AUS NEM Methodology

Modo Energy provides benchmark data for battery energy storage systems across global energy markets, applying a standardised mathematical methodology to ensure consistency and transparency across all produced Indices.

1. Introduction

The Modo Energy Australia National Electricity Market (NEM) Methodology Framework outlines the calculation and construction of Modo Energy’s battery energy storage Indices within the NEM. This document provides detailed insights into:

• the inclusion criteria for assets;
• the components that constitute published revenues; and
• the methodologies employed;

to ensure accurate and reliable benchmarking for Australia’s battery energy storage sector.

1.1 Representation

Modo Energy’s Indices are designed to track the performance of grid-scale battery energy storage systems in the NEM. Given the diversity of battery energy storage projects, Modo Energy’s Indices may be configured to highlight and compare specific attributes (e.g., system duration or region-level performance).

2. Index Construction

2.1 ME BESS AUS NEM Indices

Modo Energy currently produces three Indices to track the performance of battery energy storage systems in the NEM:

• ME BESS AUS NEM: Includes all qualifying assets in the NEM.
• ME BESS AUS NEM (1H): Includes assets with a duration of less than 1.5 hours.
• ME BESS AUS NEM (2H): Includes assets with a duration of more than 1.5 hours but less than 2.5 hours.

2.2 Inclusion Criteria

To be included in the Indices, battery energy storage assets must meet specific criteria:

• Metering: Battery energy storage assets must not share a meter with other co-located resources.
• Scheduled: Battery energy storage assets are registered as Scheduled with AEMO.
• Availability: Assets must be available (as defined in section 2.2.1, below).

2.2.1 Asset availability

Asset availability is assessed based on market activity recorded for each settlement day. An asset is considered active and included in the daily Index calculation if it has recorded market activities, defined as either:

• generating revenue from energy trades; or
• holding of ancillary service contracts.

Assets with no recorded market activity on a given settlement day are considered inactive and excluded from the Index for that day.

2.3 Index calculation methodology

The index calculation follows a clearly defined, rule-based methodology with no discretionary adjustments, ensuring transparency, consistency, and reliability.

The Index value is calculated daily by dividing the sum of revenues of all active assets (see section 2.2.1) against the sum of their total rated power or energy capacity (see section 2.3.1 for divisor details). This provides a normalised measure of average revenue per unit of capacity.

2.3.1 Divisor

The divisor is a fundamental component of Modo Energy’s BESS AUS NEM Indices, acting as a normalisation factor to ensure assets of all sizes can be benchmarked against the produced Indices. It is calculated daily by summing the total rated power or energy capacity of all active assets (see section 2.2.1), with rated power based on an asset’s nameplate capacity rather than its grid connection.

The divisor is recalculated daily to reflect changes in asset availability, ensuring the Index continues to represent assets actively contributing to revenue generation.

2.4 Index value representation

All Index values are reported in terms of net revenues per settlement period. Revenue and Index values can be represented using the following units:

• AUD/MW/hour (hourly): Calculated by dividing the total index value for the assessed period by the total number of hours in the period (days × 24).
• AUD/MW: Calculated by summing the total index value for the assessed period.
• AUD/MW/year (annualised): Calculated by dividing the total index value for the assessed period by the number of days in the period and multiplying by 365 to project an annualised value.

3. Revenue Components

3.1 Revenue Components of Indices

This section outlines the revenue streams included in the Indices. Each revenue component is essential for evaluating the overall performance value of battery energy storage systems in the NEM.

The revenue components included in Modo Energy’s NEM Indices are:

• Energy Market Revenue: The wholesale energy market operates continuously, allowing for the purchase and sale of electricity in 5-minute settlement intervals. This market ensures that electricity supply matches demand across each period, with dispatch instructions and prices calculated by AEMO before each interval.
• Frequency Control Ancillary Services (FCAS): Essential for maintaining grid stability and reliability. This covers:
  • Regulation services (raise and lower); and
  • Contingency services (raise and lower), with response times including Very Fast (1 sec), Fast (6 sec), Slow (60 sec), and Delayed (5 mins).
    • When reporting on Contingency service revenue components in the index, we group the different response periods under their respective direction (raise or lower).

3.2 Excluded revenues

Revenues from certain services or arrangements are excluded from Modo Energy’s Index calculations. These exclusions include:

• Tolling and floor arrangements.
• Bilateral contracts (e.g. Power Purchase Agreements and ancillary services such as SIPS).

