Submission: AUSTELA response to Western Australia Design Implementation Paper for the Capacity Investment Scheme
Introduction
AUSTELA welcomes the Capacity Investment Scheme for Western Australia (WA) and the government’s focus on addressing capacity challenges in Western Australia in the coming years, particularly of the long-duration dispatchable capacity that will be critical in keeping the lights on as the two large coal plants are retired towards the end of this decade. We very much support the goal of using the WA CIS to support reliability through new investment in renewable capacity. This is essential not just for 2030 goals but net zero by 2050.
AUSTELA’s response builds on previous submissions made to consultations on the CIS in the NEM (see here and here) and the WA Reserve Capacity Mechanism review (see here).
Concentrating Solar Thermal – generating and storing clean, dispatchable power at lowest cost for WA and creating local jobs
AUSTELA appreciates the Paper’s explicit acknowledgement of Solar Thermal, which has a critical role to play in WA’s energy mix. Concentrating Solar Thermal Power (CSP) systems are excellent contributors to the objectives of the CIS and WA’s decarbonisation strategy. They incorporate long duration energy storage (typically around 15 hours) as a matter of course. They collect solar energy using low-cost mirror fields so add additional renewable generation, rather than simply storing electricity already generated. Additionally, through their steam turbine driven synchronous generators, they contribute all the system benefits that a dispatchable generator with inertia brings, offering the same services traditionally provided by gas turbines but with zero emissions.
A recent study commissioned by the Australian Solar Thermal Research Institute and completed by Fichtner Engineering and ITP Thermal (see attached report1) show this combined generation and storage capacity can offer the lowest LCOE for long duration dispatchability. This is supported by modelling in CSIRO’s Renewable Energy Storage Roadmap 2 . The CSIRO document also forecasts that the the WA grids will use an estimated 70GWh of renewable thermal energy storage capacity in 2050 This is built on the assumption that with its high DNI and its scarce water resources, WA grids should build high levels of solar thermal with storage to maintain reliability and security while decarbonising industry and reaching net zero by 2050.
1 Kretschmann J, Lovegrove K, Klump F, Zapata J and Puppe M. The Australian Concentrating Solar Thermal Value Proposition - Dispatchable Power Generation, Process Heat and Green Fuels. Prepared by Fichtner and ITP for the Australian Solar Thermal Research Institute. October 2023. 2 CSIRO, 2023. ‘Renewable Energy Storage Roadmap.’ https://www.csiro.au/en/work-with- us/services/consultancy-strategic-advice-services/CSIRO-futures/Energy-and-Resources/Renewable- Energy-Storage-Roadmap
As well as being well-suited to WA’s hot, dry climate, deployment of the technology could offer a jobs boost to the state as CSP typically create more jobs, as plants need a more skilled and qualified labour force, than VRE or BESS that are mainly operated remotely.
AUSTELA recommendations for the CIS in WA to attract invaluable CSP
In its current draft form, AUSTELA envisages three main challenges to attracting CSP systems into WA under the CIS proposal:
1. Reliance on Four-hour equivalent dispatchable capacity
A well-planned electricity system that achieves 2030 and 2050 decarbonisation targets at lowest cost to taxpayers must deploy an appropriate share of long duration (8+ hours), dispatchable capacity sooner rather than later. The reference to a ‘’four-hour equivalent’’ carries an implicit preference for shorter duration BESS systems. The ‘’four-hour equivalent’’ metric could achieve this if tenders specifically assess long-duration dispatchable capacity as being worth additional payment in proportion to its actual duration. However, it is currently unclear if this will be the case, risking attracting only short- and medium-duration dispatchable capacity. This will help meet short-term targets but will lead to higher costs in the long-term as longer duration capacity will need to be installed at a later date.
Recommendation: AUSTELA recommends that the basis for assessing tender responses clearly and transparently rewards longer duration (8+ hour) storage systems in proportion to their duration (for example a project with 12 hours of storage capacity receives three times as much as 4 hours).
