Energy transition: Community batteries can help solve storage problem for Ausgrid

The CEO of NSW distribution company Ausgrid has found a sweet spot in the gap between residential batteries and utility scale batteries that could save the state $20 billion on its energy storage rollout.

Marc England, the chief executive of NSW distribution company Ausgrid, says he’s found a sweet spot in the gap between home batteries and utility scale batteries that could save the state $20 billion on its huge energy storage task.

It’s a “medium-sized” battery with 5 megawatt hours to 10 MWh of energy storage located on Ausgrid’s own land – typically a substation. England reckons it should be able to be installed at just 40 per cent of a residential battery’s cost per kilowatt-hour.

Marc England, chief executive of Ausgrid at Beacon Hill Community Battery on Sydney’s northern beaches.

Advocates of community batteries say they can help households that can’t afford their own home batteries or don’t have off-street parking to access benefits such as time-shifting their electricity demand, charging an electric vehicle, or being paid for grid support during supply squeezes. Home batteries can cost upwards of $13,000 depending on their capacity.

Ausgrid owns distribution networks in eastern Sydney, Hunter Valley and Central Coast. It is 49 per cent owned by the NSW government with 51 per cent held by AustralianSuper, IFM Investors and Dutch pension fund manager APG.

The distribution and transmission company has applied to the Australian Renewable Energy Agency – a federal green bank – for help in funding 10 medium-sized “community” batteries. It is already trialling pole-mounted “community” batteries of 250 kilowatt hours to 500 KWh, or about 25 to 50 times larger than typical household battery such as a 13 KWh Tesla Powerwall.

It has installed three of them with help from Arena, and has funding for another six. But batteries of this size haven’t yielded the economies of scale that Ausgrid’s number crunchers believe “medium-sized” batteries can achieve.

“What we think is the real opportunity is to install 10 MWh batteries in the low voltage distribution network near our substations, and provide customers with a benefit, but also tap into the grid benefit and the wholesale market benefit,” England says.

“The sweet spot we’ve analysed is the 5 MWh or 10 MWh where you get the scale advantage of size, but you can still tap into all three value pools.

“We think it could be a step change in the role of distributors play in this energy transition.”

Grid benefits include backup during supply squeezes and a reduction in peak demand that can save investment in poles and wires. The wholesale market should also benefit from smoother, less volatile prices.

Victorian distributor AusNet Services is also rolling out community batteries, including a 5 MW/10 MWh battery at Phillip Island, with more in the pipeline, a spokeswoman says. Storage – one of the lagging components of the faltering clean energy transition – is critical to firming variable wind and solar power.

England says NSW’s energy storage task over the next five years is about 16 gigawatt hours (16,000 MWh) – the equivalent of about 1.33 million residential 12 KWh batteries’ storage capacity. He says that if half of the capacity of the household batteries expected to be installed over that period were instead 20 MWh community batteries, which cost about 40 per cent of household batteries per KWh, the savings would be $19 billion to $20 billion.

You could get an even cheaper price per KWh with a larger utility-scale battery, but this would have to be installed in the high voltage transmission network, which sits above the local low voltage distribution network. A utility-scale battery supports the grid when supply from variable wind and solar energy resources drops, or an ageing coal or gas generator drops out suddenly. But it cannot provide the benefits to residential and small business customers that community batteries provide, England says.

Locating community batteries on a distributor’s poles or substations eliminates the problem of NIMBY objectors. Arena funding would also help Ausgrid and other proponents establish the commercial viability of community batteries. Arena was allocated $171 million in the October 2022 budget to deliver 342 community batteries, and in April invited applications for $120 million worth ranging from 50KW to 5000 KW of capacity.

England says more support – such as regulatory tariff changes – is needed for the community to get the most out of batteries located in local distribution networks.

Community batteries are currently treated as non-regulated assets, meaning they have to earn about 15 per cent on their capital to justify the investment. If they were treated as regulated assets, Ausgrid’s required rate of return would be guaranteed at about six per cent or seven per cent, England says, reducing the cost to the community.

A new tariff would also be required for customers to access the full range of benefits. Instead of being paid a feed-in tariff like a typical rooftop solar household, a solar household in a community battery zone would be able to export surplus power to the community battery without paying transmission and distribution charges, and in exchange for that be able to import power from the battery without paying transmission and distribution charges.

In other words, says England, it would be treated just like a home battery. “We think that’s eminently possible. That tariff doesn’t exist in tariff structures today, but that’s something we need to have conversations on because that could unlock the real customer benefit here,” he says.

That would also enable Ausgrid to order more batteries – say 100 rather than 10 – and secure greater volume discounts and lower prices.

“If we went to market for hundreds, yeah, we could get cost down materially,” England says.

“We believe there’s a shift we can make – a real step change – in this energy transition.”

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