The state’s economic regulator is working out how best to balance a need for storage on the electricity grid against concerns Western Power could gain an anti-competitive advantage.
The state’s economic regulator is working out how best to balance a need for storage on the electricity grid against concerns Western Power could gain an anti-competitive advantage.
The Economic Regulation Authority of WA has been reviewing its planned approach to Western Power’s next access arrangement, which will last from 2022 to 2027 and set how much revenue the grid operator can earn over that period.
The ERA’s draft decision last month proposed that batteries owned by Western Power be excluded from assessing the value of the state owned enterprise’s network, which is a key step in determining the regulated return Western Power is allowed.
But it is a complicated issue, because batteries provide a range of services to the grid, both storing power and helping to keep the network working at operating requirements.
Western Power wants to use batteries as an alternative to traditional technologies such as voltage regulators or capacitor banks.
Other operators are concerned that allowing the grid operator to run batteries with the wrong regulatory settings would put too much market power in the hands of Western Power.
Alinta Energy, who are planning a battery at Wagerup, wrote in its submission there would need to be a level playing field for storage and agreed with the ERA’s proposal.
“Alinta Energy is concerned that the 2020 Access Code reforms allowing Western Power to earn regulated returns on storage assets may create an unequal playing field,” the company’s submission said.
“(Alinta) supports the ERA considering any measures that can be implemented in the Access Arrangement, including ringfencing, to avoid Western Power gaining an anti-competitive advantage in storage markets.”
Perth Energy, owned by AGL Energy, said allowing Western Power to own and operate batteries was not a good solution for the market.
“Batteries can offer a number of market essential system services which are best provided through a competitive market process rather than by the regulated network operator,” Perth Energy’s submission said.
“As a result, the system benefit arising from any batteries that Western Power controls would be restricted.
“This issue is compounded by the potential for battery investment by Western Power to crowd out investors who can use the battery for other purposes.
“We consider that a more efficient approach would be for Western Power to use system support contracts with battery providers who could also supply (essential system services) thereby reducing overall system costs.”
WA Independent Power Association chair Richard Harris told Business News there were concerns Western Power would be conflicted by providing access services to generators while also potentially supplying electricity from the batteries.
"WAIPA recognises that the biggest impact of roof-top solar is on the distribution system, and that the placement of batteries at key locations is warranted in maintaining a secure and reliable system," Mr Harris said.
"However, it would be better for Western Power to contract those services from independent battery service providers to avoid conflicts of interest.
"In addition, the private sector can utilise all the value streams from a battery than those utilised by Western Power which leads to more efficient and effective outcomes without conflicts
“Should Western Power be allowed to own and operate batteries, their deployment should be confined to the distribution system, and the management and operation of those batteries should be ring-fenced from Western Power’s other network services
“Because discharging electricity from a battery into the market has impacts on market prices, if Western Power were to operate batteries it should have to buy its electricity from Synergy and sell back into the market at the same rate, under a contract which is public.”
Western Power’s submission said batteries would be subject to the usual tests for investments.
The state owned entity agreed storage may be used to provide non-network services.
It said it would support further developing the ERA’s suggestion to exclude those services under the access code, by “requiring the relevant portion of the investment in the storage solution to be excluded from the regulated asset base”.
At least two utility scale battery projects in Perth have been given development approval this year.
Synergy’s $120 million battery in Kwinana was the latest, getting the nod this week, although work is still under way on procurement.
