Electricity usage could grow significantly in Australia’s National Electricity Market (NEM) over the coming decades. This has major implications for the amount of renewable energy and storage that needs to be built, beyond just replacing retiring coal-fired power stations.
Based on AEMO’s 2024 Electricity Statement of Opportunities (ESOO), the NEM’s underlying electricity consumption is projected to reach 211 TWh in 2025, gradually increasing to 371 TWh by 2041 and 515 TWh by 2054 under the Central Scenario (see chart below). AEMO incorporates various factors into its forecast, including distributed solar PV, home battery adoption, electric vehicle (EV) uptake, green hydrogen development, and more.
The business sector (dark grey in chart) aggregates underlying electricity consumption from large industrial load (LIL), liquefied natural gas (LNG) and business mass market (BMM) sectors. While electrification and hydrogen production sector are generally part of the business sector, these are presented separately by AEMO.
The chart shows that electricity usage is expected to decline in the categories labelled as the business sector and the residential sector. This is largely due to offsets from rooftop PV and small non-scheduled generation. 2041 is a critical point in the forecast as it marks the last year when electricity demand from the residential sector remains positive. From 2042 onwards, demand from the residential sector is projected to turn negative, meaning that households would become a net exporter of electricity.
In the coming years, we are likely to see substantial load growth from a combination of hydrogen production, data centres, and electrification in transport, mining, and manufacturing industries.
Green Hydrogen
Green hydrogen is produced using a process called electrolysis where electricity is used to split water into oxygen and hydrogen. This is a nascent industry, but has potential to be a major consumer of electricity in the future.
Green hydrogen production in Australia is expected to ramp up in the early 2030s, supported by government initiatives like the $4 billion Hydrogen Headstart program. However, the recent cancellation of the hydrogen plant project in Whyalla by the South Australian Government highlights the ongoing uncertainty surrounding hydrogen project development in Australia. Despite the significant potential of green hydrogen, the scale and timing of production remain uncertain and difficult to predict.
Data Centres
The second growing industry is data centres, which are expanding alongside the increasing utilisation of artificial intelligence (AI) and 5G telecommunications in the business and government sectors. In Australia, as of 2024, there are at least 135 operational data centres, mostly located in major cities such as Sydney, Melbourne, and Brisbane. An additional 1.7 GW is expected to be added to the system when all planned and proposed projects are completed by 2029, according to the M3 Property Research Report.
Electric Vehicles
Another significant contributor to load growth in the NEM is electric vehicles (EVs). EV adoption is already increasing rapidly, as reflected by the rising number of EVs on the road. EVs now account for 9.5% of all new car sales in Australia according to theState of Electric Vehicles 2024 report published by the Electric Vehicle Council. Furthermore, AEMO’s 2024 Forecast Accuracy Report revealed that the actual number of EVs is nearly 30% higher than previously forecast.
Uptake of EVs is expected to continue accelerating in the years ahead. This is driven by the global expansion of the EV industry and supportive domestic policy measures such as the introduction of a New Vehicle Efficiency Standard (NVES) for light vehicles.
The combination of these factors suggests that the future electricity landscape could be more complex than what we’ve seen in the past. Energy Synapse specialises in modelling the electricity market and revenue from utility-scale renewable energy and storage projects. Our models take into account the changing dynamics in the grid, including load growth. Learn more about our services.
Author: Mohamad Afin Faisol, Analyst at Energy Synapse.
Vanadium flow batteries are taking on the long duration storage challenge
February 20, 2025
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As Australia continues its transition from fossil fuels to renewable energy, there is growing interest in vanadium flow batteries and other storage technologies that can provide medium-to-long duration storage.
Energy Synapse sat down with Jeremy Peters, an expert in vanadium flow batteries, to get his insights on the key advantages of the technology, how it is being deployed, and where the biggest opportunities are in the Australian market. Jeremy Peters is the General Manager Energy at Vecco Group and is responsible for downstream business including electrolyte manufacturing and battery projects. Jeremy has 20 years of experience in the electrical industry and is a Director of the Advanced Materials and Battery Council
Can you tell us more about vanadium flow battery technology and how it has been deployed internationally?
Vanadium flow batteries (VFBs) are a mature and proven technology developed in Australia in the 1980s and have been commercialised overseas. There are hundreds of VFB installations globally with China leading the world on scale with a 700 MWh project commissioned in 2024 and gigawatt manufacturing facilities now in operation. We are seeing significant growth in the pipeline for VFBs locally in Australia, with recent deployments in South Australia and Western Australia, as well as the battery jointly delivered by Vecco and Sumitomo Electric for Energy Queensland in 2024 with 100% of its electrolyte made at Vecco’s Townsville facility.
VFBs are durable, have no cycle limitation, are not susceptible to thermal runaway and the electrolyte does not degrade. The battery’s energy capacity is directly linked to electrolyte volume installed, with systems typically ranging from 4 to 12 hours of duration. As a result, they are highly scalable and cost-effective. To increase storage, you simply add more electrolyte to the tanks. As capacity (i.e. duration) increases, the cost per kilowatt-hour drops significantly.
Due to their proven capability and unique characteristics, both fundamental to the bankability of these batteries, VFBs are becoming a key long duration energy storage solution set to significantly increase their market share, as the supply chain matures, and adoption accelerates.
