Since the first grid-scale battery energy storage systems came online in Australia, their role in the grid has changed dramatically. Batteries are now becoming a core component of an increasingly decarbonised electricity grid. This has led to multiple gigawatts of grid-scale battery energy storage systems in various stages of development in Australia. Each of them requires significant investment, with millions of dollars at stake and years-long development timelines. As a result, capital expenditure, or capex, is an important consideration when building a battery.
This report analyses the costs of building a grid-scale battery in Australia (the NEM and WEM). We analyse costs for past projects as well as projections for the future, with comparisons to other countries.
Executive summary
- Grid-scale battery capex in Australia are comparable to similar markets like Great Britain and the United States. Drastic reductions in the costs of battery containers will lead to a steady and large decrease in whole-of-system costs.
- However, continued high costs for labour and land, as well as power capital costs like transformers and grid connections, will moderate capex decreases.
- Developers should look to build batteries where electricity assets are already present and/or where they already own the land. This will insulate the project from land and power capital costs, which are inflexible and will remain elevated.
- Developers and financiers should also plan for more drastic capex drops than previously projected. This is because historical and near-future capex decreases have been very aggressive. While lower input costs are clearly beneficial for battery developers, this is a double-edged sword. Later entrants to the market can undercut existing assets if they face much lower costs than anticipated.
Australian battery projects have grown in size, thanks to falling container costs
Per kilowatt of power, batteries in Australia (in both the NEM and WEM) have increased in cost over time. But this is due to more recent projects being longer-duration: while the first Australian batteries were at one hour of duration or less, two-hour and four-hour batteries are now the norm. When measured per kilowatt-hour of energy capacity, build costs have actually decreased.