Photo Credit: Advanced Microgrid Solutions
Australia is a ripe market for batteries to balance its fast-changing generation mix and keep its power grid stable — and it’s definitely getting them.
Tesla’s 100-megawatt/129-megawatt-hour Hornsdale project, built in 100 days last year on a dare from CEO Elon Musk, is being followed by more large-scale battery projects. That includes one from British billionaire Sanjeev Gupta, which is to be even bigger than Hornsdale, as well as new projects by Tesla, Fluence and others. On the behind-the-meter front, Australia is a global leader in residential solar-battery projects, and is aggregating 100 megawatts of them to create the "world’s largest virtual power plant."
All of this energy storage will need software and expertise to optimize its value to the grid. Batteries are well-suited to serve Australia’s grid and profit from its energy market price fluctuations. But the long-term value of batteries is intimately tied into how effectively they’re managed, both to keep their upfront and operational costs to a minimum, and to grasp every available opportunity to maximize their revenues.
That’s where Advanced Microgrid Solutions sees itself playing in the Australian energy market. Over the past year, the San Francisco-based startup has shifted its focus from developing large-scale, behind-the-meter energy storage projects in California and a handful of other states, to becoming the provider of the software that allows others to optimize their own energy storage assets.
According to Jesse Bryson, AMS’ senior vice president of global market development, Australia is one of the company’s first big targets for its new business. “In Australia, market design is about the most complicated in the world,” he said. “If we can solve Australia, we can do it in any market.”
Bryson, who led the corporate distributed energy resources strategy for big AMS customer Southern California Edison before joining the startup in 2016, noted that its large California projects are also capable of optimizing themselves to meet multiple grid market opportunities.
"We’ve developed the platform to monetize utility-scale assets as well as aggregations of behind-the-meter assets,” he said. “That’s the next step in the evolution of AMS.”
Sizing up the Australian market opportunity
Bryson declined to discuss any specifics on where and with what partners AMS might be approaching this opportunity in Australia. But among its strategic investors is Australian utility AGL, which is building the 100-megawatt solar-battery virtual power plant in South Australia, the same grid-constrained region that’s the home of Tesla’s Hornsdale project. This spring, AGL switched its VPP battery system partner from Sunverge to SolarEdge, Tesla and LG Chem, but hasn’t announced whether it has shifted from using Sunverge’s management software to using other platforms.
Bryson did share an analysis conducted by AMS on the continent’s energy markets, which indicates that the energy storage boom now underway in South Australia isn’t expected to gobble up all of the market opportunities in the region. This finding comes in contrast to a McKinsey & Company analysis from May, which indicated that Tesla’s Hornsdale project had reduced revenues for ancillary services across the country by providing most of the frequency control ancillary services (FCAS) needed for the region.
This analysis, however, overlooked the fact that FCAS is procured on a national basis outside of times when South Australia is islanded, according to Matt Penfold, AMS’ vice president of commercialization. An example of this islanding occurred in the summer of 2016 and 2017 when “major outages occurred on the transmission line that links South Australia to the rest of the country, and resulting in well-publicized blackouts. This was a major issue for the Australian economy,” he said.
“The main issue with the McKinsey analysis was that they focused solely on the state of South Australia, while FCAS is procured on a national basis the vast majority of the time. Once you take a national view of the market you see that total FCAS procurement costs have actually increased since the introduction of the Hornsdale battery," he said. "There is plenty of room for more storage assets to generate revenues from FCAS in Australia.”
In broader terms, the AMS analysis paints an optimistic picture for energy storage in the Australian National Energy Market, based on the increasing amount of wind and solar power coming online, the range of both merchant and contracted revenue opportunities, and comments from grid operator AEMO's CEO Audrey Zibelman, who was a big proponent of energy storage in her previous roles at U.S. grid operators and as CEO of startup Viridity Energy.
AMS' software play
AMS conducted its analysis using real data from Australia’s AEMO, which is “a very fast-moving market — it settles every five minutes,” Penfold said. “You only have two minutes to make the decisions by the time you have the data published and visible from the previous dispatch signal. It lends itself very well to an algorithmic trading approach.”
That’s the approach that AMS has built into its software. “We’re forecasting economic conditions on the market, such as price elasticity, and how performance will impact price signals, and bidding the battery into the market based on those price signals,” he said.
Of course, battery providers like Tesla and Fluence have their own battery management software platforms, but they’re primarily focused on optimizing the operations of the storage system, rather than on market-facing operations, said Penfold. On that side of things, “there aren’t that many tools like this today, I would argue. A lot of this trading is done by traders with quite simple problems to solve.”
AMS has had an insider’s view of Australia’s market for energy storage for some time, via its relationship with Macquarie Capital, which provided AMS a $200 million project finance fund in 2016. It has also brought in several Tesla alums with direct experience with the Hornsdale project, including Ryan Hanley, who brought expertise from SolarCity and Tesla's grid services team during his seven-month tenure working on AMS's transition to software, and Seyed Madaeni, who led development of Hornsdale's optimization and bidding software engine before joining AMS in January as SVP for energy markets trading.
According to Penfold, “What’s different about this tool, relative to what I’ve seen from the platform that’s operating the Hornsdale battery" and other software he's seen in the market, "is that we’ve built it to run any hardware from any [manufacturer],” meaning that it can incorporate batteries, inverters and power control systems from multiple vendors.
“It could be used for any storage or renewable generation technology,” such as pumped hydro storage, he added. “And we’re excited about the convergence of this product with behind-the-meter resources.”
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