2. The link between the Reserve Capacity Mechanism (RCM) and CIS processes
The CIS and RCM tender processes, as presented in the paper, while to be coordinated, still appear to be separate, presenting challenges for developers likely to bid into both schemes.
We note that: ‘The CIS assessment will include a limited review of contribution to reliability, with the aim of reflecting the same principles that are used in the RCM certification and Capacity Credit assignment processes. ….. It is not intended that the CIS tender process would duplicate those aspects of the RCM process.”
We agree that the same assessment as the RCM should be adopted and that it should not be duplicated. This however seems to be introducing a timing problem. The discussion paper is suggesting that successful projects under a CIS tender would need to bid into the subsequent RCM cycle. This implies that CISA’s would be awarded in the absence of knowledge of the assessment of Capacity Credit under the RCM process. This seems to contradict the intent.
Recommendation: AUSTELA recommends either combining the two schemes into a single process, or at least running them concurrently, giving developers and the government certainty on opportunities and outcomes.
3. Solar thermal in Clean Dispatchable category
We appreciate the explicit acknowledgement of Solar Thermal. Specifying that it belongs in the Clean Dispatchable category avoids the ambiguity that is present in the NEM Design Implementation Paper.
We would note though, that for a solar thermal project to be fairly assessed against a battery project, the fact that it also introduces new generation and not just storage will need to be explicitly recognised.
Recommendation: Ensure tender documents recognise that some technologies can provide both generation and dispatchable capacity.
Other feedback
We offer the following comments to specific sections of the design implementation paper.
- RE: Section 1.1, Page 4 ‘’ The objective of the CIS is to encourage new investment in renewable capacity and clean dispatchable capacity to support reliability and reduce market volatility in Australia’s rapidly changing energy markets.’’
AUSTELA feedback
- AUSTELA very much supports the goal of using the CIS to support reliability through new investment in only renewable capacity. This is essential not just for 2030 goals but for net zero by 2050.
- RE: Section 1.1 page 4 ‘’ … the CIS is expected to target an indicative 6.5 TWh of VRE and 1.1 GW of four-hour equivalent (4.4 GWh) dispatchable capacity in the WEM over the period to 2030.’’
‘’ DCCEEW is preparing to commence the first CIS tender for the WEM in June 2024, with an indicative target of 500 MW of four-hour equivalent (2 GWh) clean dispatchable capacity.
AUSTELA feedback
- Given the timeframes, it is highly unlikely CSP or any technology other than batteries will be prepared to bid into the first tender. This risks missing out on the long duration storage that WA will need to meet its targets.
- From the SWISDA, the volumes being supported do not seem to be large enough to achieve the desired outcomes.
- RE: Section 1.1 Page 5 ‘’In is intended that CIS tenders for the WEM, covering both renewable capacity and clean dispatchable capacity would then be conducted on an annual basis, in advance of each year’s Reserve Capacity Mechanism (RCM) process’’. Further bidders are expected to also participate in the RCM process.
AUSTELA feedback
- To reduce the administrative load and avoid burdensome duplication, AUSTELA recommends either combining the two schemes into a single process, or at least running them concurrently, giving developers and the government certainty on opportunities and outcomes.
- This is OK but the question could be asked, why not just use CIS money and modify the RCM process so that some or all of it is mandated for renewable energy. Would that not reduce the administrative load?
- RE: Section 3.2 Ensuring complementarity between CIS and WEM Page 11; ‘’….will require projects to participate in the RCM process and be eligible to receive Capacity Credits in order to receive CIS payments’’
- RE: Section 3.2 Page 12; Clean Dispatchable CISAs, proponents will bid the floor and ceiling revenues with reference to total facility revenue per unit of rated capacity ($/MW):
AUSTELA feedback
- So it is presumably $/MW/year. The term used is ‘’rated capacity’’ but this is unclear because having required participation in the RCM it should be ‘’Capacity Credit’’ as assessed under the RCM. If it is linked to assessed Capacity Credit. That would be good, but we note the timing issues raised above.
