According to Georgios Konstantinou, a lecturer in energy systems at the School of Electrical and Telecommunications Engineering at the University of New South Wales, “providing FCAS and other frequency support functions is one of the roles that HPR, and for that matter most battery energy storage systems (BESS) that are grid-connected, are expected to play in. FCAS is also the main source of “revenue” for BESS in the domestic market of electricity [or NEM].” Indeed, the benefits of these services, particularly in response to a major network disruption event in South Australia, prompted Neoen to expand HPR by 50% in 2020.
The key event during the alleged period, for which the Australian Energy Market Operator (AEMO) notified the AER, was HPR’s failure to provide its full dose of stability services during a major network disruption resulting from the tripping of Australia’s newest and most troublesome coal generator. , the 750 MW Kogan Creek power station in southeast Queensland. “To lose 750 MW in a single unit to NEM is probably as bad as it can be for a single event,” Konstantinou said.
Guillaume Roger, an associate professor at Monash University who is currently setting up the institution’s Australian Electricity Market Initiative and associate director of the Monash Energy Institute, told pv magazine that AER’s claims are based on fact. which are not disputed. “For the incident in question, HPR provided less than half the power it should have under the terms of the agreement. The reason for this is that the inverter’s software settings were set to an insufficiently sensitive level following a firmware/software upgrade from Tesla, which was ignored by HPR engineers.
And yet, despite the important trip to Kogan Creek, the lights remained on. As Roger put it, “HPR’s failure had no material impact on the network.” And what’s more, “HPR returned the overpayment to the market operator; he therefore did not win the operation.
Possible outcome
Thankfully, this incident was collectively contained by other network contributors, but the software error could have proved disruptive and perhaps realized AEMO’s fears of lights out. However, as Konstantinou observed, when the system loss is of a magnitude greater than 700 MW, as was the case in the Kogan Creek case, “I don’t think any of the HPR parameters would have makes a difference.” Still, Konstantinou says that might not be the case as more BESSs join the grid and more traditional synchronous generators such as coal and gas pull out. As this happens, “the promised capacity becomes more and more important”.
Roger of Monash University agrees, adding that the “dramatic shift to renewable energy” makes standby capacity “even more critical”. Moreover, it is particularly important in South Australia, which no longer has any coal-fired plants and only a handful of gas-fired ones. Looking at it from a different angle, what Roger called “a speculative mindset”, one might suggest that the legal dispute is “a signal to take these ancillary markets seriously”.
The hammer meets the nut
The claims of the regulator cannot therefore be considered without substance. But what makes the case controversial isn’t that a generator didn’t work as promised, but that it’s just the batteries, the new kid on the block, that seem to be so summarily punished. Is this a case where the AER brandishes a mace to crack a nut?
A source familiar with the matter estimated the monetary penalty initially requested by the AER at some AUD 10 million ($7.4 million). To put this into perspective, the regulator has fined Queensland state generator CS Energy (which owns the Kogan Creek power station) AUD 200,000 for the slowness of its fossil fuel generators to provide FCAS services on several incidents over a two-year period. -six-month period, including a major incident on August 25, 2018, resulting in widespread outages to almost all parts of the network except South Australia, thanks to its utility scale and fleet distributed of batteries.
According to a report by Canberra-based think tank The Australia Institute’s Gas & Coal Watch, the Kogan Creek power station is the NEM’s least reliable generating unit, failing 13 times over a two-month survey period. years. In total, the report recovered 93 outages at Queensland’s gas and coal-fired power stations over this period. Indeed, BESS are part of a set of solutions to cover the growing unreliability of thermal power generators.
Dan Cass, head of energy policy and regulation at the Australia Institute, told pv magazine that “Australia is on a steep learning curve to keep up with the rapid and disorderly coal withdrawals. The most important insurance policy is to build more big batteries like HPR. If ARE’s action discourages investment in batteries, it would be a very perverse outcome for consumers… ARE’s action seems misguided and raises questions about the regulator’s priorities.
