The risk is that there might not be enough inertia in the system, which will destabilise markets (and arguably this point goes beyond questions of reliability and to the heart of whether we can or should maintain our present quality of life). The difficulty is that this is not a problem that can be solved, economically or technically, with storage unless the technology evolves to a point where batteries can provide both inertia and capacity.
It means that solving for these points often leads commentators to the extremes for and against different fuel types. That is the challenge with policy development in most countries, Australia included, because it requires us to hold a number of conflicting points in check while coming to an answer of how to set energy policy.
Laser focus on the specific problem
In Australia, the National Electricity Market (NEM) is an energy system, meaning it pays when energy is being generated and supplied into the system. It does not pay baseload or peaking power to sit idle and to provide capacity or inertia when it is required. Many other systems globally have similar structures.
One of the options to address the issues associated with mass penetration of renewables, namely, maintaining inertia, is to begin paying for it.
Batteries are not a viable solution to create synthetic inertia. While batteries provide capacity, that is very different to providing inertia. It means they provide little in terms of system strength and risk destabilising when grid signals increase from rotating generation. Current battery software and communication technologies are also too slow to respond to sudden frequency drops, which can happen in less than a quarter of a second.
Nor is demand response a viable solution, whether it is contractual (through paying people to turn off), or the more politically unpalatable load shedding or rolling outages.
That leaves paying for inertia, by creating inertia markets. This would require rotating inertia as a service, to be valued in a much different way than it is today, and paid under mechanisms that will incentivise both new and existing technologies to provide the underpinning reliability the system needs. These are significant changes and would stretch the bounds of existing ancillary services in a market like the NEM in Australia.
These are not new challenges. In Australia, like in many other countries, the Australian Energy Market Operator (AEMO) establishes minimum inertia requirements in each region. These are published, along with rules around system strength. However these arrangements imply a continued requirement for rotating inertia. How that looks in an environment where renewables are rapidly reducing in price is the challenge.
We need to balance a need for rotating inertia in the system with the fact that renewables will be the primary method of power generation in our grandchildrens’ lives. While the energy only market has served us well in the NEM since 1998, it may be time to challenge the conventional wisdom.