This report describes a model to understand the behavior of storage in the NEM, focusing on how the size of storage influences competition and collusion behaviors.
Report extract
Electricity storage on large scale is nothing short of revolutionary; it is the perfect, and very timely, complement to intermittently available renewable energy generation. While full of promise, it also entails plenty of challenges. Storage allows for the use of dynamic strategies in buying and selling energy, which market rules must account for; in particular, there is a distinct risk of market manipulation. Clearing and dispatching storage units in the energy market must also be amended to account for this new behaviour. Storage is likely to play a critical role in ancillary services like FCAS, including the newly added very fast FCAS markets, and other new services such as synthetic inertia and possibly system strength. Finally, unlike conventional generators, storage presents no significant returns to scale, which may offer an opportunity for enhanced competition in the energy market.
This project intends to study the problem of storage integration into the NEM under the lens of economics. It will assist in designing the correct incentives for investment and for the use of storage. In doing so it will contribute to increasing the penetration of renewable energy, whose essential challenge remains intermittency and grid stability.
