Over the past decade, a handful of volatility events have delivered extreme prices and subsequent upside returns for batteries in Australia's National Electricity Market (NEM). A volatility event is when one or more factors outside of system norms trigger severe price spikes. The triggers could be extreme weather, plant explosions, transmission outages, or a combination of these.

Since the last major event in 2022, 7 GW of new BESS capacity has come online. This is alongside additions in solar, wind and household batteries. The question for the future is therefore whether these events were a symptom of under-capacity in the system, or a permanent feature of how the NEM experiences system stress?

This article analyses historic system events in the NEM and their causes. Applying forward projections of these same events, we also show how to assess volatility value in the future.

Executive Summary

• The driving factors behind volatility events are changing. Wind is becoming the driving factor in South Australia and Victoria. New South Wales and Queensland remain capacity and outage-driven.
• The opportunity is concentrated. Across 2016 to 2026, the NEM saw 21 region-spanning events, and the largest six delivered half the total battery opportunity.
• FCAS delivered historic upside, but its role is fading. The single highest-value event was driven by FCAS Contingency in an uncompetitive market. Its value falls by 85% when assessed purely on energy arbitrage opportunity.
• Capacity margins are at their highest in almost a decade. The buildout of battery energy storage has pushed supply margins up in each state, dampening the impact of future volatility impacts.

FCAS has been the prime driver of historical system event value for BESS

​Four batteries provide examples of revenue opera through the decade's events: Hornsdale Power Reserve and Lake Bonney in South Australia, Gannawarra and Ballarat in Victoria.