Australia's energy storage market jumped from baby steps to the biggest battery in the world. Now it's filling in the gaps with smaller projects that are still among the world's largest.

The state of Victoria and the Australian Renewable Energy Agency each pitched in $25 million to support two new energy storage systems. One, supplied by Fluence, will sit at the critical Ballarat substation in a congested transmission zone, and another from Tesla will integrate into an existingsolarpower plant. Construction will begin this month for completion by the end of the year.

"Things have been moving really quickly in Australia, which is super exciting," said Praveen Kathpal, vice president for market applications at Fluence. "The work that’s been done in other parts of the world has greatly accelerated the pace at which Australia can develop."

Australia will become the 16th country where Fluence will have battery systems operating. It partnered with Spotless Sustainability Services as the engineering, procurement and construction (EPC) contractor. In an unusual business structure, the network company AusNet Services will own the system and contract it out to retailer EnergyAustralia for use.

This will be the first storage system globally where a transmission network company owns the asset and a market participant dispatches it via a long-term contract, Kathpal said. This model could prove useful in other competitive electricity markets, like Texas, New York, New England, the U.K. and continental Europe.

The Fluence system will provide 30 megawatts of power and 30 megawatt-hours of duration, meaning it is geared for fast-response uses like short-term peak capacity and frequency regulation.

Tesla, fresh on the heels of its world-record-holding South Australia system, will install 25 megawatts/50 megawatt-hours at the 60-megawatt Gannawarra Solar Farm. That one will be owned by Edify Energy and Wirsol, to be dispatched by EnergyAustralia under a long-term offtake agreement, like the other system.

Australia has a competitive electricity market, similar to ERCOT in Texas, with transmission and distribution companies disaggregated from generation and retail. Since there aren't vertically integrated utilities or specific market products for procuring storage, developers have to get creative.

So far, they've been able to count on government support to test out business cases.

"The role of policy in this case is to internalize some of that external value in a way that makes the project work," Kathpal said.

In the Fluence project, the energy retailer will use the batteries to play the market. It could call on it during peak demand moments, to shield customers from spiking energy prices, and perform other services like frequency stabilization. The contracted model means EnergyAustralia can access the tool without putting it on company's balance sheet. 

Longer-term, the system could take on more of a role in transmission and distribution value. The government press release notes, "This project will demonstrate how batteries can help provide grid stability and support on a congested transmission terminal, at a critical location, reducing the need to expand the substation."

The details of how exactly AusNet could monetize that value over the long term weren't immediately clear. Transmission and distribution upgrade deferral has been cited as a promising value that storage can provide, but projects so far have tapped that on a much smaller scale.

Over at the Gannawarra Solar Farm, the Tesla battery will use its longer duration to integrate solar energy onto the grid, and prove out the process for retrofitting existing solar plants.

Tesla's swift response last year to South Australia's blackouts suggests a narrative that a big battery can save the grid next time around. As more battery systems join the grid, Kathpal cautioned against viewing them as magic bullets for grid outages.

"[The Ballarat system] can support reliability by providing bursts of power when it’s most needed, but to truly prevent scenarios like that you need a lot more storage and you need it in more places across the network, deployed for a greater range of applications," Kathpal said.

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