- RE: Section 3.5.1 Registration with AEMO, ownership and minimum size (page 15):
AUSTELA feedback
- Requiring a capacity of 30MWe or more is appropriate.
- Requiring a Special Purpose Vehicle ownership is appropriate and normal practice for CSP .
- RE: Section 3.5.2 Technology contributing to zero emissions and reliability (page 16):
AUSTELA feedback
- The definitions of eligible technologies for zero emissions are appropriate.
- The requirement that ‘’ To meet the reliability objectives, projects will be expected to meet the same minimum standards for Capacity Credit eligibility that are stipulated in the WEM Rules’’ is entirely appropriate.
- RE: Section 3.5.3 Expected development status of connection approvals (page 17):
AUSTELA feedback
- These requirements seem reasonable.
- RE: Section 3.5.4 Participation in other schemes (page 17):
AUSTELA feedback
- We note in particular that grants from ARENA and support from the CEFC will not impact CIS eligibility which we agree is appropriate.
- RE: Section 3.5.5 Technology, timing and delivery risk (page 18);
AUSTELA feedback
- We note that technologies like CSP that incorporate Long Duration Energy Storage take longer to construct than shorter duration BESS. It will be important to consider this when mandating timelines so as to avoid hidden discriminations and perverse outcomes.
- RE: Section 3.6.2 Project bid (Stage A) – technical, commercial and social licence assessment (page 19):
AUSTELA feedback
- We note that technical and commercial viability, proponent capability and social licence are proposed to be assessed in the same way as for the NEM, which is reasonable.
- RE: Section 3.6.2 page 21 ‘’ The CIS assessment will include a limited review of contribution to reliability, with the aim of reflecting the same principles that are used in the RCM certification and Capacity Credit assignment processes. ….. It is not intended that the CIS tender process would duplicate those aspects of the RCM process.”
AUSTELA feedback
- We agree that the same assessment as the RCM should be adopted and that it should not be duplicated. This however seems to risk introducing a timing problem. The discussion paper is suggesting that successful projects under a CIS tender would need to bid into the subsequent RCM cycle. This implies that CISAs would be awarded in the absence of knowledge of the assessment of Capacity Credit under the RCM process. This seems to contradict the intent. We suggest that the two processes should be aligned so as to be carried out concurrently or they should be combined into a single process.
Background on AUSTELA and CSP
AUSTELA is an industry association, representing companies that are involved in solar thermal power generation. Its members includes Australian companies and Australian subsidiaries of international companies.
Solar thermal technologies take their energy from the sun and - unlike solar PV - store the energy as heat rather than converting it to electrons immediately. Concentrating Solar thermal Power (CSP) generation systems operate with an array of mirrors that concentrate the sun’s heat and store it in a medium (typically molten nitrate/potassium salts). The heat – to around 600˚ Celsius – can be stored for many days and used to drive a steam turbine which produces electricity via a synchronous generator whenever needed, day or night. Typical systems have tanks with enough salt to run the power block in the absence of sun for 15 hours or more. CSP systems can also provide clean industrial process heat which typically displaces gas-powered heat in manufacturing.
While the renewable energy sector has been dominated by wind and PV, the imperative for reliable dispatchable renewable generation – to balance variable generation – makes CSP an ideal technology option to include in electricity grids. While relatively small in uptake to date, CSP has a 30-year track record and currently around 6.5GWe of installed capacity in more than 100 utility scale plants around the world. Spain is the past leader in utility-scale CSP and China is currently building 28 CSP projects. A recent key example is the Noor Energy project in Dubai, a 700MW CSP project hybridised with 250MW of solar PV.
AUSTELA regularly comments on the mix of future renewable energy technologies, energy system design and market rules and incentives. We brief ministers, senior departmental officeholders and regulators and continue to be available to the CIS team as it designs this critical mechanism for the energy transition.
ENDS
Submission from AUSTELA directors:
- Keith Lovegrove (Managing Director ITP Thermal)
- Victor Marin ( Director Cobra Australia )
- Craig Wood (CEO and Director Vast Energy)