Optimising the Value-Stack of Distributed Energy Resources (DER)

While residential energy storage deployment has seen significant growth in several regions, there still seems to be challenges in drawing out their full value. One important issue to consider when investing in such systems would be defining the different value streams that can be tapped into. James Brown (SA Power Networks), Felix Keck (Ausgrid) and Alida Jansen Van Vuuren (Ausgrid) provided their insight into the different value streams, how to go about stacking them and their suggestions for how distributed energy resource (DER) deployment in Australia could be boosted.

Unlike most DER, energy storage systems are capable of tapping into multiple value streams. These value streams include wholesale energy markets, ancillary services and network support (incl. frequency control, energy arbitrage and grid exports). According to Mr. Brown, future growth is expected in areas like demand response, provision of synthetic inertia and network services which will enable a certain level of network investment deferral.

With several services to reap benefits from, which ones in particular are of most interest to customers? Mr Keck believes that this boils down to the individual customer and their recent experience. For example, in an area that has experienced recent reliability issues due to major storm impact, resilience against grid outages is going to be perceived as the most important aspect. Compare this to an area that has not gone through such reliability issues, then financial benefits and sustainability becomes more prominent. 

Mr. Brown stated that “customer understanding of DER benefits is quite limited, with many customers seeking to maximise grid feed-in-tariff earnings despite these only forming a small component of the overall value stack”. This limited understanding of DER is just one of the factors preventing DER accessing the full value stack. Other elements include the limited availability of integrated “smart DER” products to maximise the potential of passive DER, emerging distribution network constraints, the lack of clear price signals, as well as legacy market participation rules and requirements.

In order to overcome these limitations, Mr. Brown suggested the need for more technical integration of DER with the distribution network to maximise the use of available network hosting capacity, changes to market rules to enable more DER to participate, and regulatory changes to allow investment from DNSPs to support the uptake of DER. However, these changes take time, mainly due to the design and regulatory processes required to go through. 

Network assets generally have a 20 to 30 year lifespan. Therefore, it is crucial that the best possible long-term strategic decisions are made in order to make full use of these assets. Ms. Jansen van Vuuren noted the importance of having multiple trials running concurrently in order to save time, while making informed decisions. She advocates for the concept of regulatory sandboxes where organisations can experiment with innovative products and services outside of those tedious processes and pass through the ones that actually work. 

Compared with most European energy storage markets, Australia boasts a rather unique landscape with several remote locations and slightly different requirements. This is possibly why, unlike the situation in countries such as Germany and the UK, the Australian energy storage space is relatively concentrated on a few retailers. Increased retail competition and retail disruptions were highlighted as the key to opening up more cost-reflective price signals for storage to respond to. 

Mr. Keck observed that currently the prices that customers receive are a combination of both network price components and wholesale or retail price components which effectively increases the overall complexity. “Even if the network was to directly incentivize certain behaviour, that would still only work if a retailer has the direct interest to pass that through to the customer, which may or may not be the case” he added. 

If you want to know more about this and other topics directly from end users of energy storage technologies join us at one of these annual events: The Energy Storage World Forum (Grid Scale Applications), or The Residential Energy Storage Forum, or one of our Training Courses.

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