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In addition to residential battery systems, utility-scale batteries are also gaining traction around Australia, as both the private and public sectors consider investment in large battery storage solutions.
Where are the big batteries?
There are currently six utility-scale batteries operating in the National Energy Market (NEM), which are all within SA and Victoria. Whilst there is a range of developers and investors building battery storage solutions, there are only two battery manufactures that have installed operational batteries in Australia: Tesla and Fluence.
Considerations in developing the battery
Although increasing, the Australian market for utility-scale batteries is still in its early stages, as developers continue to grapple with these batteries’ revenue streams. Operating the battery in the wholesale (merchant) market, in competition with traditional generation is limited by the batteries’ inherent requirement to charge and recharge at different points in time.
This charging paradox is a key consideration during the development phase and in consideration of battery design. The power (MW) capacity represents the maximum output of the battery at any one point in time. The energy (MWh) however, represents how long the battery can run or discharge at maximum power, before it needs to be recharged again. The developers’ intended revenue strategy drives the battery design and power to energy ratios.
How to make money?
Given these considerations, developers look to both market and contract revenue sources in order to commercialise battery projects:
A balancing act
While batteries present an exciting technology solution that is emerging across the network, there is a tipping point to make them financially viable. The largest and most prominent utility-scale battery in Australia to date, Hornsdale was only able to progress to project development and finance, due to a 10-year $4 million per annum contract with the SA government for SIPS grid support services.
While there is an increasing market for utility-scale batteries, project development, more often than not they require government underwriting or support. Continued cost reductions, better signals and more evolved revenue streams will help accelerate entry and provide the necessary confidence to investors.
This blog was co-authored by Cara Teoh.
Kumar is a Partner in the Financial Advisory practice and is responsible for the Energy and Resources Sector. He specialises in portfolio management, policy advice, commercial and financial analysis, market modelling (electricity, gas and renewable energy), strategic positioning and assisting clients with growth strategies. Kumar helps his clients make future decisions with confidence.