What are the biggest opportunities for vanadium flow batteries in an Australian context, in terms of application, size, storage duration?
In Australia, the greatest opportunities for VFBs are in applications requiring long duration storage – typically 6 hours or more – where their unique advantages offer both technical and economic benefits. VFBs excel in scenarios where durability, safety and daily cycling are critical, offering a distinct competitive advantage over other technologies.
The greatest opportunities we see are:
Energy shifting in distribution networks: With Australia having one of the highest per capita rates of rooftop solar, VFBs can play a key role in energy shifting. This means storing excess solar energy generated during the day for use in the evening when demand peaks. Their long-duration capabilities allow for substantial load shifting, easing pressure on the grid and enhancing system resilience.
Diesel replacement in mining and industrial sectors: Australia’s remote mining operations and industrial sites, often relying heavily on diesel generators, can significantly benefit from VFBs. The battery’s ability to provide reliable, long duration storage without degradation makes them an ideal solution for off-grid power, reducing both fuel costs and carbon emissions. VFBs’ durability and unlimited cycle operations also mean they can handle the demanding, continuous energy needs of these industries.
Storage integration with grid scale generation: VFBs can be deployed alongside large-scale generators to improve resilience and allow for more flexibility in export scheduling. Their ability to provide extended discharge times without degradation makes them ideal for balancing out load changes, and smoothing out variability in renewable generation, ensuring a steady supply of power in more situations.
Vecco Group is actively building a local vanadium battery supply chain in Australia. Can you tell us more about the benefits of having a local supply chain and how it will impact VFB economics?
With Australia hosting the world’s third-largest vanadium deposit and established mining and processing capabilities, Vecco plans to leverage our local manufacturing talent and develop a local end-to-end supply chain, rather than relying on the mine-and-export model Australia has adopted in the past.
From our customers, we know that one of the key barriers to vanadium flow battery deployment has been the historical volatility in vanadium prices, which can account for around 60% of the total battery cost. By controlling the entire supply chain – from mining to electrolyte manufacturing – Vecco can offer customers price certainty on the cost of vanadium electrolyte as they develop their battery project.
Our customers also recognise Australia’s low sovereign risk and strong mining reputation, which positions us as a reliable trading partner for VFB projects.
What is needed to increase adoption of VFBs in Australia?
Essentially, everybody needs to keep doing what they’re doing. We are confident the market is heading in the right direction, and it’s important the industry continues advancing technology, improving efficiencies, and reducing costs. Project owners need to critically assess and choose the right battery technology for their specific needs, ensuring that VFBs are considered for suitable applications. Governments also play a crucial role by supporting the development of a secure, domestic supply chain, fostering Australian manufacturing, and reducing reliance on imported batteries.
Are there any unique considerations that project developers and EPCs need to take into account if they are thinking about using vanadium flow batteries in their projects?
The batteries want to be used, developers and owners should focus on maximising the unique advantages these batteries offer. Rather than protecting them from use, they should leverage the unlimited cycle capability, fast response times, and apply value to the elimination of thermal run-away risk. The long battery life (25 years) should be fully utilised and consider a second use or end-of-life cost recovery for the completely reusable electrolyte, adding further value to the system. Too often, we mistakenly see the operational parameters adopted in a lithium-ion battery model lifted and applied to vanadium flow batteries, which leaves value on the table.
We know from our customers that when operated in these sweet spots (e.g. duration, cycling frequency, life of asset etc), VFBs become economically competitive with lithium-ion batteries, which benefit from a mature supply chain operating at significant scale and capital invested.
While VFB technology is mature and proven, its supply chain is only now gaining significant momentum with the recent acceleration of demand for long duration energy storage. China is leading the way with GWh production facilities and battery deployments, which is already bringing costs down through scale and performance improvements. This ongoing investment into the VFB supply chain and learnings from deployments will only improve the cost competitiveness across broader long-duration energy storage applications. In August 2024, the US Department of Energy (DoE) released its extensive Earthshots Report on Long-Duration Energy Storage Technologies, which recognises this pathway for VFBs. The DoE project a levelised cost of storage of $0.06/kWh for flow batteries by 2030, outperforming all other electrochemical and thermal storage systems.
About Vecco Group
Vecco is an integrated critical mineral mining and manufacturing business, developing a vanadium battery supply chain in Australia, the USA & Europe. Vanadium electrolyte is currently being manufactured by Vecco in Townsville at its commercial demonstration scale facility. Vecco’s critical mineral mining project in Julia Creek QLD is under assessment for mining lease approval. Once operational, the Vecco integrated supply chain will mine, process and manufacture over 1 GWh of vanadium electrolyte each year. Vecco is supported by Idemitsu (a global energy company), who recently acquired a controlling interest in Vecco via Idemitsu Australia, taking Idemitsu’s total investment in the Vecco Group to more than AUD $75 million.
About Energy Synapse
Energy Synapse is an Australian modelling and analytics firm specialising in wholesale electricity markets, renewable energy, and energy storage. We can tailor our market and revenue models to account for the unique technical parameters of any storage technology, including vanadium flow batteries. Learn more about our modelling services.
