Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Select Committee into the Resilience of Electricity Infrastructure in a Warming World
07/03/2017
Storage technologies and localised distributed generation in Australian electricity networks

CORBELL, Mr Simon, Victorian Renewable Energy Advocate

[10:20]

Evidence was taken via teleconference—

CHAIR: Good morning. I welcome Mr Simon Corbell, the Victorian Renewable Energy Advocate, appearing via teleconference this morning. Information on parliamentary privilege and protection of witnesses and evidence has been provided to you. I remind witnesses that the Senate has resolved that an officer of the department of the Commonwealth or of a state shall not be asked to give opinions on matters of policy and shall be given reasonable opportunity to refer questions to a superior officer or a minister. This resolution prohibits only questions asking for opinions on matters of policy and does not preclude questions asking for explanations of policy or factual questions about when and how policies were adopted. Mr Corbell, do you have a brief opening statement before we go to questions?

Mr Corbell : I will just make a very brief opening statement. I would like to thank the committee for the opportunity both to appear and to appear by teleconference. My role is a new role constituted by the Victorian government as a renewable energy advocate. This is a position that has been created by the state government to assist the state to progress its strong renewable energy targets of 25 per cent renewable energy by the year 2020 and 40 per cent by the year 2025. My role is to work with the state government, in particular, its policy officers and the relevant ministers in advice and policy development to reach that target, and also to work closely with renewable energy industry developers, particularly in the wind, solar and waste-to-energy fields, as well as with local communities to help facilitate their transition to a clean energy future.

I would like to briefly outline three opportunities that I think are very relevant to the committee's terms of inquiry. The first is in relation to the role of battery storage in the electricity markets. There have been some very significant developments in relation to battery storage nationally in Australia, and some useful initiatives that I think the committee would be interested in learning about at a state level. The first is the commitment by the Victorian state government to invest significantly in large-scale battery storage to improve grid stability and provide for dispatchable load into the Victorian NEM region. This involves a commitment to the development of 20 megawatts of large-scale battery storage in grid-constrained parts of the state. This was announced by the Victorian government in February this year.

The second is support for small-scale distributed energy generation and storage. There are a number of very interesting initiatives occurring within Victoria, which are focused on enabling small rural communities, in particular, to improve energy security for their communities, reduce power costs and, obviously, also reduce the environmental impacts of relying on fossil fuel powered generation. Small rural communities, like Natimuk in the state's north west, are aiming for 100 per cent renewable energy. Equally small communities on the outskirts of Melbourne, such as Newstead, are also currently working through programs and proposals to assist them to make that transition, which involves a range of responses including solar, battery storage and changing of energy market rules and regulations to enable peer-to-peer trading. In this context, it is very valuable, I think, to highlight the importance of government interventions to assist those communities to develop the technical expertise needed to enable them to help make that transition.

The final initiative I would like to briefly touch on this morning in my closing comments at this introductory stage is in relation to battery storage in the Australian Capital Territory.

In my previous role as a minister for the environment in the ACT, the ACT government embarked on a significant program of supporting and subsidising the rollout of battery installations at 5,000 individual household and small business sites across the territory. That program is ongoing and it highlights the importance of providing support to new technologies to bring forward their deployment at scale, to allow lessons to be learnt about how that deployment can take place in the most efficient way, and to build support for a growing industry. With that, I would be very happy to answer any questions that you, Chair, or your colleagues may have. Thank you for the opportunity to make a brief opening statement.

CHAIR: I would like to firstly go to the issue of what rule changes you think might need to be made to the electricity market to bring on more storage capacity, particularly through the projects that you are overseeing here in Victoria, in order to make that work on either a state or a national level. What market rules do you think need amending?

