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Batteries hit their peak as gas phases out

When it comes to electricity peaking services, batteries beat gas hands down.

Despite what some in the Federal Coalition and conservative media would have you believe, it is now undeniable that Australia’s energy future is renewable. Every Australian state and territory government has acknowledged this – regardless of political allegiance – and the market bodies have already begun mapping out what the transition to a clean energy-based electricity system will look like.

The Australian Energy Market Operator (AEMO) is leading the way on this front, with the latest iteration of its Integrated System Plan anticipating that an additional 26 to 50GW of new large-scale renewable energy generation will be needed in the National Electricity Market by 2040 to replace Australia’s retiring coal-fired generators. To support this massive influx of new renewable generation, the majority of which will be large-scale wind and solar, AEMO has signalled that 6 to 19GW of new dispatchable resources will be needed.

A decade ago, this would have been provided by gas, which was touted as the ideal transition fuel from coal to renewables. However, steep price rises for gas, combined with rapid technological advances for storage technology and the growing urgency of the climate emergency, mean that gas is no longer the preferred dispatchable resource. Technologies such as pumped hydro, large-scale battery storage, distributed batteries, virtual power plants and other demand-side participation are now seen as the best options to firm up our increasingly renewable electricity system.

The Morrison Government had a strong preference for a “gas-fired recovery” from the covid-19 pandemic, which extends to the use of gas to firm up the changing electricity system. However, analysis recently released by the Clean Energy Council – Battery Storage: The New, Clean Peaker – categorically rejects this plan, finding that gas is no longer fit-for-purpose in a 21st-century electricity system.

Batteries beat gas on any measure

The Clean Energy Council’s study compared a new 250MW gas peaker with a new 250MW four-hour grid-scale battery, both built in NSW and operating over a 20-year period. The report found that large-scale battery storage is already a far superior choice than gas for electricity peaking services, based on cost, flexibility, services to the network and emissions.

When it comes to cost, the study found that a four-hour battery provides cost savings of more than 30% on a levelised cost of energy basis, providing energy for $156/MWh compared to $234/MWh for a gas peaker. Notably, the battery also outperformed gas on capital costs, an area where batteries have traditionally struggled to compete, offering a 25% saving compared to a gas peaker.

These substantial price differences will only grow in future as battery prices continue to decline, with the US’s National Renewable Energy Laboratory forecasting that the cost of batteries could fall as much as 63% between now and 2030 due to technological advances and increased economies of scale.

In addition to their cost advantages, batteries also provide a superior peaking service compared to gas, offering a faster ramp rate, higher accuracy and better-quality frequency response. They also provide a more comprehensive range of network services, including digital inertia, voltage support, system strength and fast frequency response.

Real-world examples of these services have already been seen with the Hornsdale Power Reserve. Since it was commissioned in 2018, Australia’s biggest battery has saved South Australian consumers millions of dollars by providing frequency control ancillary services, helped to keep the lights on during major network events and unscheduled coal outages, and delivered grid-scale inertia services in a world-first to help stabilise the South Australian electricity grid.

Batteries will also be used for other vital services in the future. For instance, the 300MW/450MWh Victorian Big Battery, currently under construction, will help to unlock an additional 250MW of peak capacity on the Victoria-NSW interconnector, saving millions of dollars in expensive transmission upgrades.

Risk far outweigh benefits

While the future applications of batteries have almost unlimited potential, gas projects come with several inherent risks. First among these is the price of gas, which has a significant impact on the economic feasibility of gas-fired peaking services. While the Clean Energy Council’s study assumed a gas price of $6.50/GJ – which still resulted in a new gas peaker costing 30% than a four-hour battery – AEMO forecasts that gas prices will increase by almost $4/GJ between now and 2032, further undermining the case for gas peaking services.

As the world increases its climate change ambitions, carbon risk also becomes a significant consideration for gas-fired power stations. This may make finance more difficult to procure, increase insurance premiums and raise the prospect of early closure, all of which would further diminish the business case for a new gas-fired peaker.

Gas-fired generation also comes with operational risks from planned and unplanned maintenance outages, which will increase in frequency as the growth of variable renewable generation forces gas plants to ramp more often, causing more wear-and-tear that will shorten their technical lives. In contrast, batteries have higher availability due to the requirement for less maintenance and can offer guaranteed fixed power and energy for over 20 years.

One area where gas does outperform batteries is in duration of storage, with a gas-fired plant able to keep generating power as long as it has a steady supply of gas. Of course, for longer-duration storage, gas plants will be competing against hydro power, which has demonstrated its effectiveness and increasing cost competitiveness for long-duration storage.

However, the demand spikes that peaking services are designed to meet typically range from a few minutes to a couple of hours. This is supported by the market’s clear preference for two to four hours of storage duration, with several recent storage announcements seeking this capacity.

The future will be battery-powered

As the Clean Energy Council’s analysis shows, the case for the widespread use of batteries to provide firming support to Australia’s electricity system is impossible to ignore. On almost any measure – cost, emissions, flexibility, risk – batteries are the far superior option for peaking services. This has already been recognised by governments and project developers around Australia, with 21 battery projects currently under construction (or due to start construction soon) around Australia. Together these projects will deliver over 1,366 MW of new energy storage capacity with the ability to discharge 2,728 MWh.

It’s time for the federal government to also acknowledge the potential of batteries by abandoning its gas-fired fantasy for the electricity sector and embracing the compelling potential of batteries in Australia’s clean energy transition.

*This article was initially published on EcoGeneration, with data current as of 20 May 2021.