How did Tesla Slaughter Its Opponents as Soon as It Entered the Market?

Things the Tesla big battery has taught us about the Future of the Electricity Market

Read it in other languages: 華文

Last summer, Tesla announced that they would build the largest utility scale battery ever in South Australia.

As soon as the news was released, Reneweconomy pointed out that a 100MW battery was not built for balancing the residual load variations.

Rather, it would cause drastic change in the ancillary service market that provided frequency and voltage stability.

Although we already knew what effect it would cause to the market, the results were still very striking when it first came out.

According to Tesla’s own data, with merely 2% of the total capacity in the ancillary service market of South Australia, the battery has achieved a 55% market share since it went online. It also lower the price of the market by 90%.

What the Tesla big battery did was simply bringing the price back to normal and preventing conventional power plants from routing the market.

To call this a slaughter of the existing competitors is, however, somehow unfair; what the Tesla big battery did was simply bringing the price back to normal and preventing conventional power plants from routing the market.

Reneweconomy has long pointed out that the strategic bidding behavior of some conventional gas power plant operators is part of the reason why electricity prices in Australia remain high.

The decrease of price in the ancillary service market after Tesla big battery entered is perhaps another empirical proof to the theory.

Some warned that a market share of 55% and price reduction of 90% for only a single battery may limit further development of utility scale batteries in South Australia.

But as more conventional power plants go offline and the share of renewables on the grid continues to surge, the demand for smarter and more flexible options in the ancillary market will only grow greater.

In addition, we should always look further to the horizon: utility scale batteries will one day ultimately provide services that balances the residual load.

When does that day arrive is something I’m researching on and hopefully I can write about it in the near future.

More regarding Energy Transition in South Australia

Long Term Effects to the System

The control mindset for conventional power systems is more like driving a large truck, while the new mindset would be more like controlling ten connected bicycles at once.

From a system’s perspective, the “must run capacity” from conventional power plants can be largely reduced if the frequency and voltage stability are provided by fast response batteries. This will also increase the flexibility of the system to residual load variations.
(In some researches that focus on a 100% renewable scenario, how to eliminate the “must run capacity” constrain totally via storage options is one of the most important issue.)

The control mindset for conventional power systems is more like driving a large truck, while the new mindset would be more like controlling ten connected bicycles at once.

It is obvious that the latter requires more flexibility and faster response. But if well managed, one can perform more local and sophisticate adjustment in this case.

For those of you who are interested in how frequency, voltage, and residual load services will carry out in the new mindset, you can read the following presentation or this web page:

The Conservatives Strikes Back

The coalition government of Australia and its supporters have long pointed their fingers on the ongoing energy transition in South Australia as the reason why the state has a high electricity retailer price and also its reliance on imports from neighbor states. This is simply an attribution fallacy.

South Australia has long relied on imports from neighboring states, even before the transition took place. Higher renewable production has reduced such reliance and increased energy independence of the state.

On the other hand, there is no evidence that higher penetration of renewables increase the wholesale prices. Retailer prices in states with less variable renewable energy actually rose more than those with more.

Higher VRE penetration did not lead to higher retailer price rise. Note that Tasmania(TAS) has nearly 100% of renewable energy in electricity generation, and the cheap hydropower also constrained the price rise.

Of course, the conservatives also smeared the Tesla big battery project when it was announced, attacking its feasibility.

When it did finished in time, they turned their narratives and attacked the insufficient size of the battery. “It can’t support the grid’s demand for even a hour,” they claimed, as if the battery was designed to provide reserve margin.

The noises from those naysayers sound just too familiar everywhere around the globe.

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Tony Yen

Tony Yen

A Taiwanese student who studied Renewable Energy in Freiburg. Now studying smart distribution grids / energy systems in Trondheim.