Read time: 5 mins
Based on How trial network tariffs impact the potential benefits of Neighbourhood Batteries, published May 2024.
Analysing five tariffs trialled by Australian networks, ANU researchers have identified the best design for tariffs on neighbourhood batteries – a ‘two-way time-of-use’ tariff design. They also found that if battery management systems can shoulder the burden of managing tariffs, households and the grid would benefit.
Read time: 5 mins
Based on How trial network tariffs impact the potential benefits of Neighbourhood Batteries, published May 2024.
1
Neighbourhood batteries could play an important role in Australia’s energy transition, but their viability depends upon tariff design and how the battery will be operated.
2
Complex, changing tariff structures are hard to navigate. ANU experts found that households could optimise their use and save on costs if this burden was shifted onto battery management systems.
3
Their findings show that a combination of ‘two-way time-of-use’ network tariffs and two-way demand charges would be the best choice for neighbourhood battery tariffs.
A neighbourhood battery is a mid-scale form of energy storage, situated within a neighbourhood. They have a capacity of several hundred kilowatts – enough to supply the energy needs of hundreds of homes.
They have the potential to benefit communities with greater penetration of consumer energy resources, like rooftop solar to the electricity grid, and increased local network capacity. They also allow the sharing of locally stored renewable energy with those who don’t own solar panels.
Like all batteries, they are subject to tariffs. Tariffs are a reality of Australia’s modern energy system, charged by electricity networks to retailers, who pass the costs onto customers.
The revenue raised by tariffs finances the grid’s maintenance. Australia, like many other countries, is moving away from static or fixed electricity tariffs to dynamic tariffs that better reflect network costs, and Australia’s National Electricity Rules require networks to structure their tariffs to accurately reflect the costs of households.
Studying the impact of tariffs, ANU researchers simulated five network tariffs trialled by Australian Distributed Network Service Providers – Ausgrid, Jemena, Citipower and Powercor, Essential Energy and Evoenergy. Their goal was to analyse how effective each tariff was at incentivising the flexible behaviour of neighbourhood batteries.
They found that a ‘two-way time-of-use’ network tariff – which pays owners to generate in times of peak demand and charge in times of low demand – had the best impact on demand and financial outcomes for stakeholders.
In one simulation, a two-way tariff reduced peak demand by as much as seven per cent, all while still providing an overall payment to the battery owner.
Adding a ‘demand charge’ – which bills owners based on their highest demand for electricity overall – reduced peak demand by a further two per cent and increased that payment.
The findings indicate that for neighbourhood batteries, a ‘two-way time-of-use’ tariff design, combined with two-way demand charges, would maximise benefit and achieve the best outcomes for consumers.
Drawing upon a body of research carried out by social scientists, they indicate that complex tariffs are a barrier to savings and other benefits for most electricity users.
By shifting the complexity of tariff management onto battery energy management systems, households may be able to optimise their network usage and save money, without the burden of understanding and responding to complicated pricing structures.
For neighbourhood batteries, a ‘two-way time-of-use’ tariff design, combined with two-way demand charges, would maximise benefit and achieve the best outcomes for consumers.
