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Using solar, batteries could save NZ $500m

Newsroom logo Newsroom 16/04/2019 BusinessDesk
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Maximising use of solar, batteries and other forms of distributed energy could save the country about $500 million long-term, the Electricity Authority has been told.

Giving owners of those technologies equal access to distribution and transmission networks would speed their take-up and enable their owners to sell their output to other users or be used in coordinated services by network companies, the industry’s Innovation and Participation Advisory Group says.

A market for such distributed energy resources – DER – will be needed, and network companies will need to set minimum technical standards for those wanting to provide coordinated services.

But the group says action is needed now to maximise the benefit to consumers and minimise the cost of implementing the “radical” changes that will be required.

The industry, the Electricity Authority and the Commerce Commission will all need to act now to reduce barriers to equal access, it says.

“Delaying action will create significant costs to consumers, particularly from uncoordinated or constrained investment in DER,” the IPAG says in a 74-page final report to the authority.

“We expect the rate of DER investment will be orders of magnitude greater than traditional electricity infrastructure investment – acting with urgency to remove barriers to equal access will increase the benefits and avoid the costs.

“Failure to take action is likely to lead to increased costs to consumers from either lower service quality or increased network provision costs in future.”

Solar, batteries and electric vehicles are seen as key tools to help the country meet its emission-reduction targets while also potentially lowering the cost of energy supply long-term. But the new technologies also have the potential to distort power flows or overload some lines, and make power systems less reliable.

IPAG says the new technologies are only useful for the wider community if they are coordinated and predictable. But the potential benefits are large.

If network companies use only their own demand response and DER, they could achieve gains of $100-$150 million at the distribution level, and another $50-$400 million if they are used in other markets.

But if all procurers can access those services from any owner, the potential distribution gains climb to $150-$300 million and the benefits from other services jump to $400-$750 million.

IPAG says creating a market for those services will generate revenue streams for providers and accelerate investment in panels, batteries and automated systems to manage them. But using them to help manage local grids will also require more and better data about the needs of the low-voltage power network.

“Distributors will need to take action first, because a DER market needs more data about network conditions,” IPAG says.

“It is a big change and, in addition to more data, distributors will require more resources and greater analytical ability.”

IPAG favours a low-cost, pragmatic approach to getting the market started. It prefers distributors develop processes themselves, but noted that historically, industry-led processes “have not been fast.”

It has recommended the Electricity Authority publish a plan by June for developing an equal access programme.

The authority would need to work with distributors, data users and the Electrical Engineers’ Association to determine what data is required to support a DER market, how contracts could be developed to enable DER to be used as a network alternative, and what connection standards should be set for DER on all networks.

It says the EA should be able to report back on those work streams by September and start to implement some by the end of the year.

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