"Currently, South Australia's peak loads are managed by open-cycle gas turbine (OCGT) plants. But by 2025, battery storage would be cheaper than OCGTs in managing peak loads even at gas price of A$7/mmbtu. OCGTs would then be relegated as emergency back-ups," Bikal Pokharel pointed out.
Mr Pokharel works as WoodMac’s Asia-Pacific power & renewables principal analyst is one of the main contributors of the study. GTM Research, meanwhile, pointed out the South Australia experience is “noteworthy in a global power mix” that is increasingly shifting to renewable energy.
"One determining factor is the rate with which battery charging costs declines. By 2025, we expect battery charging cost to decrease as off-peak prices will gradually be set by excess wind generation. Battery storage then becomes a potential solution for managing peak loads,” Mr Pokharel explained.
Wood Mackenzie estimates that 400MW/ 1,600 MWh of battery storage will be sufficient to handle the highest peaking residual demand in 2025. This storage asset will be unlike the 100MW/ 129 MWh Tesla Hornsdale facility which is designed to meet energy security needs.
Gas-burn set to plunge 70%
If all committed and planned renewables projects progress, renewables are expected to be double the capacity today by 2025.
This would mean that 67% of South Australia's power capacity would be renewables. Gas demand in the power sector will then decline by 70%.
South Australia retired its last coal plant in 2016 and is projected to have installed renewable energy capacity exceed its peak demand by 2020. Meanwhile by 2035, renewables and batteries will provide a commercial solution for both base loads and peak loads. As a consequence, gas will increasingly be used just for emergency back-up.
Still, owing to intermittent nature of wind and solar energy, a robust power system needs back-up generation and a supporting ancillary system.
Must-run gas units mitigate intermittency
Risks in connection with intermittent RES power supply are well known in South Australia – the region was hit by a series of power failures in recent years. This is why gas power, for now, will remain important in ensuring uninterrupted power supply.
For gas to integrate renewables' intermittency, there needs to be more flexible gas contracts, on an hourly, monthly and annual basis.
“Capacity payments or the introduction of 'must-run units' will be needed to ensure sustainability of gas-fired power plants. If gas contracts can't meet the flexibility required for this, South Australia might need to look at alternative fuels, such as diesel, for back-up power generation," the study finds.
Today’s RES still uneconomic
"It is also worth noting that renewables built to date have been uneconomic without subsidies, and cost reduction trend will have to continue before they can compete," Pokharel stressed, concluding
“If current cost trends continue, 2025 could very well see renewables and batteries overtake rival generating alternatives in dominating South Australia's power system, and the region could become a leading case study on managing a power system in transition for other mature markets to follow."