Mr Corbell : The market rules of the National Electricity Market are very complex beasts and I would not profess to have a detailed or intimate understanding of all of them. Facilitating changes, particularly at a regulatory level at the transmission and distribution business level, to allow for better trading between individual energy generators and distributors, for example with distributed household storage, is critically important. Changes around, in particular, the five-minute rule are worthy of consideration, but there are a range of other changes as well which I believe need to be properly looked at. I am hopeful that the work being undertaken by the Finkel review in particular will highlight the importance of those reforms.

CHAIR: Can I ask you about the current government tender for battery storage here in Victoria? Can you give us more information about that? What is the purpose? What is the foreseen capacity? Is this simply something that would be used to bid into the spot market, or is it something that would be there for more long-term contracts?

Mr Corbell : The state has indicated that it is open to both of those possibilities in expressions of interest from the market for the development of 20 megawatts of large scale storage at three possible individual sites across the Victorian NEM region, which have been identified as physically constrained in their transmission capacity. The approach will be to ask the market to come forward with proposals on how they believe that battery storage project could best be deployed. The state has indicated that it will be leveraging support from the Australian Renewable Energy Agency to assist with financing of those proposals. ARENA has indicated its support for that process. The state will be seeking those expressions of interest as of now. In fact, it opened in the last couple of days. The process is due to be concluded and a decision will be taken later this year.

CHAIR: Could you give us an understanding of the benefits of reverse auctions? I am specifically thinking in relation to your experience in the ACT.

Mr Corbell : The reverse auction program is a very effective way of driving down the costs of renewable energy generation. The reverse auction program has been used in the Australian Capital Territory context and is also proposed to be used in the Victorian context with the new Victorian renewable energy target.

The benefits of reverse auctions are numerous. Firstly, it enables the entity running the auction, in this case the state government, to require proponents to be highly competitive in their pricing for renewable energy projects. It allows for full market disclosure of the price of developing renewable energy. Often this is hidden behind power purchase arrangements with individual companies that are not able to be transparent in the marketplace, so a reverse auction brings that transparency.

Secondly, it allows for renewable energy developers to achieve a lower cost of finance. Typically, the benefits of a reverse auction—particularly if it is coupled with a long-term contract, as was the experience in the ACT and as is proposed in Victoria—allows for cheaper finance to be secured by renewable energy developers than would otherwise be available in the market, and that allows for more competitive and lower cost projects to be built. The experience in the ACT was that the prices achieved for wind energy projects and, at the time, the smaller larger scale solar projects that were supported were the lowest ever achieved in the energy market at that time, and they continue to set significant benchmarks for affordable renewable energy generation.

The third benefit of a reverse auction is that it enables other criteria to be applied in determining the overall value of a project to the contracting party—in this case the state government. In the ACT experience, that meant that the ACT was able to leverage not only strong value-for-money outcomes in terms of the price of renewable energy generated but also significant economic development and community engagement outcomes. The ACT secured half a billion dollars of direct investment into the ACT economy as a result of commitments made by renewable energy developers to invest in research, development, skills training and job development in the jurisdiction. The Victorian government similarly is highlighting the importance of local jobs as a key outcome of the reverse auction process and will be proposing to apply a weighting to the scoring of proposals through the auction program to determine their value in terms of economic development outcomes for the state.

Finally, and equally importantly, there is the engagement with local communities. Both in the ACT and, again, in the proposed Victorian scheme, it is proposed that a weighting be applied to strong community engagement outcomes on the part of renewable energy development proponents. This is designed to ensure that those proponents take seriously the importance of engagement with local communities, building social licence and making sure that they are able to win the support of their host communities for the development of those projects.

Senator McALLISTER: Thanks, Mr Corbell. I wondered if you might talk to us about the way the Victorian government is thinking about battery storage. In your opening remarks, you talked about a project to establish a large-scale demonstration project in Victoria. I am wondering if you can give us any insights into the way the Victorian government might think about the debate between the merits of large-scale storage and storage behind the meter. There are obviously a lot of issues associated with how we might approach that from a regulatory perspective in the market, and I just wondered if you could walk us through how the government is thinking about that proposition.

