Their absolute emissions are relatively small though since they are only used periodically. It’s not inconceivable that this issue could be addressed by offsets. Biogas, CCS or conversion to hydrogen are all also solutions in principle.

Both gas peakers and pumped hydro are synchronous generators, which means they naturally support system strength and inertia. These characteristics keep the grid secure. Batteries are inverter-connected and so don’t inherently help with security, although inverters can be designed to be “grid-forming” which allows them to do so. The Hornsdale extension and Dalrymple, also in South Australia are examples of batteries with grid-forming capability.

Realistically, a mix of all three is likely to be a good balance for the power system over the next few decades. Also, realistically, the actual mix we get looks likely to be determined by government fiat as much as by the market. While the federal government has put its fiscal weight behind snowy 2.0 and Tasmania plans its Battery of the Nation (for the avoidance of doubt, this is actually increased hydro capacity), South Australia and Victoria are underwriting batteries big and small. Victoria’s latest battery support is for the Neoen installation at Moorabool.