Operating batteries in the National Electricity Market (NEM) average 2.2 hours of storage. However, four-hour BESS make up 54% of the 12.5 GW set to build by 2030 and New South Wales’ next long-duration tender seeks 12 GWh of eight-hour-plus storage. How does the business case of these longer duration assets stack up compared to the existing shorter duration fleet?

In Modo Energy's forecast, eight-hour batteries earn the highest returns, in every region and scenario. In the Central scenario, an eight-hour battery going live in 2030 returns 11.1% across the four mainland regions, and 12.1% in New South Wales (unlevered, pre-tax). Beyond eight hours, returns fall: a 12-hour battery earns 17% more revenue than an eight-hour one but costs 37% more to build.

​Key takeaways

• Eight-hour BESS see the highest returns: 11.1% in Modo Energy's Central scenario, against 8.7% for four hours.
• Declining cost projections are incentivising later start dates. As capex falls faster than revenue, targeting a build date of 2030 improves its forecast IRR.
• Expanding storage size later is a viable option: a four-hour battery built for 2030 and taken to eight hours in 2032 earns 11.2%, in line with 11.1% for eight hours from day one.
• There is a 9-point IRR spread between Modo Energy’s high and low scenarios, and a 4-point spread between p10 and p90 reference weather years.
• Returns at a state's best and worst performing connection points vary by up to 3.4%, highlighting the importance of modelling constraints at a nodal level.

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​Longer duration BESS is worth the additional capex, up to 8 hours

Increasing duration unlocks additional arbitrage at the cost of energy capex (the cost of additional MWh). Doubling a battery's duration from four to eight hours increases the overall capex by 58% ($195k/MWh for each additional MWh, against $337k/MWh for the first four).

The daily price shape covers that additional cost. Over 2030–49, the fifth and sixth highest-priced daily hours earn a spread of $126/MWh, and the seventh and eighth earn $90/MWh. This covers the cost of additional storage and is why eight-hour batteries return the most in every scenario.