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 sets out:

• what the Indices measure and the key terms used;
• the inclusion criteria for assets;
• the components that constitute published revenues;
• the data inputs, parameters and calculations used;
• how judgment, missing data and revisions are handled; and
• the limitations of the Indices.

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).

1.2 Rationale

The Indices measure the average net revenue earned per unit of installed capacity by grid-scale batteries trading in the NEM wholesale energy and FCAS markets.

Each Index value is the total revenue of all active assets divided by their total capacity. Each asset therefore contributes in proportion to its size. This gives a single figure, in AUD per MW or AUD per MWh, that an asset of any size can compare its own revenue against.

1.3 Definitions

• Active asset: A battery energy storage asset with recorded market activity on a settlement day, as defined in section 2.2.1.
• Dispatch interval: A five-minute period in which AEMO dispatches and prices the NEM.
• Settlement day: The 288 dispatch intervals with AEMO interval timestamps from 00:00 to 23:55 Australian Eastern Standard Time (AEST, UTC+10) on that day.
• Rated power (MW): An asset’s nameplate power capacity.
• Energy capacity (MWh): An asset’s rated energy storage capacity.
• Duration (hours): Energy capacity divided by rated power.
• Net revenue: Energy market revenue (export revenue less the cost of imported energy) plus FCAS revenue, excluding the revenues and costs listed in section 3.2.
• Divisor: The sum of the rated power or energy capacity of all active assets in an Index on a settlement day, as defined in section 2.4.1.
• Index value: The net revenue of all active assets in an Index divided by the divisor.
• Frequency Control Ancillary Services (FCAS): Services procured by AEMO to keep system frequency within its operating standard, described in section 3.1.
• FCAS enablement: The amount of an FCAS service (MW) that AEMO instructs an asset to provide in a dispatch interval.
• Marginal Loss Factor (MLF): A factor published by AEMO for each connection point that represents transmission losses between that point and the regional reference node.

2. Index Construction

2.1 ME BESS AUS NEM Indices

Modo Energy currently produces eight 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 at least 1.5 hours and less than 2.5 hours.
• ME BESS AUS NEM (4H): Includes assets with a duration of at least 3.5 hours and less than 4.5 hours.
• ME BESS AUS NEM-NSW: Includes all qualifying assets in New South Wales.
• ME BESS AUS NEM-QLD: Includes all qualifying assets in Queensland.
• ME BESS AUS NEM-SA: Includes all qualifying assets in South Australia.
• ME BESS AUS NEM-VIC: Includes all qualifying assets in Victoria.

Assets with a duration outside the 1H, 2H and 4H bands are included in ME BESS AUS NEM and their regional Index only.

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.
• Commissioned: Assets must have reached their commissioning date.
• Availability: Assets must be available (as defined in section 2.2.1, below).

Modo Energy assesses whether an asset meets these criteria, as described in section 5.1.

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:

• importing or exporting energy; or
• earning revenue from FCAS enablement.

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

2.3 Asset information

All published asset details – Ownership, Optimizer, Capacity (MW), and Energy capacity (MWh) – provide Modo Energy’s best and most up-to-date view, established through public announcements and internal data analysis. Optimizer is reported as a combination of Autobidder and Market participant where the two parties are separate, with the Autobidder preceding the forward slash.

Asset information may be updated as new information becomes available. Index values may be revised as a result (see section 5.3).

2.4 Index calculation methodology

The index calculation is rule-based. Where judgment is needed, it is applied as described in section 5.1.

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 2.4.1 for divisor details). This provides a normalised measure of average revenue per unit of capacity.

For settlement day d, summing over all active assets i in the Index:

Index value_d = Σ_i Net revenue_i,d ÷ Σ_i Capacity_i,d

2.4.1 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.

2.5 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.

2.6 Parameters

The following parameters are set by Modo Energy.

2.7 Minimum data

An Index value is published for any settlement day with at least one active asset in that Index. No value is published for a settlement day with no active assets.

3. Revenue Components

3.1 Revenue Components of Indices

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 and costs

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).

The following costs are not deducted from net revenue:

• FCAS cost recovery, including regulation FCAS cost allocation (causer pays).
• Network charges.
• AEMO participant fees.

4. Data Inputs and Calculation

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.

The Indices use the following inputs, in order of priority:

4.2 Energy throughput and cycles

Energy volumes 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.

Energy throughput is calculated on this basis in both import and export directions. Cycles are calculated as the daily sum of export throughput divided by the system’s rated energy storage capacity.

4.3 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.

4.3.1 Energy Market Revenue Calculation

Energy market revenues, as referenced here, refer to revenues earned in the NEM spot market. These revenues are calculated from the estimated energy volumes described in section 4.2 (Energy throughput and cycles).

The calculated energy volume, on a 5-minutely basis, 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.

4.3.2 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.

5. Expert Judgment, Data Disruption and Revisions

5.1 Expert judgment

The Modo Energy team decides asset inclusion (section 2.2) and maintains asset information (section 2.3). Where the criteria in this methodology do not clearly settle a case, the team makes the decision. The team monitors asset behaviour, and inclusion decisions and asset information may be reviewed where that behaviour changes.

5.2 Market disruption and missing data

The Indices are calculated from AEMO next-day dispatch data. If volume data for a settlement day is missing or incomplete, the Index is not calculated for that day until the data is available. If price data is incomplete, gaps are filled from AEMO Daily Reports where available.

Index values are not adjusted for periods of market stress. Values for affected days may be revised once complete or corrected data is available.

5.3 Updates and revisions

The Indices are updated daily. Published values may be revised, for example when source data is updated or corrected, or when asset information changes.

6. Methodology Changes

New products or services introduced into the NEM may be assessed for inclusion in the methodology.

6.1 Material and non-material changes

Changes are classified as material or non-material. A change is material where it may meaningfully affect benchmark values, the inputs used, or what the benchmark measures. Material changes are announced with not less than 30 days’ written notice before they take effect, together with an impact analysis.

Non-material changes are corrections and clarifications that do not alter the substance of the methodology. They may be made without prior consultation and are disclosed as soon as practicable.

Emergency changes needed to protect the integrity of the benchmark or to comply with law may be made without prior consultation, with notice given as promptly as circumstances permit.

All changes are recorded, with their effective date, in the change log.

6.2 Change log

Changes to this methodology will be recorded here.

7. Limitations

• Revenues are estimated from AEMO dispatch data and published prices. They are not taken from settlement statements and may differ from the revenue an asset is paid.
• Contracted revenues, such as tolling and floor arrangements, are excluded. The Indices may therefore understate total revenue for contracted assets.
• Some duration Indices contain few assets. A single asset can materially affect their values.
• An active asset’s full capacity is included in the divisor for the whole settlement day, even if the asset was only available for part of it.
• Asset information relies in part on public announcements and may be incomplete or out of date.

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.

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