Battery storage has great potential to generate high revenues during large market shifts, especially in Queensland (as shown in our previous analysis in Cotw #158). The Queensland government’s recently announced Energy and Jobs Plan (QEJP) would be another big shift as it aims to reduce the state’s reliance on generation from coal-fired power stations by building 7GW of pumped hydro storage across two sites in the period FY 2030 to FY2035. However, recent delays in the construction of other generation assets, such as Snowy Hydro 2.0, can create some uncertainty around the assumed transition planned in Queensland.
Considering the well-publicised delays in the construction of Snowy Hydro 2.0, Cornwall Insight Australia has explored two sensitivity cases to our Benchmark Power Curve Neutral scenario for the build-out of pumped hydro in the state of Queensland – refer to Table 1. In this Chart of the week, we explore the ‘what ifs’ and investigate the impact of these sensitivities on the operational profits of a battery energy storage system (BESS) from CY2029-2037.
Table 1 lists the three scenarios we modelled in the BESS simulation. Scenario A assumes no additional capacity is installed during the delays to the construction of pumped hydro facilities, while Scenario B explores a scenario where an additional 4.8 GW of battery capacity is built to fill the gap caused by delays.
Table 1: Modelling sensitivities, Cornwall Insight Australia
|Scenario A||Borumba PHS and Pioneer-Burdekin Stage 1 and 2 are all delayed by two years to FY 2032, FY 2034, and FY 2037.||No market response until the pumped hydro gets commissioned.|
|Scenario B||Borumba PHS is delayed by two years to FY 2032, and Pioneer-Burdekin Stage 1 and 2 will have a staggered rollout.||An additional 1.8GW BESS capacity will be added in FY 2030 and 3GW in FY 2038, respectively in order to fill the gap created by delays.|
|Benchmark Power Curve Neutral Scenario||No Sensitivity (Based on AEMO’s Step Change scenario 2022 ISP). QEJP pumped hydro completed on schedule.||N/A|
Using Cornwall Insight Australia’s Storage Investment Model, we simulated a stand-alone 100MW/200MWh BESS with standard conditions to analyse the impact of these sensitivities on a battery’s operational profits. Figure 1 looks at the effect of the two sensitivities on the operational profitability of the batteries and compares it with the Neutral scenario for CY 2029-2037 and annual average wholesale prices in Queensland.
As shown in Figure 1, Scenario B has lower average wholesale prices by 18% during CY2029-37 compared to Scenario A. In comparison, the Neutral scenario observes ~6% higher prices than Scenario B. Figure 1 illustrates the higher battery operational profits in Scenario A. This is largely driven by higher wholesale prices and larger intra-day price spreads. The battery makes ~33.1% more profit across the 8-year period due to the delay of the pumped hydro storage assets. Higher energy revenues (~$57M more than Scenario B and ~$41M more than the Neutral scenario) are primary contributors to the significant differences.
Looking at the three scenarios, a delay in the construction of pumped hydro by two years allows the battery to use high-price events and increase the profitability in Scenario A compared to the remaining two scenarios. A key point to note is that these sensitivities are Cornwall Insight Australia’s assumptions and may be altered as the market shifts or new information comes into play.
Our in-house BESS model provides battery revenue forecasting based on engineering techniques and assumptions using our vast experience, comprehensive research, and independent view of relevant areas. For more information on the BESS SIM model or other modelling products, please contact email@example.com.
 Standard operating conditions utilised: Maximum cycling rate = 2 cycles/day; MLF: avg of operating BESS (0.968 Gen, 0.963 Load); Round-Trip Efficiency = 85%; Market prices = Cornwall Insight Australia Benchmark Power Curve and FCAS Price Curve Q4 2022