This Climate Business podcast: Big storage batteries are here. Can they fix our electricity market? – Dr Jen Purdie (edited excerpts)
Listen to the full episode here.
If you had to describe New Zealand's electricity market, the word might be unhappy. Prices are rising, long-term supply is uncertain and we're told that we're just going to have to burn a lot more gas to keep the place running. Here's some good news. In July, the Ruakaka Battery Energy Storage System, this country's first and largest storage battery began bidding into what is known as the reserve capacity market.
Ross
How do batteries like the Ruakaka battery work in the electricity system?
Jen
So batteries are charged when there's excess generation. That's when it's windy or it's sunny, or when we've got lots of water in the hydro lakes, and they discharge when there's not enough generation to meet demand. And that's generally when demand is highest over the evening peak.
Ross
The market splits between what is called the energy market and the reserve capacity market. Can you explain those two things?
Jen
The energy market is where generators offer energy into the market, and the system operator, Transpower, calls on generators to supply that generation up to the point where it meets demand. The reserve market is separate to that, but they do have a lot of linkages, of course. The reserve market is around the fact that New Zealand can't store electricity very well. And so we need to be ready in case any any big operating unit falls off at any time or breaks. What they do, therefore, is have other pieces of generating plant ready to go and so that they can pick up instantaneously. Batteries are really, really good at this. They can just pick up and supply load instantaneously.
Ross
So could we understand the reserve market as a kind of insurance?
Jen
Absolutely. If you think of electricity as water in a pipe, we've got to keep it flowing. We can't store it very well. Obviously, we're starting to get batteries, but we've only got two of them so far. And so we just need to keep the lights on at all times, and that's what these backup units do.
Ross
We hear a lot these days about why we need more gas generation. Is that because of the weakness of our reserve market, or is it something else?
Jen
Currently about 15%, I think, of our total generation is provided by gas and coal, and a tiny bit by wood and oil. You can put coal in a big pile with a digger and it's sitting there waiting, whenever you want it. Whereas the renewables that we're starting to see more and more on the grid are intermittent. So, the wind stops blowing, the sun stops shining, and the hydro lakes sometimes go dry. In those instances we need backup generation. They call it firm generation that is just always available. And it's really easy to provide that with thermal generation. The challenge for the next couple of decades is to get that thermal generation out of the system, because of the greenhouse gas emissions that they have, and to find alternatives for that. And to do that, we need some sort of firm power that can fill in those gaps when the renewables aren't generating.
Ross
And batteries can help with that too, along with the reserve market?
Jen
Absolutely. That's traditionally what they're for, firming up generation. You do need a lot of them to do that. And of course, there's firming needed at a whole lot of different timescales. There's also things like wind patterns throughout the day. There's more sunshine in summer than winter. So, on all those different time scales, you need something to help. And batteries are really good at that sort of day to day helping, they're not so good at the long-term problems.
Ross
It sounds that when it comes to battery storage for the grid, we're taking baby steps?
Jen
We have only got two grid scale batteries at the moment. The prices of batteries have halved every four years for the last 20 years, which is massive. We've got less than 200 megawatts at the moment, a 35 megawatt battery in Huntly and a 100 megawatt battery in Northland, plus a whole lot of little rats and mice ones. Now you compare that to 9,000 megawatts of installed capacity on the grid. That's about 2% of our capacity. We expect that to double in the next two years and certainly start increasing a lot more after that. Possibly even more important is household batteries and vehicle batteries.
Ross
Household solar plus batteries. That's where Australia is taking a lead. What is it that they're doing that we're not?
Jen
Australia has been subsidising solar and battery systems, and they've reached, in some places, half of the load, or sometimes much higher than that, is coming from solar and supported by batteries. But we're not subsidising them. But prices are just dropping so fast. Solar and wind are by far the cheapest forms of electricity we've ever seen, and certainly a lot cheaper than thermal. We're going to see more and more of that being built over the next few years.
Ross
Can you paint for us the bigger picture about batteries? They come with their own environmental cost, don't they?
Jen
There are two aspects to batteries. They charge when prices are cheap, which naturally means there's lots of wind and solar. And they discharge when prices are expensive, which means probably you've got coal and gas plant on the grid. So, in that regard, they will displace fossil fuel generation. And that's great. However, they do have rare earth metals in them, lithium and cobalt. There's supply chain issues around that. There's geopolitical tension around access to those minerals. The mining of those rare earth metals is pretty dirty. There are problems with batteries, but the amount of fossil fuels they displace and the amount of wind and solar and hydro that they enable means that they are going to generally, on balance, be a good thing