Capacity Mechanism needs electric vehicles

The Energy Security Board has released the high-level design for a Capacity Mechanism, but where is the discussion around renewable powered electric vehicles?

Electricity market operators across the world favour big levers, transmission companies favour building big power lines, market players favour controlling market conditions through assets; but where is the voice for a consumer led capacity market using renewable powered electric vehicles?

Energy Security Board

The Energy Security Board's high level design of a Capacity Mechanism is planned for implementation by 1 July 2025, and technology advances are happening rapidly. The ESB has stated …

“The ESB recognises that solar PV located at the customer's premises provides a large and growing portion of supply to the NEM. Distributed battery storage is now also growing strongly, while new technologies offer opportunities to derive benefits from more flexible demand. The ESB’s program is addressing a range of issues to unlock the potential benefits of integrating demand-side resources into the market and this will extend to the capacity mechanism. There are options as to how that integration could be achieved, which could both provide efficient resources to the capacity mechanism and benefit customers.”

Electric Vehicles

It was during the Federal Election in April 2019, Prime Minister Scott Morrison said that Labor’s plan to target increasing the sale of electric vehicles would strip people of four-wheel drives and spell “the end of the weekend”. Furthermore, Mr Morrison went on to say, “The sort of vehicles that Bill Shorten wants you to drive, you can’t get one for less than $45,000 and it won’t tow that boat, it won’t tow that trailer”.

Contrary to Mr Morrison’s claims, Ford Motor Company in the US has released the Ford 150 Lighting which has a standard battery energy storage capacity of 98kWh (or 131kWh for an extended pack), which compare to a Tesla Powerwall of 13.5kWh. Not everyone will want to drive (and park), a Ford 150 that has about double the torque of its competitors and if fully charged could run a house for about 4 days without any roof-top solar. A 6kW solar system could extend the run to about a week in winter, and 10 days in summer.

The lower cost variants of the F-150 Lighting 2022 model are sold-out in the US, reflecting the strong demand and changing consumer preferences for electric vehicles. How quickly things are changing, and whilst a F-150 will not suit everyone, it is a sign of the fast-changing Electric Vehicle (EV) market and how consumers are ready to switch.

The hydrological power plants have extolled the virtues of deep storage, and the market operator has endorsed the need for deep storage. The possibility for using EV’s to assist in this deep storage solution is within the foreseeable future, and so we have a deep storage solution on four wheels!

You must wonder, if we put in place incentives to accelerate the move to EV’s, how far we could go?

EV’s can mirror the success of Airbnb which exploits an under-utilised asset. EV’s can be used in their traditional transportation role but can also be used to act as a sponge for surplus solar, and then after the sun has set, power a home, business, shopping centre, car park, electric train, airport terminal, or grid. The capital expenditure is leveraged.

Behind-the-meter assets like EV’s and roof-top solar deliver superior benefits to the consumers beyond what can be extracted by large scale projects. For instance, utility-scale assets and behind-the-meter assets can both capture:

1. prevailing spot prices using an appropriate spot price pass-through arrangement with a Retailer
2. with aggregation, the home solution can participate in the ancillary services market, just like a grid connected asset
3. act as a physical and financial hedge for the consumer or Retailer
4. with aggregation, the home solution can underpin financial trading just like a grid connected asset
5. and finally, both in-front of the meter and behind-the-meter should be able to participate in a Capacity Mechanism

However, the extra value stream that a behind-the-meter assets can capture are:

1. avoided network charges
2. avoided environmental charges such as Large-scale Generation Certificates (LGCs), Small-scale Technology Certificates (STC’s) and state-based certificates such as the Victorian Energy Efficiency Certificates and the NSW Energy Savings Certificates
3. avoided market fees
4. avoided share of ancillary services costs
5. lower loss factors because a home (or work), is likely to be more centrally located than a utility-scale build

The potential benefits of a F-150 Lighting during this year in NSW and Queensland, would have probably paid for the entire cost of the vehicle if spot revenue was being received.

The challenge with this extra value stream is that these consumer benefits are a wealth transfer from network owners and are a competitor to market players that do not have control of the behind-the-meter asset. Consequently, these assets are not necessarily championed as hard as other alternative solutions.

Capacity Mechanism

A carefully constructed Capacity Mechanism will choose projects using a selection criterion that balances the trilemma of energy security & reliability, affordability, and lower emissions. The Green Party is worried about prolonging carbon intensive industries, especially coal-plants, but the assessment can weight emission intensity to favour other options, and therefore ameliorate the Green Party’s concerns.

Renewable powered EV’s fit perfectly against the energy dilemma as they can contribute to assisting energy security & reliability, lower costs, and reduce emissions by displacing petrol combustion vehicles as well as displacing higher carbon intensive generation.

Orchestration of behind-the-meter solutions with EV’s is a critical tool to solve the trilemma facing the industry but it needs to receive the air-play, policy setting and recognition that it deserves. Given we are trying to find a medium to long-term solution we should incentivise the assets that are able to adapt and leverage technological and cost breakthroughs.

The battery EV market has the benefit of being a global market and therefore global research and development investments are being placed in the industry, so therefore it is reasonable to expect batteries to continue to become more powerful, lighter, and cheaper.

EV's and Orchestration

Behind-the-meter solutions with EV’s can not only assist in solving the Capacity Mechanism requirements but can be a more efficient solution than building large interconnectors or more large-scale generation. Remember, the lowest cost new entrant is the one you don’t have to build. As we have shown for the Tasmania to Victoria second link (Marinus Link) based on work we undertook funded by the Energy Consumers of Australia, accelerating behind the-meter solutions with complementary dispatchable plant in Victoria, would be a smarter solution and deliver more benefits to the community.

Orchestrating behind the meter is a very real solution, evident by the number of Virtual Power Plant (VPP) initiatives underway, exampled by Origin Energy’s plan to acquire 2,000MW of VPP capacity to assist replacing Eraring Power Station. AEMO Step Change forecast predicts there will be around 500,000 Electric Vehicles by 2025 and almost 4 million by 2030, while roof-top is forecast to be 18,700MW by 2025 and 28,000MW by 2030. Just imagine if we incentivised EV’s and fast-tracked solar charging stations at homes, businesses, car parks, railway stations, shopping centres, etc?

The WA market has been orchestrating behind-the-meter technology through Project Symphony, which is further evidence of the growing capability to utilise these assets to solve the market transition challenges.

Conclusion

We need to promote the technologies that will serve the industry and consumers well into the future. A consumer led solution will have behind-the-meter solutions including renewable powered electric vehicles at the forefront.