It has been an interesting year for Australian energy markets, facing unprecedentedly high energy prices, coal outages, and market suspension. In today’s Chart of the week, we will investigate the impact a BESS would have made during FY 2022.
Using Cornwall Insight Australia’s battery simulation model, we simulated a stand-alone 200MW/400MWh BESS with standard conditions*[1], estimating battery operating profit for batteries participating in the FCAS and wholesale energy markets for each of the mainland NEM states. Figure 1 looks at the profitability of batteries in the NEM over the past financial year and shows that QLD provided the greatest opportunities for battery profits in FY 22, followed by SA, NSW, and then VIC. The main drivers behind the high battery revenues in QLD and SA are high energy price events allowing the battery to earn significant revenues over short-term price spike events.
One thing to note is that these results assume perfect price foresight. That is, the optimisation algorithm knows with certainty what future prices will be. Therefore, actual revenues are likely to be lower for an operational BESS (our analysis indicates that this reduction for perfect foresight is usually in the order of 10-20%).
Our BESS results show high energy arbitrage opportunities in QLD (accounting for around 70%) due to price volatility in QLD, with VIC making the lowest revenue in the energy markets during the same time scale.
Figure 2 illustrates the contribution of daily operating profit to the annual total. If battery revenues were consistent throughout the year, we would expect the cumulative revenue line (blue) to be linear throughout the year. However, we see that QLD’s revenues for FY22 have been driven by a few price spike events, with 50% of revenues earned over 8% of the year. In our simulation, almost 10% of the year’s battery profit was earned on 1 February and 8 March, where the average wholesale price hit $14.5K (1 February) between 6pm-7pm and $11.6k between 5:30pm-7:30pm on 8 March.
Looking at these charts, QLD was best placed to earn significant operating profits in FY2022. In a future Chart of the week, we will look at battery revenue forecasts in 2035 using our BPC and FCAS forecasts.
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 enquiries@cornwall-insight.com.au.
[1] No. of cycles per day – 1
MLF: avg of operating BESS (0.968 Gen, 0.963 Load),
RTE: 85%
