Battery cycling is central to project economics in the NEM. Most assets have historically targeted one cycle per day because it aligns with warranties, but this leaves value on the table when market conditions support additional cycling. Higher cycling lifts revenues but also accelerates degradation, making the trade-off between early returns and long-term performance a critical factor in determining the value a battery can deliver.
Across 2025, batteries averaged 0.85 cycles per day, with a clear seasonal pattern. Cycling increased through winter as higher demand and lower renewable output provided greater trading opportunities. It then eased through spring and early summer. The annual average shows that most assets remain below their warranty limits.
Batteries are cycling more in 2025 than last year, driven by higher energy price volatility and FCAS saturation, which makes energy arbitrage the more attractive revenue stream. Price signals are strengthening, but most assets still cap cycling at or below one cycle per day due to warranty constraints.
This article breaks down how cycling rates, degradation, repowering costs, and market conditions interact to determine where battery value is maximised in the NEM.
Executive summary:
- Batteries cycled 0.85 times per day in 2025, below the standard one-cycle-per-day warranty allowance.
- The optimal cycling range is 1.3–1.5 cycles per day when coupled with repowering. Cycling beyond this threshold accelerates degradation without delivering meaningful additional value.
- Victoria shows the highest long-term cycling potential, supported by its distinct morning and evening peaks.
- Cycling variability narrows over time as batteries and pumped hydro reduce volatility, leaving cycling driven mainly by fundamental spreads.
Cycling more than once per day leads to the highest project returns
Despite batteries currently cycling under once per day on average, our modelling suggest higher rates of cycling can be more profitable when coupled with a strategy for repowering. Most assets focus on trading the spread between the middle of the day and the evening peak, leaving money on the table from the morning peak. Increasing cycle limits allows assets to capture this additional revenue, but at the cost of faster degradation.
Cycling more than once per day lifts Internal Rate of Return (IRR) by ~1 percentage point for NEM batteries. This is despite greater degradation and costs from repowering. The uplift comes from earlier revenues recovery and greater earning potential following repowering.
A 2-hour battery has the highest IRR at 1.5 cycles per day, while a 4-hour peaks at 1.3 cycles. These levels stay optimal even when repowering costs shift by ±50%. Cycling beyond these points adds unnecessary degradation for limited additional revenues, lowering overall IRRs.
Victoria offer the greatest uplift in IRR from over-cycling for both 2-hour and 4-hour assets. Its pronounced morning and evening peaks create two dispatch windows, supporting higher daily cycling.
Two-hour batteries see greater uplift from increased cycling. This is because morning price peaks tend to be shorter in duration than those in the evening.
Batteries in the NEM are cycling less than once per day on average
Most operational NEM battery warranties allow for an average of one cycle per day for up to 25 years. This gives operators flexibility to increase cycling during high-volatility and reduce it during quieter conditions to manage degradation.
Historically, cycling has not shown a consistent relationship with region, indicating that trading strategy and warranty limits have a greater influence than state-level market conditions.
Only a few batteries recorded a median cycles above one per day. Many assets reached 1.5 cycles per day or more during high-volatility events, while cycling dropped during periods of narrow spreads. This variation highlights the opportunistic nature of battery dispatch.
Future battery cycling will depend on market conditions
This analysis uses Modo Energy’s Central Forecast to estimate maximum cycling potential by region and duration. This aims to quantify the upper limit on cycling based on future price shapes.
Victoria shows the highest long-term cycling potential due to its pronounced morning peak, with South Australia showing very similar dynamics. This pattern allows morning discharge, daytime charging, and evening discharge. Queensland shows the lowest potential because its morning peak is smaller.
Cycling opportunities are expected to decline over the next four years because of the rapid deployment of grid-scale batteries, and increased interconnection. This is expected to put downward pressure on spreads. Meanwhile, the distribution of cycling is projected to change, too.
The number of daily battery cycles varies significantly month to month over the next five years as the system becomes more dependent on intermittent generation. Coal retirements and increasing battery capacity add to this volatility and widen the range of achievable cycling outcomes.
In the 2030s, the commissioning of Snowy 2.0, Borumba and other large PHES projects subdue energy price volatility, narrowing the spread of cycling behaviour. Over the long-term, batteries and other firming technologies reduce energy price volatility, leaving cycling driven mainly by fundamental spreads. As a result, cycling levels converge within each region.
The narrowing spread in cycling over the forecast highlights a key constraint: battery cycling in the NEM is capped by market conditions, not by technical capability or warranty flexibility.
Batteries with cycle targets above 1.6–2 cycles per day fall short on average across the entire forecast because the market cannot support cycling at these levels. Even without degradation, realised cycling remains below target in all regions and durations. Daily price shapes do not provide enough consistent, profitable charge–discharge windows to sustain such high cycling over time.
This shows that setting cycle allowances too high adds no practical value. Negotiating for higher cycle limits only matters up to the point where the market can physically supply profitable spreads. Beyond that threshold, additional warranty flexibility goes unused.
Degradation limits long-term revenues and shapes optimal cycling strategy
Battery degradation is tied to energy throughput, so higher cycling accelerates energy capacity loss. As usable energy declines, the battery earns less revenue in later years. This limits the value additional cycling can provide across the entire length of a project.
Once the battery’s warranty expires, the owner can replace the old cells with new ones - known as repowering. However, this has a cost, which is why operators must balance revenue with degradation to maximise returns for their battery.
The impact of degradation becomes clearer when looking at how revenue shifts over time for different cycling strategies.
The highest cycling strategies earn more in early years but less in later years because of its reduced energy capacity. After repowering, revenue lifts again before capacity begins to decline once more. This pattern shows why degradation, not just price shape, constrains the level of profitable cycling.
The combined effect of front-loaded revenue, degradation, and repowering costs produces a clear optimum.
Present value peaks at 1.3 cycles per day for a 2-hour asset, and at 1.5 cycles per day for a 4-hour asset. Beyond this point, the value gained from extra cycling is outweighed by faster degradation and earlier repowering.
This effect is different between regions: for example Queensland sees limited upside for increasing cycles at a four-hour system, while Victoria sees the greatest uplift of all when increasing cycles for a two-hour system. This causes different deltas in project IRRs between regions and cycling rates.
Why assets still consider cycling once per day
Many assets continue to target a single cycle per day because it simplifies the commercial and financial structure of a project, rather than for operational reasons.
- Avoiding repowering. Cycling once per day reduces throughput and helps assets avoid repowering altogether, which makes projects simpler to finance and operate over their full life.
- Bankability. Lenders may favour predictable cycling and degradation profiles. Over-cycling increases uncertainty and relies on volatility that is difficult to underwrite.
- Offtake alignment. Many offtake structures, including virtual tolling or heads-and-tails contracts, are easier to manage when the battery follows a single daily cycle.
- Simpler value translation. With one cycle per day, the spread between charge and discharge windows converts directly into value, reducing the complexity of assessing project value.
Finding the balance between early revenue and long-term performance
- Cycling above once per day improves returns when coupled with a repowering, but only within a narrow band.
- The biggest increase in IRRs from increasing cycling comes to projects in regions with the lowest returns. Developers building in these regions should consider alternative cycling strategies to improve their business case.
- Degradation and repowering costs set the practical limit, not market prices alone.
- The economic optimum is 1.3–1.5 cycles per day for both 2-hour and 4-hour assets.
- Beyond this range, value falls as reduced capacity erodes mid- and late-life revenue.
- The right cycling strategy varies by region and duration, but the trade-off is consistent: more revenue early vs. less capability later.
Choosing the right cycling level depends on each project’s trading strategy, region, and duration.