When asked if the AER had been as contentious with coal and gas generators as with HPR, Roger replied in the negative. “ARE has been a toothless tiger at best and politically captured at worst by either the fossil fuel lobby or the federal government,” he added. “In addition to these breakdowns, there has been for years gross abuses of market power in the NEM, as well as market manipulation, which the ARE has failed to prosecute.” Roger noted that for the AER’s defense, such manipulations are difficult to prove, “although everyone knows what’s going on.”
Despite the enormous potential of renewables and BESS in Australia, the country’s federal politics remains plagued by what has been dubbed its “climate war”. And the Savage Chair of the AER seems to have chosen its side a long time ago.
Savage came to AER in 2019 after a long career in energy that has rarely seen her on the side of a rapid transition to renewables. Indeed, she was previously executive director of policy at the Business Council of Australia (BCA) when the organization verged on climate denial. In 2018, the business group called the opposition Labor Party’s proposal for a 45% emissions reduction target for 2030 “destroying the economy”. In 2021, the BCA reversed its position, saying a 50% target by 2030 was a necessity, lest Australia lose its competitive advantage in renewables and “be left behind and n ‘pay the price’.
“(Savage) hasn’t worked for the consumer,” said senior energy analyst Tim Buckley, director of Climate Energy Finance. “She didn’t even work for a company that worked for the consumer. And now she works for Angus Taylor [Australia’s Minister for Industry, Energy and Emissions Reduction], which only has the fossil fuel industry in mind. Buckley is certainly not the only energy industry insider to tell pv magazine that Savage is eager to satisfy Prime Minister Scott Morrison’s desire to back the coal and gas industry.
As Andrew Forrest, iron ore magnate and green hydrogen pioneer, told the Queensland Media Club on February 25: “Taylor stands in the way of both market (it’s never a wise move ) and the conclusive science of climate change. What bothers me most is that this fidelity to the backsight hampers Australia’s real and proper destiny…to become a pollution-free nation exporting pollution-free products and fuels on a scale that dwarfs industry iron ore…Minister Taylor pays lip service to green energy, but takes action on fossil fuels.
Forrest ended by asking the assembled media what the difference was between Angus Taylor and God, the response: “God doesn’t think he’s Angus Taylor.”
Worst case
Most agree that the Federal Court case in question is unlikely to reverse Australia’s huge battery momentum. It shouldn’t harm the future activity of these batteries either. The FCAS market will remain at the center of concerns for battery developers like Neoen. As Roger put it: “With current arbitrage costs and performance, storage operators are not breaking even by simply buying and selling power…I hasten to add that it is not easy, and that the current market design is not conducive to systematic energy arbitrage.This will likely change as costs come down.
In the meantime, batteries like Neoen’s other big battery, the Victorian Big Battery (VBB) “are mainly on standby as a power reserve thanks to an agreement with the Victorian state government”. That is, the business case for batteries is “not yet made” solely by clear price signals in the market, and therefore the RHP breach is unlikely to have an impact. As Neoen Australia’s managing director, Louis de Sambucy, said in response to the legal action: “While we are disappointed with the AER’s decision, we will continue to maintain our collaborative relationship with them. “
According to Konstantinou, what would impact the deployment of batteries would be if they or renewables in general were associated with higher prices (the trend is the other way), or if there was a more visible event. such as a technical breakdown or a fire. Sure, the VBB suffered a fire last year when it was put into service, but the event was isolated to two Tesla Megapacks and barely delayed the launch of the project.
At the last hearing in the Hornsdale case on February 24, 2022, Federal Court Judge Besanko reserved judgment. But whispers have been heard close to the case suggesting a settlement is near for a fraction of the original unconfirmed figure of AUD 10 million, a fraction more in line with the sanction imposed on CS Energy. Those same whispers also described the affair as a “witch hunt,” in which large batteries are burned at the stake.