Mr Corbell : The state recognises that battery storage has a critical role to play in providing for increased resilience of the grid in Victoria, particularly with a transition to a higher level penetration of intermittent renewable energy generation through solar and wind. There are opportunities to couple battery storage with wind and solar energy generation so wind and solar energy generation, obviously, can occur at times which do not match peak demand, and the capacity to store that energy generation through batteries from solar or wind and then make it available when required in terms of demand is a very valuable capability.

The state has identified that there are a number of parts of the Victorian grid which are potentially weaker in terms of their capacity to manage transmission and has therefore recognised the value of battery storage in those locations.

The two areas are in the north-west of the state, including the areas around Horsham and Bendigo, and in the south-west of the state, including areas around Terang. They are priority locations for storage. There was also the capacity to look at the development of these projects alongside a large-scale solar or wind generation project so that batteries and innovation are brought together.

Finally, there is the question you were asking around large-scale versus distributed storage. Victoria does have some significant advantages when it comes to distributed storage because of its rollout in the previous decade of smart meter technology. Being able to leverage the availability of that smart meter technology at a household level can play a role as well. I do not think the state has reached a conclusive view on distributed storage at a household level versus large-scale storage, say, at the megawatt scale—whether one is preferred over the other. That is not a position that the state has reached at this time, but clearly the state does see value in supporting distributed generation and storage as a way of improving the overall reliability of the grid and allowing Victoria to continue to be a net exporter of electricity into other parts of the NEM, even with the closure of coal-fired generation, such as Hazelwood.

Senator McALLISTER: Thinking about large-scale storage, has the Victorian government got a view about what kind of market participant most appropriately would develop and deploy large-scale storage? I ask because, historically, network businesses have not been allowed to have a generation capability as well, I guess to protect consumers from an exploitation of their market position. There are obviously some people arguing that, in fact, network providers are best placed to know when and how battery storage would be deployed. I am wondering if these issues have come up for the Victorian government in this pilot project you mentioned and how you are thinking about that question?

Mr Corbell : I think that is an open question at this time. The expressions of interest process has just commenced. The tender will be released in April this year and then it is proposed to proceed to a committed contract by the middle of this calendar year. So there is still a lot of work ahead. The critical issue, I think, is to make sure that the entity that is delivering the battery storage capability understands how greatest value can be brought to the network as a result of that installation. Certainly we have seen network businesses interested in supporting the development of large-scale generation projects, and that has certainly been the case for, say, EnergyAustralia in Victoria, who have recently committed to support the development of a number of large-scale solar projects in the state. So, increasingly, I think it is critically important that we remain open to a range of possibilities for the development of this technology, recognising that it is new technology and may require changes to the way we think about who participates in the provision of that type of service.

Senator McALLISTER: Some of the other market participants have suggested to us that battery services are insufficiently rewarded in the NEM design—in particular, their services in relation to providing inertia to stabilise power systems. There is a real change before the AEMC at the moment that proposes establishing a market that would reward this feature of battery storage. Has the Victorian government formed a view about that or about any other element of NEM design that impacts on battery providers capturing the value that they are providing?

Mr Corbell : I think I can confidently say that the Victorian government strongly supports reforms to the NEM rules that provide for and recognise the role of distributed storage, battery storage and other storage technologies in providing reliability services within the National Electricity Market. There is a need for that reform. They have been poorly incentivised to date and their role can be very significant if they are properly recognised within NEM rule design.

CHAIR: Senator Duniam, do you have any questions as well?

Senator DUNIAM: Yes. Mr Corbell, thank you for coming along. I wondered whether you heard much of the last witness's testimony with regard to access to gas as a resource for energy generation. Did you catch much of that at all?

Mr Corbell : Senator, I did hear some of it, yes.

