Batteries in South Australia earn $1 million over two days

December 24, 2019

Big battery south australia tesla

Grid-scale batteries in South Australia earned almost $1 million from the energy market over two days from 19-20 December 2019 (see Figure 1) as the nation sweat through an extreme heatwave.

This revenue is just from arbitraging the wholesale energy market and includes the cost of charging the batteries as well as marginal loss factors (MLFs). It does not include revenue from frequency control ancillary services (FCAS) or any bilateral contracts.

Energy market revenue South Australia batteries

These earnings will be especially welcome news for Infigen’s new 25 MW/52 MWh Lake Bonney battery. The Lake Bonney battery, which cost $38 million, was only recently energised (October 2019) and appears to have started commercial operation in late November (see Figure 2).

Infigen Lake Bonney Battery

The 100/129 MWh Hornsdale Power Reserve (HPR) has been operating the longest (since late 2017). Despite being a bigger battery, the HPR earned similar revenue to the Lake Bonney battery. This is because the HPR has only 30 MW/119 MWh available for commercial operation in the energy market.

We recently published a comprehensive 21 month analysis of how the Hornsdale battery has been operating, bidding, and earning revenue from energy arbitrage and all eight FCAS markets. Our independent analysis is supported by the Australian Energy Storage Alliance and has proven to be a very valuable resource for developers and investors of battery storage. In 2020, the HPR will be getting 50% bigger and will be demonstrating a range of new grid services, including fast frequency response.

Batteries seize opportunity as Australia sweats through three hottest days on record

The very high daily revenue earned by batteries last week coincided with the first price volatility of the season. The spot price in South Australia hit the market cap of $14,700/MWh for an hour on Thursday 19 December (see Figure 3). Tuesday, Wednesday, and Thursday of that week were the three hottest days ever recorded in Australia.

South Australia December 2019 electricity generation spot price

Figure 3 shows that the high pricing also coincided with low electricity generation from wind and solar. As a result, expensive gas and diesel generators were needed to meet demand. Being both dispatchable and fast responding, batteries were well placed to take advantage of this volatility in pricing.

This highlights a broader economic challenge for wind and solar farms. Wind and solar farms have a marginal cost of zero. As a result, they put significant downward pressure on electricity prices at the time at which they are generating electricity. However, because they are weather dependent, their operators cannot ramp up production to take advantage of high prices.

As the uptake of variable renewable energy grows, the earnings gap between renewables and other market participants will continue to increase. Energy storage is of course, one of the solutions to this problem. Thus, we can expect renewable energy projects to increasingly incorporate storage to help manage this risk.


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Author: Marija Petkovic, Founder & Managing Director of Energy Synapse
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Hornsdale Power Reserve earns record revenue in September 2019

October 21, 2019

Hornsdale Power Reserve

The world’s biggest lithium-ion battery, the 100 MW/129 MWh Hornsdale Power Reserve in South Australia, has just earned its biggest monthly revenue from wholesale markets.

The ‘Tesla big battery’ as it is commonly known, was famously brokered via a deal on Twitter and has been operating in Australia’s National Electricity Market (NEM) since late 2017. We recently published independent analysis, which provides a deep dive into the operation, merchant revenue, and bidding strategies of the Hornsdale Power Reserve from January 2018 to September 2019. In this article, we look at just one of the many insights from the report.

Our analysis shows that the Hornsdale battery earned approximately $3.4 million from wholesale markets in September 2019 (see chart below). This is the highest monthly revenue that the battery has achieved. Note that this is inclusive of the cost of charging the battery. However, it does not include non-market revenue streams (such as the contract it has with the South Australian government), FCAS payments under the causer pays methodology, or any other factors which are private to the operator.

Hornsdale Power Reserve revenue from energy arbitrage and FCAS

The overwhelming majority of revenue in September came from providing frequency control ancillary services (FCAS). Contingency services, which correct major frequency deviations in the grid, accounted for the highest share of revenue (55%). This was due to a strong rebound in contingency FCAS prices. In September 2019, the Australian Energy Market Operator (AEMO) made changes to how it calculates FCAS requirements. This has resulted in a higher volume of contingency FCAS being procured, which has contributed to the upward pressure on prices.

Operating batteries has a learning curve

At a high level, the revenue that a battery can earn each month and how this is split across various markets, depends on two factors:

1. Prevailing market conditions; and

2. The strength of the battery’s trading strategy.

The Hornsdale battery may have earned the single highest monthly revenue in September, but it also missed significant opportunities throughout the month. In our analysis, we compare the actual operation of the Hornsdale Power Reserve with our optimised operation model. This comparison shows that there was potentially more than $1.1 million of additional revenue available in the market in September. This highlights the complexities of operating batteries under real world conditions and uncertainties.

Batteries are unlike any other asset in the NEM. A generator, such as a coal or gas plant, can theoretically keep producing electricity as long as the fuel continues to be supplied. In contrast, a battery has a limited capacity to charge or discharge energy at any point in time. As a result, previous charge/discharge decisions can have a big impact on future revenue. There is still much to learn about how to operate batteries in the most profitable way.


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Author: Marija Petkovic, Founder & Managing Director of Energy Synapse
Follow Marija on LinkedIn | Twitter


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