Key Areas f or F uture R esearch:

3.31 Do value streams exist that can be used for these technologies, microgrids, community batteries and VPPs individually or in combination as well as combined?

3.32 What is each value stream's significance (impact) on the economic viability of individual systems and a combined system?

There is a need to quantify these streams theoretically and practically (through demonstration project(s) for a range of current and future technology costs and operating and regulatory scenarios.

3.33 What is the cost of indirect value streams, and how do we evaluate these costs?

What are the constraints on providing services into each value streams?

Exploiting the full potential of microgrids, VPPs and community battery systems individually and in an integrated format requires a policy and regulatory reform. Key constraints associated with each system and their specific value streams are summarised below.

M icrogrid constraints (Monash University, 2019; Wright et al., 2022)

Essential service and service performance. There is a need for clear and transparent policies for the authorisation and governance of microgrids, and in particular to address the provision of essential service and protections and service performance to provide choice, affordability and supply reliability to microgrid participants. Further policies are required for defining the status and authorisation of the microgrid owner or operator, the appropriate form of legal and contractual relationships between the parties, and microgrid customers’ rights.

Network transformation and access. Network transformation must provide the right to connect microgrid resources to the existing network, determine the value of network services, and lower losses and wholesale prices. A carbon pollution reduction policy is required to facilitate energy efficiency and enable efficient investment in renewable energy.

Regulatory constraints. Microgrids need a dedicated owner and operator who is licenced to engage in distribution and retail activities. Licensing is a compulsory requirement for microgrids that utilise existing supply networks with many residential customers (10 customers on a single site). In addition, some regulatory constraints directly impact the microgrid-specific value streams. For instance, power export and local peer trading require an exemption or a special license. In Victoria, power export (selling) in the NEM can be through VPP/small generation aggregator (SGA) or requires registration with NEM as a wholesale market participant.

Other constraints. Microgrids in Australia are in the pre-feasibility and early trial stages. Currently, there is limited evidence from real projects on the extent to which, and how, these different value streams impact/contribute to the overall microgrid revenue/profit for the owner/operator and its customers. It also remains to be established whether microgrids are the most viable energy solution, particularly compared to other related energy business models (e.g. stand-alone solar PV and battery systems). Additional technical challenges include a lack of tested enabling technologies.

VPP regulatory and operational constraints

Currently, VPP operators can only participate in the wholesale energy market as an SGA. Operationally, AEMO requires batteries larger than 5 MW and generating systems larger than 30 MW in order to be scheduled through the central dispatch process, but it has no provision for the aggregation of resources (i.e. VPPs). AEMO’s Virtual Power Plant Demonstration Project included an assessment of regulatory and operational arrangements that affect VPPs. The observations from this project have already fed into several regulatory processes (AEMO, 2021b).

Community battery regulatory and policy constraints (ANU, 2020b; Shaw et al., 2020; McKell, 2021)

Network charges. There is a need for a mechanism to determine the network cost for community batteries. This pricing mechanism should consider the local use of service (LUoS) (i.e. reduced local energy transport). Moreover, monetising the network and system operator services, such as the cost of network upgrade deferral, providing supply during contingencies and maintenance, and providing congestion relief and capacity reserve is a tedious task and has not yet been attempted.

Operation in a disaggregated market. Several trial projects are underway in Western Australia, where state-owned DNSPs and regulations allow buying and selling energy directly from/to customers, making the community battery model relatively straightforward. However, this is not possible on the east coast of Australia, where regulations governing the NEM currently do not allow buying and selling energy directly from/to customers. Here, the regulation for community battery trial projects needs to be relaxed to determine and introduce the necessary regulatory framework changes. Policy needs to address the possible risk of increasing inequality between community batteries and other electricity users, and there is also a lack of clarity on managing the lifecycle impact of batteries.