Along with the retirement of coal/gas power plants in the NEM, long-duration energy storage systems (LDESS), often exceeding 8 hours of storage, are becoming more crucial in transitioning to a more sustainable and renewable energy future. LDESS technologies, such as battery storage systems (BESS), thermal energy storage systems (TESS), compressed air and pumped hydro storage, would offer grid operators a flexible, consistent power supply during peak demand or low renewable generation, resulting in less reliance on fossil fuel-based power plants.
In recent years, TESS has attracted lots of attention as a promising type of storage. TESS is a technology that allows for the capture and retention of heat energy for later use. Thermal energy can be stored through phase-change materials that absorb and release heat during their transition between solid and liquid states.
In this Chart of the week, we investigate the prospects of long-duration TESS and BESS in NSW and QLD by presenting some analysis and key insights derived from models of BESS and TESS, both developed by Cornwall-Insight Australia.
Figure 1a shows forecasted revenue for 100MW/8hrs LDESSs in NSW and QLD from the energy market arbitrage and 8 FCAS markets. Neglecting the policies of governments in these two states, the results show that QLD is a better option for investors than NSW. Having a much faster response time, BESS can earn around 8.5% and 7.5% of revenue from NSW and QLD FCAS markets, while this revenue stream is less than 2% for TESS in both states, which uses a turbine to export stored energy to the grid.
This highlights the value of a higher ‘round-trip efficiency’ to capture arbitrage revenue compared to ‘response time’ to harvest revenue from FCAS markets with limited sizes. This has been the major advantage of BESS over TESS (e.g. charged by a 100MW resistive heater).
Based on the US National Renewable Energy Laboratory (NREL), capital costs of a 100MW/8hr BESS and TESS are $491M and $407M, respectively. Noteworthy that these costs may vary based on the technology of assets, EPC and construction expenditures. Comparing the gross profit (revenue minus cost) of these two technologies for the QLD scenario, it can be seen that BESS performs better with $791M than TESS, which returns a $344M profit. A similar ranking is obtained for the NSW scenario as well.
From an operating point of view, Figure 1b shows how TESS captures a higher $/MWh of energy exported to the grid than BESS. In fact, the low round-trip efficiency of TESS (i.e., 42% for TESS considering efficiencies of a resistive heater, turbine efficiency, and thermal loss; 82% for BESS considering inverter efficiencies) would force TESS to only operate during peak price periods as its total exported MWh is lower than BESS. However, the value of this parameter is less divergent for these two assets in the second half of the operating horizon. This would illustrate the significance of capacity degradation as a distinct advantage of TESS over BESS. This is clearly depicted in Figure 2a, where BESS degradation diminishes BESS arbitrage opportunity when the energy price spread increases yearly, and FCAS revenues almost fade.
Having said that, the matter of availability and maturity of TESS is still uncertain, at least for the next couple of years, compared with BESS technology which seems the most promising current investment option. Therefore, the question would arise, “How is the performance of a long-duration BESS compared with a 2hr- BESS?”. From the revenue point of view, based on Figure 2b, an approximate 285% increase in total revenue (for NSW and QLD cases) is obtained when upgrading BESS MWh to 8hr, which needs to be optimised against 350% investment capital increase (NREL, reference year 2025).
In this Chart of the week, we benefited from our consulting and Benchmark power curve modelling services, which provide a comprehensive advisory platform for long-term revenue forecast of renewable energy and storage systems in NEM. Please contact us at enquiries@cornwall-insight.com.au for more information.
