popular articles

Battery Profitability: Australia Benefits from Energy Price Volatility

The rise in energy price volatility is boosting battery investments in Australia, strengthening their key role in the energy transition.

Please share:

Australia’s battery storage market is witnessing significant growth, driven by increasing energy price volatility in the National Electricity Market (NEM). According to a report by Wood Mackenzie, these conditions are enhancing project profitability and attracting new investments. However, storage development still lags behind the rapid expansion of renewable energy.

Over the past decade, Australia’s wind and solar capacity has grown sixfold to around 43 GW, supplying more than a third of the country’s energy. In contrast, battery investments represent less than one-tenth of this capacity, highlighting the need for solutions to manage renewable energy fluctuations and stabilize the grid.

A Pipeline of Large-Scale Battery Projects

Wood Mackenzie reports a promising pipeline of 60 GW in battery projects, representing an investment potential of over AUD 80 billion (USD 50 billion). Four-hour storage systems, in particular, demonstrate strong profitability. Their internal rate of return (IRR) is estimated to range between 13% and 15% in key regions such as Queensland, New South Wales, and Victoria.

This profitability is supported by daily electricity price volatility, with price spreads often exceeding AUD 100 per megawatt-hour and spikes reaching up to AUD 400. These fluctuations create significant opportunities for energy arbitrage, which could account for over 80% of battery revenues by 2030.

Cost Reductions and Growing Opportunities

The financial outlook for batteries is further strengthened by projected declines in investment costs. Wood Mackenzie forecasts a 20% reduction in costs for four-hour systems by 2030. For instance, a system operational in 2026 could generate an average of AUD 263,000 per megawatt annually, with maximum returns in Queensland.

Impact of Coal Plant Retirements

The progressive retirement of 21 GW of coal plants in the NEM by 2045 will create capacity gaps that batteries can fill. With renewable energy’s share expected to exceed 60% by 2030, the battery market will be critical to addressing increased price volatility and rapid price shifts.

Significant Policy Support

Initiatives such as the Capacity Investment Scheme provide financial backing for battery projects. However, the report highlights that high price volatility makes these investments viable even without government guarantees. This creates a unique opportunity for investors to capitalize on the rapid changes in Australia’s energy market.

Register free of charge for uninterrupted access.

