The head of one of the country’s biggest energy retailers and coal generation companies admits that the industry has some “thinking to do” as the huge uptake of household batteries – driven by federal government rebates – change the nature of the grid and the market they have long dominated.
Mark Collette, the boss of EnergyAustralia, which owns the Yallourn and Mt Piper coal fired power stations in Victoria and NSW respectively, says everyone should be looking at how home batteries can “minimise” the size of the grid.
“[The battery subsidies] are massive, and they will encourage the growth of a big industry, which changes the nature of how the grid actually works,” Collette said this week during a panel session at the Australian Clean Energy summit in Sydney.
“We’ve got more thinking to do as an industry and as policy makers … what does the grid need to look like? What do houses look like? And then, by virtue of that, if they have a lot of controllable, dispatchable energy in them, how do we minimise the size of the grid given that’s already there?”
Inflation is falling rapidly but cost of living pressure in electricity bills is still high. Collette believes focusing on batteries and how they influence future grid investments is the way to “liberate as much cheap solar energy” as possible and bring down those prices.
“That really matters, because when we look at the cost outlook it is driven in large part by those fixed investments in networks, and they’re going through at rates that can be double inflation,” he says.
“That’s probably the single biggest [productivity] opportunity, is to… minimise the scale of investment that needs to happen on networks.”
EnergyAustralia has interests in the Kidston pumped hydro project as a solar soaker, Collette says, as well as neighbourhood and grid-scale batteries.
Batteries actually pushing up wholesale prices
It is often claimed that big batteries will be key in helping cap wholesale energy prices, but Professor Ross Garnaut warned earlier this week that monopolistic gaming of the market is keeping prices high, a claim supported by the newly released quarterly price report from the Australian Energy Market Operator.
And yet Origin Energy chief Frank Calabria told the forum that big battery investments are needed to manage the rise and fall of renewable energy generation across a day, and the unexpected drop outs from ageing coal power plants.
Origin is currently commissioning the first stage of what will be the country’s biggest battery, the 700 megawatt (MW), 2.8 gigawatt hour (GWh) Eraring facility next to the coal fired power station that could close in 2027, and is building a 300 MW, 650 (MWh) system next to its Mortlake gas power plant in Victoria.
“That’s responding to the market … as you see more variable energy coming [from] renewables but also, as you see aging coals, reliability. We’re having to respond to far more events every single day, and they’ll work well alongside our existing gas peaking. So a lot of capital going into there,” Calabria told the summit.
“That amount of investment [including network costs] is going to ultimately be recovered in consumer bills. So our attention has to be, how do we bring consumers along on that transition?”
Consumers are not feeling like electricity retailers are bringing them along on the journey, as Renew Economy editor Giles Parkinson wrote in June after an “extraordinary” power bill price hike encouraged a number of readers to say they’d been hit by similar news.
Back gas
But while batteries and renewables might be the cause — and a solution — of the new energy order for both Calabria and Collette, they’re also openly campaigning for more support for gas power stations.
“We are investing in firming for those times when there are wind droughts and it’s cold and it’s still and it’s dark, and the worst case scenario is where you have to have something that can just run for a week that’s not influenced by weather,” Collette says.
He says there needs to be more gas in the grid but it needs to be paid for to allow it to “get a fair return along the way”, adding an ultimatum that the alternative is investment returns will need to rise and that will drive up costs for consumers.
Long term policies that support gas are also part of Calabria’s pitch, who says Origin invested in “several gigawatts” of gas generation in 2009-10 on the understanding a carbon price would be in place only for policies to change every election since 2007.
“It’s billions of dollars people are putting out there,” he says.
“If you’re asking us to then invest over 20 year assets, then we will want to make sure, especially when they may not run very long as you get into the further years and decades, we’re going to need to know that we have the confidence that someone’s not going to change the rules the day after we make those investments.”
And yet while the cost of building new gas peaking plants is still rising at a steady pace, according to the latest CSIRO GenCost report, it also delivers very good returns, suggesting that long term policy support is still more needed for renewables and batteries.
Gas generators were able to deliver average value per megawatt hour of nearly $300 in the second quarter and returns have surged since 2021 thanks to oligopolistic market gaming, says Superpower Institute director Ross Garnaut.
By comparison, renewables and batteries are in more need of long-term policy horizons and financial support because a perfect storm of falling revenue sources is making these technologies harder to justify building, he told the summit this week.
Image: Superpower Institute
Rachel Williamson is a science and business journalist, who focuses on climate change-related health and environmental issues.