Increasing value for battery storage to shift generation

The Federal Government announced last week that they would step into the electricity market to build up to 1,000MW of gas-fired generation to fill the gap left by the Liddell Power station for the 2023-24 summer unless the market can demonstrate final investment on dispatchable power by 2021.

Since then, the Federal Government has revised this target down to a possible 250MW given the current number of projects in the pipeline, acknowledging that other technologies such as batteries can provide the support required.

Research from Cornwall Insight Australia highlights that battery storage might be able to fill this gap instead of gas-fired generation. In fact, the data shows there is an increasing value for batteries in New South Wales (NSW) to shift generation in the market and realise the energy spread value.

Key findings

  • There is an increasing value for batteries in NSW to shift generation in the market and realise the energy spread value (shown in the below graph).
  • Batteries spread have increased from ~$130/MWh in 2018 to $288MWh* so far in 2020.
  • Battery storage costs have fallen well below the capital costs for Open Cycle Gas Turbines (OCGTs), as well as fuel costs for batteries trending to ~10/MWh.
New South Wales battery storage spreads

Ben Cerini, Principal Consultant at Cornwall Insight Australia, said:

“Frequency Control Ancillary Services (FCAS) accounts for a significant amount of value in current storage projects in the National Electricity Market (NEM). Therefore, there is real potential value for battery storage energy trading.

“Battery storage value is a sign to the government that we don’t need more gas-powered generation. Also, if we are projecting a tightening of gas supplies on the east coast and the government wants to push gas prices lower, then building large gas-powered generation (GPG) is counterproductive.

“Batteries are dispatchable they now compete with GPG as peaking assets in their own right and are winning in huge capacities. With new markets emerging in the NEM, it will not be long before projects like this begin to look feasible in the Australian market.”


Notes to Editors

*This takes the spread between the lowest and highest 30min price, so actual spreads that want to use a full cycle per day trading will be slightly less.