Publicite

Recently published in

Ormat Technologies has signed tolling agreements for two new energy storage facilities in Israel, further strengthening its diversification and resilience in the energy sector.
Canadian Solar, through its subsidiary e-STORAGE, has signed an agreement with Copenhagen Infrastructure Partners to deliver a 960 MWh energy storage system in Australia. The Summerfield project, located in South Australia, will begin construction in 2025 and will be one of the largest in the country.
Canadian Solar, through its subsidiary e-STORAGE, has signed an agreement with Copenhagen Infrastructure Partners to deliver a 960 MWh energy storage system in Australia. The Summerfield project, located in South Australia, will begin construction in 2025 and will be one of the largest in the country.
Cordelio Power accelerates its energy storage program with the acquisition of over 1.0 GWh of equipment and the signing of new contracts in the United States. The commissioning of the McHenry BESS in Illinois marks a key milestone in its expansion.
Cordelio Power accelerates its energy storage program with the acquisition of over 1.0 GWh of equipment and the signing of new contracts in the United States. The commissioning of the McHenry BESS in Illinois marks a key milestone in its expansion.
Copenhagen Infrastructure Partners (CIP) has begun construction of the Summerfield storage system in Australia. With a capacity of 960 MWh, this project aims to strengthen the country's energy infrastructure and address the growing challenges of electricity storage.
Copenhagen Infrastructure Partners (CIP) has begun construction of the Summerfield storage system in Australia. With a capacity of 960 MWh, this project aims to strengthen the country's energy infrastructure and address the growing challenges of electricity storage.
Tyba, a platform specializing in energy storage optimization, has announced a $13.9 million Series A funding round. Led by Energize Capital, this investment aims to enhance the platform’s artificial intelligence capabilities and improve the profitability of energy storage infrastructures.
SolarBank has announced the start of construction for its first battery energy storage system (BESS) project in Ontario, a strategic investment aimed at addressing the growing demand for power grid optimization.
SolarBank has announced the start of construction for its first battery energy storage system (BESS) project in Ontario, a strategic investment aimed at addressing the growing demand for power grid optimization.
EDP Renewables Canada Ltd. and Caldwell First Nation finalize the land purchase for the Edgeware project, a 75 MWac energy storage facility in Ontario. This project, supported by a 20-year contract with IESO, aims for commissioning in 2027.
EDP Renewables Canada Ltd. and Caldwell First Nation finalize the land purchase for the Edgeware project, a 75 MWac energy storage facility in Ontario. This project, supported by a 20-year contract with IESO, aims for commissioning in 2027.
CS Energy and Calibrant Energy have completed three stand-alone Battery Energy Storage Systems (BESS) in Westchester County, New York. These strategically located installations, equipped with Tesla’s MegaPack2XL technology, will provide critical grid support during peak demand periods.
CS Energy and Calibrant Energy have completed three stand-alone Battery Energy Storage Systems (BESS) in Westchester County, New York. These strategically located installations, equipped with Tesla’s MegaPack2XL technology, will provide critical grid support during peak demand periods.
Enfinity Global Inc. announces the addition of two new battery energy storage projects in Texas, with a total capacity of 425 MW, expected to begin construction in 2025.
The Almholme Energy Hub project, with 1025 MW/2050 MWh of storage capacity and 49.9 MW of solar power, becomes the second-largest approved project in the country.
The Almholme Energy Hub project, with 1025 MW/2050 MWh of storage capacity and 49.9 MW of solar power, becomes the second-largest approved project in the country.
esVolta invests $243 million in three energy storage projects, targeting nearly 1 GWh of capacity to address ERCOT grid challenges by 2025.
esVolta invests $243 million in three energy storage projects, targeting nearly 1 GWh of capacity to address ERCOT grid challenges by 2025.
Relyion Energy successfully completed UL 9540A tests for its modules made from second-life electric vehicle batteries, strengthening their compliance with international safety standards.
Relyion Energy successfully completed UL 9540A tests for its modules made from second-life electric vehicle batteries, strengthening their compliance with international safety standards.
In 2024, the energy storage sector saw a 5% increase in total investments, reaching $19.9 billion. However, a notable shift is evident with a decline in venture capital funding and a rise in debt and public market financing.
The Salzburg Battery Storage Project, a 150 MW standalone installation in Midland Township, has received its permit, marking a significant milestone in the U.S. energy storage sector.
The Salzburg Battery Storage Project, a 150 MW standalone installation in Midland Township, has received its permit, marking a significant milestone in the U.S. energy storage sector.
This thermal storage infrastructure, combined with Elisa’s optimization, illustrates how energy flexibility helps reduce emissions and stabilize the electrical grid within a context of increasing district heating electrification.
This thermal storage infrastructure, combined with Elisa’s optimization, illustrates how energy flexibility helps reduce emissions and stabilize the electrical grid within a context of increasing district heating electrification.
SolaX launches TRENE, a liquid-cooled energy storage system
SolaX launches TRENE, a liquid-cooled energy storage system
SWA Lithium intensifies its drilling to strengthen its strategic ambitions
Westbridge Renewable Energy is developing five new battery energy storage system projects in Alberta, totaling 539 MWh, strengthening Canadian energy infrastructure and supporting the transition to renewable energy.
Westbridge Renewable Energy is developing five new battery energy storage system projects in Alberta, totaling 539 MWh, strengthening Canadian energy infrastructure and supporting the transition to renewable energy.
CATL, the world's leading supplier of electric batteries, plans to raise $5 billion on the Hong Kong Stock Exchange to support its international expansion.
CATL, the world's leading supplier of electric batteries, plans to raise $5 billion on the Hong Kong Stock Exchange to support its international expansion.
Hydro has finalized the acquisition of all Hydrovolt shares, its former joint venture with Northvolt. This USD 7.6 million purchase aims to strengthen Hydro’s strategic position in battery recycling in Europe.
Hydro has finalized the acquisition of all Hydrovolt shares, its former joint venture with Northvolt. This USD 7.6 million purchase aims to strengthen Hydro’s strategic position in battery recycling in Europe.
Sodion Energy and UNIGRID join forces to supply 10 MWh of sodium-ion batteries, targeting sustainable mobility and energy storage markets in Southeast Asia.
Copenhagen Infrastructure Partners invests in two Scottish projects with a combined 2 GWh of energy storage, consolidating its position in the strategic UK market.
Copenhagen Infrastructure Partners invests in two Scottish projects with a combined 2 GWh of energy storage, consolidating its position in the strategic UK market.
South Africa bolsters its electric grid by awarding two 300 MWh energy storage projects to AMEA Power in the North West Province, aiming to improve energy stability.
South Africa bolsters its electric grid by awarding two 300 MWh energy storage projects to AMEA Power in the North West Province, aiming to improve energy stability.
Hithium and Samsung C&T collaborate to develop 10 GWh of energy storage capacity, strengthening their international market presence through a strategic partnership.
Hithium and Samsung C&T collaborate to develop 10 GWh of energy storage capacity, strengthening their international market presence through a strategic partnership.

Advertising