BNEF: Australian utility appetite for big batteries rising

Analyst Bloomberg New Energy Finance (BNEF) has published a report illustrating rising interest in utility-scale BESS among Australian energy companies and coal-fired generator owners, thanks to improving battery returns on investment and revenue potential.

The advent of competitive large-scale, long-duration BESS is driving a move to divest coal and gas-fired power plants from utility portfolios, reported BNEF.

The “2025 Australia Energy Storage Update” report forecasts utility-scale BESS deployment of 2.3 GW, in 2024, in Australia will expand fourfold by 2028 and could hit 18 GW in 2035. The figures will be boosted by a federal Capacity Investment Scheme (CIS) which aims to deploy 9 GW of battery projects alongside 23 GW of new renewable energy generation capacity by 2030, and by state and territorial tenders.

The report’s authors said Australia had 7.3 GW of large-scale BESS under construction at the end of 2024.

With an aging coal power fleet unable to compete with renewables sites on cost, BNEF said the rise of solar and wind power presents big wholesale energy spot market opportunities for battery-backed arbitrage – charging batteries when grid power is cheap and discharging during peak demand periods.

Figures from regulator the Australian Energy Market Operator (AEMO) show a 225% increase, year on year, in net arbitrage revenue for utility-scale BESS on the National Electricity Market (NEM) grid. The intraday NEM market saw a 41% year on year rise in arbitrage as big BESS banked a record AUD 165.4 million ($104.3 million) from such trading – almost triple the arbitrage revenue generated in 2023.

The report also says across 2024, average intraday arbitrage ranged from $88.04 / MWh in Tasmania to $538.88 / MWh in Queensland, up from 2023 figures which ranged from $41.80 / MWh in Tasmania to $373.28 / MWh in Queensland.

The uptake of rooftop solar is also having the greatest impact on negative power prices in the NEM – when prices can fall below $0 / MWh – with a record high occurring in South Australia during the fourth quarter of 2024, when 37% of all power prices were in the negative.

BNEF Australia Senior Associate and Report Author Sahaj Sood said the pending federal election is unlikely to slow the major role of large-scale batteries in Australia’s power markets.

“The election is set to be a referendum on Australia’s pathway to a low-carbon power sector. A win for the incumbent Labor Party would see continued support for renewables, and the batteries to integrate them,” Sood said.

“A win for the Coalition would see the emphasis shift toward nuclear, a potential lifeline for some of the country’s aging coal fleet. Either way, batteries will be required to balance Australia’s volatile power markets by shifting power from times of low demand and high supply to times of high demand and low supply.”

Newer, longer-duration batteries

Newer, longer duration batteries compared to frequency control ancilliary services (FCAS) in the past few years have demonstrated arbitrage has been more financially significant, where batteries with longer durations are earning more arbitrage revenue as a percentage of their capex than older shorter duration batteries.

It gives the example of the two-hour Lake Bonney battery, which has already earned 33% of its capex in arbitrage revenue, a higher ratio than the 16-minute Dalrymple, one-hour Ballarat, and 1.3 hour Hornsdale power reserve batteries.

Newer batteries like the 1.5 hour Wondoan and Wallgrove projects have both earned 20% of their initial capex in net arbitrage revenue, surpassing the ratios earned by Ballarat and Dalrymple, which have operated longer.

From pv magazine Australia.