Consultation on batteries in the electricity market enables new sector technology and boosts competition

The Electricity Authority today begins consulting on amending the Electricity Industry Participation Code (Code) so that grid-connected batteries can provide multiple services to the electricity market.

Grid-scale batteries are large battery energy storage systems, typically with a 1 MW capacity and up to 100 MW and more. Changes to the Code would allow batteries to participate fully in the national reserves market, meaning that network-connected battery energy storage systems could provide instantaneous reserve.

“Increasing the quantity of instantaneous reserves in the market will be critical once the aluminium smelter at Tiwai exits the market, as more South Island generated electricity could be exported to North Island,” says James Tipping, the Authority’s Chief Strategy Officer. “Enabling batteries to provide other services also supports enabling new technology in the energy sector, particularly in light of the Climate Change Commission’s report. This will increase levels of competition in the reserves market, increasing system reliability and benefitting consumers in the long-term.”

Billions of dollars per year are now being spent on batteries globally, as technology costs fall and the need for their flexibility increases. In New Zealand, grid-scale batteries can already participate in the wholesale energy market, as either generation when discharging or dispatchable demand when charging. However, they cannot be used for instantaneous reserve generation. This is due to the way the Code deals with existing technologies, such as partly loaded spinning reserve and tailwater depressed reserve. Batteries were simply not contemplated when the market rules were first developed decades ago.

“Batteries have markedly decreased in price and will continue to do so as global levels of investment continue to increase,” says Dr Tipping. “Some parties in New Zealand have already invested in smaller grid-scale batteries in technology pilots to explore their potential and the proposed changes to the Code support these investments.”

The target date for enabling batteries to offer instantaneous reserve to the system operator is 1 April 2022 as there are several other implementation steps that must occur.

The Authority will be consulting for four weeks on these changes.