New electricity market rules needed to hasten battery uptake, says Transpower

Solar panels are seen on the roof of Toyota's new Prius plug-in hybrid vehicles (PHV). Large-scale use of batteries is expected to become commercially viable in 3 to 5 years. Photo / Bloomberg

Large-scale use of batteries in the electricity system is expected to become commercially viable in the next three to five years, but electricity market rules will have to change to deliver owners the full value of batteries' various uses, national grid operator Transpower says in a new discussion paper.

But while households may choose to install batteries to store electricity generated from rooftop photovoltaic solar power units, Transpower suggests the best economic return may come from installing only batteries and charging them at low cost overnight from the electricity network.

Its examination of the five highest value potential uses of batteries system finds that the best opportunities are likely to be realised at its own substations in the upper North Island, where they could be used instead of fast-starting gas-fired power plants to meet peak demand and delay the need for investment in national grid upgrades.

Transpower also expects the price of batteries to fall by as much as 10 per cent a year between now and the mid-2020s as global production scales up.

"Widespread, distributed (battery) storage could, and most probably will, fundamentally change the way that power systems will be operated in the future," says the discussion document from the state-owned monopoly that runs the backbone grid of wires that connect New Zealand's 70 per cent-plus renewable electricity system to local electricity networks and their consumers around the country.

However, Transpower believes the national grid will remain an essential part of electricity distribution.

"New Zealand's remotely generated renewable generation will continue to be an economic, low-carbon electricity source," it says, referring to the fact that the largest sources of renewable electricity are hydro-electric dams situated in the South Island, while most of the largest sources of demand are in the upper North Island.

Whereas hydro lakes act as a form of electricity storage far from sources of demand, batteries would be most effective when placed close to demand load, the paper says, and would have potential not only to provide electricity for end-user consumption when required, but also to perform various technical services related to maintaining the stability of the electricity system, such as voltage regulation and frequency-keeping.

But "the value of these services is unlikely to be realised by the consumer until the appropriate market pricing and payment structures, systems and tools are available".

It says batteries connected to its grid are "not presently economic" and are unlikely to be so before 2022.

"Distribution-connected or community-scale batteries are expected to be economic from 2020", with upper North Island load centres presenting the best opportunities.

Examining the potential for owners of small-scale rooftop solar generators to add battery technology, the paper suggests "the value at a residential level is unlikely to be fully realised until cost-reflective/demand-pricing structures are introduced and arrangements are established to monetise all services that batteries can offer".

This would be likely to involve local network owners moving away from flat rate charges for the lines connecting a house to the grid.

It notes that with new pricing structures in place, "batteries under a cost-reflective tariff are expected to be largely viable even without photovoltaic benefits".

"In this case, photovoltaics would likely not be installed in a new home build, because a battery would already benefit from charging overnight from the network at a much lower cost than new photovoltaic arrays."

Likewise, it was not clear that using a battery at a commercial or industrial site to offset peak demand prices made as much sense as using existing and new 'smart' technologies to reduce load to avoid cost.