Senator DUNIAM: I understand that you are an advocate for renewable energy. The point was made by the representatives from AGL that, in the short term and medium term, access to reliable gas resources was something that was necessary. They saw that the moratoria in place in a number of east coast states over the development of gas resources was a bit of a problem. Do you have a view on this at all? Obviously, you are very much focused on the transition to a clean energy future, as you pointed out before, but I just wondered whether in your role you see this as part of the mix moving forward—better access to gas as a start?

Mr Corbell : Senator, my mandate is in relation to renewable energy generation and to support and advocate for transition to those technologies. Clearly, though, in the context of how the market transitions, we have to collectively have a regard to a range of technologies that are available to assist us in that respect.

The only comment I would make in relation to gas-fired generation is to recognise that any policy setting that provides for support for gas-fired generation should have regard to the fact that you do not want to create a situation where you have stranded assets in gas-fired generation in 20, 30 or 40 years time in the same way that we currently experience in relation to coal-fired generation. A future carbon-constrained world does mean that, ultimately, our electricity networks must be completely decarbonised. The global consensus on that is largely that it needs to occur by the middle of this century; therefore, policy settings should have regard to what types of generation technologies are supported to ensure that they are not left as isolated or stranded assets over a relatively short term. I think those are the critical issues facing policy makers in relation to the NEM at the moment.

Senator DUNIAM: I appreciate that it is outside of your bailiwick in the sense that you are focusing very much on future decisions around renewables in particular, but I was just interested in your views. On the Victorian investment in storage, I wondered—very briefly, noting that there is not much time—what sort of technology they are looking at deploying. I do not think we have covered that yet, have we?

Mr Corbell : The state has simply indicated that it wants up to 80 megawatts power of battery storage available in Victoria as part of this 20-megawatt storage project, with the intention of improving grid reliability and integration of renewable energy into the networks. So it is very much focused on using storage as a way to store electricity that is generated from renewable sources and making it available as dispatchable load into the Victorian NEM region. In terms of the exact battery technology that is chosen, that would be a matter for the market to come forward with solutions for as part of the expression of interest and the tender process.

Senator DUNIAM: Thank you very much. No further questions, Chair.

Senator ROBERTS: Thank you, Mr Corbell, for coming. I have just one question. You mentioned the need for storage capacity at areas of the grid that were constrained. That does not apply at the moment, does it? Or it did not apply until recently?

Mr Corbell : No, Senator. Thank you for the question. There are parts of the Victoria grid that have traditionally been constrained in terms of their transmission capacities—what engineers often call 'long, stringy lines'—that is, they are narrow and relatively low volume in terms of their transmission capacity. That has been largely because of the fact that the feeder communities along those lines have been relatively small either in terms of their population or in terms of their energy demand. So there simply has not been the transmission capacity built out to them to manage any more than that.

Obviously the challenge arises, though, in the context of these regions, particularly the northwest region of Victoria, which is potentially a very productive region with its wind energy resources, with the capacity of that transmission network to take renewable energy generation at scale and transmit it back down that line to other parts of the state. The lines have historically been constrained, and new challenges arise when consideration is given to additional generation along those lines.

Senator ROBERTS: Would that cost then be allocated against the intermittence, like with wind?

Mr Corbell : Which cost?

Senator ROBERTS: The cost of that battery storage?

Mr Corbell : The battery storage is proposed to be supported by grants from the state government and from the Australian Renewable Energy Agency.

Senator ROBERTS: They would not have been there but for the fact that you are going to be using intermittence.

Mr Corbell : Battery storage would potentially have been required in any event to assist with other vulnerabilities in the network, recognising that this type of technology was not previously available. But it is the case that batteries are a very capable complement to renewable energy generation.

CHAIR: Thank you, Mr Corbell. We appreciate you giving us your time today. If there is anything that you would like corrected or if there are any questions you have taken on notice, the secretariat will be in touch.

Pr oceedings suspended from 10:46 to 11:04