MARKET AND REGULATORY UPDATE AUSTRALIAN ENERGY STORAGE ALLIANCE CONFERENCE

SUZANNE FALVI, EGM SECURITY AND RELIABILITY 12 JUNE 2019 Overview

1. National electricity market

2. Governance of energy markets

3. Changing power system

4. AEMC reform priorities 5. Regulatory projects relevant to storage

2 National electricity market

• >40,000 km of transmission lines

• ~200 TWh of electricity to businesses and households each year

• Total electricity generating capacity of almost 54,421 MW (as at Dec 2017)

• >$18 billion annual turnover in 2018

3 NEM market design WHOLESALE MARKET (Generators sell their power to retailers) RETAIL MARKET

NATURAL MONOPOLIES METER

ELECTRICITY SUPPLY CHAIN

ELECTRICITY TRANSMISSION DISTRIBUTION RETAILER GENERATION NETWORK CONSUMERS

More consumers are buying and selling power

NETWORK REGULATION

The rules enable the regulator to set the maximum prices network business AEMC MAKES AUSTRALIAN ENERGY REGULATOR can charge for services they provide. THE RULES RULES (AER) APPLIES THE RULES Prices are set every five years.

Natural Monopoly Sector Component Competitive Sector Component 46.5% 53.5%

Based on the average NSW residential bill in 2017/2018. Source: AEMC Price Trends 2018 4 National governments and energy policy development

COAG COAG Energy Council

Council of Australian COAG Energy Council Governments (COAG) is made up of the nation’s implements policy reforms of energy ministers. They provide national significance that require national leadership on energy cooperative action by federal, market development which state and territory governments is so important for the health of the national economy

5 Market body roles

AEMC AER AEMO

Australian Energy Australian Energy Australian Energy Market Commission Regulator Market Operator Rule maker, market Economic regulation Electricity and gas systems developer and expert adviser and rules compliance and market operator to governments Polices the system and Works with industry Protects consumers and achieves monitors the market. to keep the lights on. the right trade-off between cost, reliability and security.

6 Who we are

We are the rule maker for Australian electricity and gas markets. We also provide advice to governments.

7 REGULATORY FRAMEWORKS TO FACILITATE CHANGING THE POWER SYSTEM

8 The generation mix is changing

9 Source: AEMC analysis (MMS Database) Synchronous generation is exiting, non-synchronous is entering

nstalled capacity (MW) capacity nstalled I

10 Source: AEMC Annual Report 2017/18 Distributed energy resources are increasing

July 2009 July 2018

Source: AEMC analysis 11 This is changing the shape of demand – SA demand profile (average across calendar year)

12 Source: AEMC analysis Energy storage projects – connected and in operation

As of January 2019, there are four large-scale energy storage facilities that have connected to the NEM:

• A 100 MW/129 MWh lithium-ion battery storage system at Neoen’s Hornsdale near Jamestown in South Australia. The Hornsdale Power Reserve utilises Tesla’s technology and commenced operation in December 2017.

• A 30 MW/8 MWh lithium-ion battery storage system at the Dalrymple substation on the Yorke Peninsula in South Australia. The project is owned by ElectraNet and will be operated by AGL, and commenced operation at the end of 2018.

• A 30 MW/30 MWh lithium-ion battery storage system at the junction of four major transmission lines at AusNet Services’s substation near Ballarat in Victoria. The Ballarat Energy Storage System is owned by AusNet Services and operated by Energy Australia. The battery is now registered and operating.

• A 25 MW/50 MWh lithium-ion battery co-located with the 60 MW near Kerang in northern Victoria. It will be jointly owned by Edify and Wirsol, and operated by Energy Australia. It is now complete and in the process of being fully commissioned. Utility scale battery storage services

13 Energy storage projects – planned (current as of Jan 2019)

Region Planned project

Queensland • 20 MW/80 MWh chemical battery storage at Cape York Solar Storage project (battery and solar farm) • 100 MW chemical battery at Kaban Green Power Hub (combined with a wind farm) • 250 MW pumped storage hydro project at Kidston Gold Mine • 2 MW/4 MWh lithium-ion battery being constructed alongside a solar and wind farm at • 1000 MW/4000 MWh Gympie Regional Energy Hub - Stage 3 - solar farm and chemical battery storage • 1000 MW/4000 MWh Ipswich Regional Energy Hub - solar farm and chemical battery storage • 1000 MW/4000 MWh Wivenhoe Regional Energy Hub - solar farm and chemical battery storage

New South Wales • Feasibility study recently completed into the potential expansion of the Scheme - Snowy Hydro 2.0

Victoria • 20 MW/34 MWh chemical battery to power glasshouse at Stawell planned (battery and wind farm) • 20 MW/34 MWh chemical battery at Bulgana Green Power Hub (battery and wind farm) • 80 MW/320 MWh chemical battery storage at Nowingi Solar Storage project (battery and solar farm) • 12MW battery at Inverleigh windfarm

South Australia • 100 MW/400 MWh chemical battery storage at Kingfisher Solar Storage project (battery and solar farm) • 100 MW/400 MWh chemical battery storage at Riverland Solar Storage project (battery and solar farm) • 25 MW/52 MWh lithium-ion battery adjacent to • 10 MW chemical battery at • 21 MW chemical battery at Snowtown North Solar Farm • 6 hydrogen fuel cell buses to be built near Adelaide • 270 MW/2000 MWh pumped storage hydro project at Baroota • 230 MW pumped storage hydro project at Goat Hill • 300 MW pumped storage hydro project at Highbury • Australia’s biggest solar thermal storage plant scheduled to open in 2020 near Port Augusta • Planning is under way on the Eyre Peninsula for the largest salt water pumped hydro facility in the world

Tasmania • Feasibility study for expansion of Tasmanian hydro

Northern Territory 5 MW/3.3 MWh chemical battery at Alice Springs • 14 AEMC priority areas of reform

1. Generator access and Shift from large geographically concentrated transmission pricing to small geographically dispersed generation

Services previously provided for free not 2. System security necessarily provided by new generation

Integrating Increased adoption of small-scale solar and 3. distributed energy energy storage technologies resources

Digitalisation of 4. Increased adoption of digital technologies energy supply

Aligning financial More variable demand and supply creating 5. incentives with the volatility physical needs

15 Current regulatory projects related to storage

2019 Competition review looks at Stand-alone power systems the solar PV and storage products review – designing a new approach being offered to customers and how to regulating stand-alone power these are evolving. systems and microgrids owned and operated by third parties.

Electricity networks economic Embedded networks review - law and regulatory frameworks review is rule changes to strengthen protections looking at ways to unlock the value of and improve access to competitive retail distributed energy resources offers for embedded network customers.

Coordination of generation and Demand response mechanism transmission investment review developing a mechanism that would allow will reform the access and charging demand to be offered into the wholesale regimes for new connecting electricity market in a transparent, generators scheduled manner. 16 We have a unique system in Australia where anyone, any company, government, advocacy group or individual person, can propose a change to the rules.

Collaboration is the key to success as it will deliver workable and lasting change.

17 Office address Level 6, 201 Elizabeth Street Sydney NSW 2000

ABN: 49 236 270 144

Postal address PO Box A2449 Sydney South NSW 1235

T (02) 8296 7800 F (02) 8296 7899