4. Data Sources and Methodology

4.1 Data Inputs and Visibility

Modo Energy includes only scheduled battery energy storage system assets identified in AEMO’s generation information updates and dispatch reports. The accuracy of data and additional context, such as optimisation provider, is sourced from public information and/or direct confirmation from the companies responsible for the project.

4.2 Revenue Calculation Methodology

Battery energy storage systems in the NEM have historically operated as both generation and load resources. In index calculations, revenue data from both resource types is combined to determine a net revenue for each market, which is then allocated to each specific battery energy storage asset. As batteries switch to bidirectional registration this changes into a single revenue figure for each market.

4.2.1 Energy Market Revenue Calculation

Energy market revenues, as referenced here, refer to revenues earned in the NEM spot market. These revenues are calculated using telemetered power values reported by battery assets to AEMO. Power values are provided on a 5-minute interval basis, in alignment with the NEM’s settlement processes. To estimate energy volumes, the reported power values are interpolated between intervals, creating an estimated measurement of energy over time.

The calculated energy volume is adjusted for transmission losses by multiplying it by the individual asset’s export and import Marginal Loss Factor (MLF**)**. MLFs represent the energy losses incurred when electricity is transported through the transmission network and are assigned to each connection point. The MLF values used for individual assets are those reported in AEMO's Marginal Loss Factors for each financial year, as published in their official reports and updated quarterly.

This energy volume, adjusted for MLFs, is then multiplied by the spot market energy price specific to the corresponding region the battery is located in to determine revenue for that 5-minute dispatch interval.

This revenue calculation methodology aligns with the processes outlined for generator revenues in the National Electricity Rules (NER), specifically in sections 3.15.4 to 3.15.6. These rules govern the settlement of spot market transactions and ensure consistency in revenue determination across market participants.

4.2.2 FCAS Revenue Calculation

FCAS revenues are calculated by multiplying the AEMO-instructed amount of FCAS (MW) for each service by the corresponding regional price ($/MW) for that service. This revenue calculation follows the methodology for generator revenues as outlined in section 3.15.6A of the National Electricity Rules (NER).

Any energy dispatched as a result of utilising FCAS is included in the energy revenue calculation.

4.3 Updates and Revisions

The Indices are updated daily to reflect the most current data. Where additional data becomes available after a settlement period, calculations are backdated to include it.

5. Governance and Compliance

5.1 Transparency

Detailed explanations of calculation methodologies and revenue components are provided to ensure transparency.

5.2 Stakeholder Engagement

Feedback from stakeholders is actively sought and incorporated into methodology updates. Reviews are conducted by a team of experts to maintain accuracy and relevance.

6. Methodology Changes

6.1 Review and Update Process

The methodology is periodically reviewed to ensure it remains up-to-date with market conditions and regulatory changes. New products or services introduced into the NEM are assessed for inclusion in the methodology.

6.2 Notification of Changes

Significant changes to the methodology are communicated to stakeholders in advance, with detailed explanations provided to ensure understanding and transparency. Historical changes are documented and archived in the appendix.

7. Consistency and Continuity

7.1 Quality Assurance

Rigorous quality assurance processes ensure the accuracy and reliability of benchmark calculations. This includes regular audits and validation of data sources and calculation methods.

7.2 Data Integrity

Data integrity is maintained through strict data management protocols, including secure data storage, regular backups, and robust data validation procedures.

7.3 Continuity Planning

Business continuity planning ensures benchmark calculations can continue uninterrupted in the event of unexpected disruptions. This includes backup systems and contingency plans for data and operational processes.

Energy market revenues, as referenced here, refer to revenues earned in the NEM spot market. These revenues are calculated using telemetered power values reported by battery assets to AEMO. Power values are provided on a 5-minute interval basis, in alignment with the NEM’s settlement processes. To estimate energy volumes, the reported power values are interpolated between intervals, creating an estimated measurement of energy over time.

Disclaimer

This document, including the methodologies and indices described herein, is the proprietary work of MODO ENERGY LIMITED ("Modo Energy") and is provided solely for informational purposes. These indices are designed for use in financial analysis, benchmarking, and decision-making. However, they do not constitute investment advice or a recommendation regarding any specific financial instrument, asset, or strategy.

While Modo Energy strives to ensure the accuracy, reliability, and transparency of the indices and methodologies, all information is provided "as is," without any express or implied warranties, including but not limited to warranties of merchantability or fitness for a particular purpose. Users should be aware that the indices are derived from data that may be subject to revisions, delays, or inaccuracies. Past performance is not indicative of future results, and external factors such as regulatory changes, market conditions, and asset-specific characteristics may impact index performance.

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