The Energy Storage Summit Australia took place on 18th and 19th March 2025 in Sydney. On day one, Modo Energy’s Country Director Wendel discussed the key trends for battery energy storage in Australia’s National Electricity Market (NEM). This article summarises that presentation.
1. Energy storage will be the backbone of the energy transition in the NEM
- We are at the beginning of a significant transition within the NEM: the retirement of dispatchable thermal generation capacity, replaced by energy storage.
- In AEMO’s Step Change scenario, combined energy storage power capacity in 2035 hits 38 GW, up from 5 GW today.
- The retirement of generation capacity across this window means energy storage will account for 65% of dispatchable capacity in 2035 and 75% by 2050.
2. BESS capacity in the NEM will double (and double again and again)
- Battery energy storage will play a significant role in this transition.
- Installed BESS capacity in the NEM will more than double in 2025 and double again by the end of 2026.
- If projected buildout rates are hit, commercially operational battery energy storage will increase by 7x by 2027. For more information, read our research article here.
3. Battery energy storage deployment will reach all corners of the NEM
- This increase in BESS capacity will see new batteries being deployed across the NEM.
- Large capacity increases will come in the central-west New South Wales and South Australia in 2024, across Queensland in 2024, and the Greater Melbourne area in 2027.
- To explore this data, check out our interactive map of big battery energy storage projects.
4. A new scale of ‘big battery’ is on the way
- The acceleration in installed battery capacity is being driven by an increase in the size of battery projects reaching commercial operations.
- Today, the majority of battery projects are 100 MW and under in size. The largest system is the 300 MW Victorian Big Battery.
- 2025 will see projects coming online with nameplate capacities of 500 MW and above, including the 850 MW Waratah Super Battery.
5. And longer-duration BESS, too
- This shift is also seeing longer duration batteries providing an increased share of total energy storage capacity.
- Most systems operating in the NEM today are between one and two hours in duration.
- In 2025, the first four-hour batteries will begin trading, and eight-hour batteries will be online by the end of 2027.
6. FCAS has saturated - or - energy trading now dominates BESS revenues
- Historicly, BESS revenues in the NEM have mostly been from the FCAS markets.
- However, these have been declining year on year since 2020. High revenues that year were driven by extremely high FCAS prices in South Australia in January.
- 2024 marked the first year that energy trading has overtaken FCAS in value for battery energy storage. Energy revenues more than doubled to their highest ever level and were behind a rebound in average fleet revenues.
- Read more in our report on BESS revenues in 2024 here.
7. But is FCAS really saturated?
- Whilst overall FCAS revenues fell in 2024, for individual systems it still contributed significantly to earnings.
- This was particularly pronounced for systems in Queensland. The state experienced multiple islanding events in 2024 resulting in extremely high prices.
- Bouldercombe was the battery that was best able to capture this value. The A$144k/MW/year it earned from FCAS Contingency was just below average earnings across all markets in 2024.
8. Battery energy storage revenues are all about volatility
- Value during extreme pricing events was extremely important for battery revenues in 2024.
- For the highest earning systems, between 40 and 50% of BESS revenues in 2024 came from energy prices above $3,000/MWh or FCAS prices above $3,000/MW/hour.
- This mainly was through energy, but batteries in Queensland and South Australia also earned value through spikes in FCAS contingency prices.
9. 11% of revenues in 2024 arrived on just one day
- BESS revenues in 2024 were extremely skewed toward a handful of high volatility days.
- 50% of total revenues came from 32 days, with 11% coming from just one day: 5th August.
- On this day prices spiked across the NEM, driven by low availability of coal generation combined with low wind and solar output.
10. Opportunities are regional
- However, aside from 5th August not all regions experienced equal pricing volatility.
- Alongside Queensland, systems in both South Australia and Queensland performed well in 2024.
- However systems in Victoria underperformed the NEM average. This was driven by a lower number of extreme priced periods within the state.
11. Not all assets are operated the same way
- Differences in revenues between batteries in the NEM have also been caused by different approaches and priorities in operations.
- In February, South Australia experienced three significant price spikes, however AGL’s Torrens Island BESS missed two of these. However, its portfolio in the state, which includes two gas plants, was still able to export at 600+MW.
- Is this an example of portfolio-based optimisation? Read February’s BESS operations deep dive for more on the different bidding strategies at play.
12. Thermal generation is retiring
- Without any significant policy changes, 6 GW of dispatchable thermal generation in the NEM will retire in the next three years.
- This includes large coal power stations Eraring in New South Wales, Yallourn West in Victoria, and.
- This leaves a significant gap in generation to be filled. Will 12 GW of new battery energy storage capacity to overcome this?
13. If you believe in volatility, you want to own assets in the NEM
- In 2024, grid-scale batteries in the NEM earned between A$50-70k/MW/year more than systems in other major developed markets: GB, ERCOT, and CAISO.
- Each of these markets saw falls in revenue in 2024, in contrast to a 45% increase in NEM revenues.
- ERCOT, the other major energy-only market, saw a 70% drop in revenues in 2024. Across the year battery capacity doubled to 8 GW, with this new capacity beginning to eat into wholesale price spreads.