Research from Cornwall Insight Australia shows a clear trend in regulation raise price setting in the Frequency Control Ancillary Services (FCAS) market with respect to battery storage. In fact, in Q119, batteries were only involved in ~2.22% of instances. This has increased to ~3.73% in Q120 and is now at a high of ~9.09% in Q121. These were at average marginal bid band prices of ~$20.6/MW/hr, ~$30.1/MW/hr, and ~$8.1/MW/hr, respectively, compared to in 2020 and 2019. Black Coal which sets the price most often, also has seen a steep decline in its price-setting bids, declining from ~$43/MW/hr to ~$36/MW/hr, and now to ~18/MW/hr over the same period.
The below graph looks at the regulation raise service and which technologies have been setting the price.
Ben Cerini, Principal Consultant at Cornwall Insight Australia, said:
“We have seen a dramatic shift in FCAS price fortunes over the past year. Going from all-time highs of ~$229.3mn in Q120 (due to the separation event) to only ~$40.1mn in Q121. Since 2019 we have also seen regulation raise prices decline from robust levels in July to December 2019, which averaged over $40/MW/hr to an average of $15/MW/hr in 2020 over the same period. Regulation FCAS has traditionally been a staple revenue stream for battery storage, accounting for ~40% of revenues for Horsdale in 2019 and ~15-20% of revenues in 2020.
“In Q119, Gordon, Gladstone and Torrens B units were responsible for 22%-25% of all price setting intervals. Gordon set the price most often, and the price at which it offered regulation was between $20-27/MW/hr.
“In Q120, things were a little different due to the separation event. Interestingly, Millmerran, Bayswater and Pelican Point were much more active price-setters in this period. With Pelican Point setting the price often at a price band of ~$37/MW/hr, which resulted in actual average prices of ~$112/MW/hr due to other units and constraints in February 2020. In March 2020, we saw battery storage enter the top 10 units for price setting in raise regulation in the NEM, with the Gannawarra battery involved in setting the price on ~2.5% of occasions.
“In January 2021, Hornsdale Power Reserve was involved in price setting for raise regulation in more than 5% of instances at an average marginal price band of only ~$7.4/MW/hr. Interestingly, when it was involved in price setting, the actual price averaged higher at $12/MW/hr, likely due to co-optimisation constraints and efficiencies.
“The trend for battery storage setting the price in FCAS markets shows no signs of stopping just yet. As a result, new bidding strategies are likely to emerge for storage as it reviews its historical position as a price taker in FCAS and bids more reflectively.
“Other markets like lower regulation and new markets such as Fast Frequency Response will become more important, and a targeted trading strategy is now more important than ever. There is significant value for storage, but nuance is needed to identify the most advantageous route to market.”
Notes to Editors
For more information, please contact: Charlotte Nelson at firstname.lastname@example.org or Ben Cerini at email@example.com
To link to our website, please use: https://www.cornwall-insight.com.au.