I spent a decade working in the Australian energy industry. So last week’s tweet by Elon Musk, that he could “fix” Australia’s power issues by installing enough battery powering 100 days was intriguing.
One of the things that makes understanding how the power system works is that the supply of energy is dependent on a number of components. And how those components are utilised is dependent on both engineering constraints and the accompanying wholesale electricity market.
In simple terms, AEMO, the Australian Energy Market Operator, runs the market and directs the generation of energy to meet the needs of consumers. There are a bunch of complex algorithms that do this but the long and short of it is the market is designed to meet the demand by supplying energy at the lowest possible price to users.
The price is set every five minutes and the market is paid on the average price per half-hour interval.
By the way, AEMO’s hands are largely tied when it comes to penalising parties that “game” the market. AEMO is a market operator, not a regulator. The electricity system is regulated by the Australian Energy Regulator which is part of the ACCC.
It’s important to understand Musk’s offer doesn’t bolster energy production in any way. It just gives the market a place to stash a bunch of energy just in case the amount of energy that can be reduced at any given time isn’t adequate to meet demand.
If you’re running a data centre, you could potentially insulate yourself from rising prices by installing your own batteries (from Tesla or local company Redflow Ltd to name a couple of options). And rather than filling them from the grid, you could install solar or some alternate power source to keep the batteries full.
As well as giving you protection from the effects of power outages, you can protect yourself from rising energy costs. As old coal power plants, such as Hazelwood in Victoria, are being closed down, there is likely to be more constraint in energy availability. And this could lead to increased costs.
One other thing – while the press often makes a big deal of the wholesale price jumping to the regulated maximum price of $14,000 per MwH – not every electricity retailer will be paying this price during times of constrained supply.
Electricity retailers (the companies that send you the bill) enter into supply contracts where they promise to use a particular amount of energy at a set price. So, while some energy will be charged to the market at the $14,000 price, a large portion is traded in contracts outside the wholesale market.
This is supposed to ensure generators don’t withhold supply in order to drive the wholesale price up – an action that generators aren’t allowed to do.
So, back to the original question: Can Elon Musk fix our power system? The short answer is no, in my view. The technology that underpins the system is based on central generation on demand. Battery tech is relatively new, especially at the scale we’re talking about. And we have increasing use of decentralised generation. The electricity system and associated markets were created in the late 1990s and things have changed a lot over the last 20 years.
For these innovations to make a difference existing operational and market assumptions need to change. If batteries are to be a major part of the central power system, then the market needs a way to integrate them into the system.
Musk’s battery tech (and Redflow and others that are currently in development and available in other markets) will be part of the new power supply system. But you still have to fill the batteries. And that means enough generation to supply a growing population of 28 million.
One thing that is clear is our power system is facing uncertain times. Our thirst for energy is not slowing and we no longer want to pump lots of black smoke into the atmosphere to meet the supply need. So, as so called “dirty” plants are decommissioned and the incentives and appetite to use cleaner sources such as wind, solar and tidal remain weak, we can expect more market volatility and, potentially, a less certain power supply.