New research from The Australia Institute, commissioned to assist the Energy Security Board’s redesign of the National Electricity Market, has shown that batteries and clean energy are poised to replace the system security that has historically been provided by coal.

The technical study was written by leading energy economist Professor Bruce Mountain and battery expert Dr Steven Percy from the Victorian Energy Policy Centre. A discussion paper by Dan Cass summarises the findings and implications for the NEM redesign project, which State Energy Ministers are due to debate in June 2021.

Key Findings

• For an energy grid to function securely it needs control systems that keep frequency and voltage within safe limits. Historically this service has mainly been provided by coal, gas and hydro power stations.
• Over recent years in Australia, these services have increasingly been provided by renewable energy, batteries and demand response, allowing coal and gas to retire more rapidly.
• These new technologies can provide a new ‘fast frequency response’ service and voltage control to keep the grid secure and reduce cost.
• Batteries and demand response provided more than a third (38%) of a key frequency control market in Q4 2020, despite comprising just 0.5% of the grid’s generation capacity.
• EnergyAustralia’s newly announced 350 MW battery is likely to be able to provide at least three times the inertia capacity of the closing 1,480 MW Yallourn coal power station.
• New survey data shows that half of Australians (51%) would prefer to pay for new batteries to keep the grid secure.
  • Just one in four (26%) prefer to continue to pay coal generators for this service.

“The business model underpinning coal and gas is collapsing before our eyes and the good news is that batteries and renewable energy are now able to step in and keep the grid secure,” Professor Mountain said.

“Renewables already create the cheapest electricity in the market and the last leg the fossil fuel industry had to stand on was the security services they have historically provided. Now we can see that even those services are being delivered in a more reliable and affordable way by renewable energy and that trend will only accelerate in the future,” Professor Mountain said.

“As coal generators continue to lose money, they will make financial decisions that harm system security by reducing maintenance or mothballing units. We must prepare for this inevitability,” said Dan Cass, Energy Policy & Regulatory Lead at The Australia Institute.

“Coal power stations are closing and being replaced by clean energy, but there is no national plan for replacing the security services that are provided by coal. Batteries, renewables and demand response are being held back by barriers that prevent them from contributing to system security, despite their exceptional potential in this space.

“Thankfully, this research shows that renewable energy is capable of providing sufficient system security to support the grid and Australians are ready for that transition to take place. Half of Australians want batteries to be used in keeping the grid secure while just one in four want coal to continue performing that function,” Mr Cass said.