May 9, 2023

1GW of big batteries now in the National Electricity Market

Australia recently hit it first gigawatt of big battery storage, with another 40 GW in the projected pipeline. During the Smart Energy Conference, Marija Petkovic, founder and managing director of Energy Synapse, looked at what we’ve learned so far.

From total non-existence before 2017, Australia’s big battery market has now hit 1 GW. During the Smart Energy Conference held in Sydney’s Convention Centre on May 3 – 4, Energy Synapse founder Marija Petkovic highlighted some key takeaways since the connection of the Torrens Island and Hazelwood batteries rounded out the country’s first gigawatt.

Perhaps the most interesting is the fact that what experts presumed to be very shallow markets, namely the Frequency Control Ancillary Services or FCAS, have in fact proven much deeper than expected. The last seven years have seen numerous predictions about new large-scale batteries collapsing these markets but Petkovic said “we’re just not seeing that play out in the numbers.”

Of course, the markets’ depth varies across years, but FCAS has consistently provided the lion’s share of battery revenue and is yet to fall in a heap. Interestingly, how much of a battery project’s revenue stack came from the FCAS markets varies massively depending on the battery’s duration.

For batteries with less than 1.5 hours of duration, it usually accounted for well over 80% of the revenue stream. But for batteries with over 1.5 hours duration, FCAS sometimes provided less than half of their average revenue.

It is also worth noting that with every passing day, both new contracts and new markets are being developed to reward the battery project’s value. Perhaps the most significant of those will be the federal government’s Capacity Investment Scheme, which has taken notes from the NSW government’s Long-Term Energy Service Agreements or LTESA scheme. Key big battery players like Neoen are also negotiating increasingly novel private contracts for their storage projects.

Today, energy arbitrage is unsurprisingly battery project’s second biggest revenue stream. Petkovic pointed out that it is not actually average wholesale energy prices that are important, but rather the price spread of these spot markets.

During the energy crisis in 2022, these spreads increased massively – sending a strong market signal for storage, which has always been something of an issue for Australia. Victoria and South Australia both have low average wholesale prices, but big pricing spreads – making them attractive locations for big batteries.

On average, Australia’s big batteries do 0.8 cycles per day – though Petkovic points out this figure is highly dependent on whether the projects are chasing FCAS markets (in which case they cycle less) or energy arbitrage.

Australia may 40-fold its big battery installations over the coming decades with over 40 GW in the pipeline. This, however, includes all battery plans from the earliest stages – some of which inevitably won’t reach realisation. The growth projects are far from out of line though, with the Smart Energy Council expecting Australia to be home to 78 big batteries by 2025, with 14.5 GWh of capacity.

In terms of battery chemistries, Petkovic described herself as “very interested” in flow batteries, which are probably the most developed alternative to lithium chemistries today.



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