SA batteries paid to charge as solar sends electricity prices negative
December 2, 2021
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Batteries in South Australia have been paid to charge throughout September and October 2021 due to a record number of negative price intervals. Wholesale electricity prices were negative almost 40% of the time.
The chart below from the Energy Synapse Platform shows the average intraday generation and price profile for South Australia in September. The lowest prices occur in the middle of the day, due to an abundance of solar energy (particularly rooftop solar). Solar creates a “duck curve” not only in the demand profile, but also in the price profile. This sends a signal for energy storage to soak up excess solar, and discharge the power at more valuable times (such as the evening).
Batteries normally incur a cost when they purchase wholesale energy to charge. However, as can be seen in the Energy Synapse Platform, “charging costs” were a positive revenue line item for the Hornsdale Power Reserve and Lake Bonney battery in South Australia. The 150 MW Hornsdale Power Reserve earned more than $300k from charging over the two months, while the 25 MW Lake Bonney battery earned over $100k.
Negative energy prices were certainly a welcome boost for batteries. However, it is important to note that frequency control ancillary services (FCAS) remain the dominant revenue stream.
Solar farms without batteries face an economic limit
As more solar is added to the grid, daytime prices get lower and lower. This places an economic limit on how much solar (without storage) can be deployed in a market.
The Tailem Bend solar farm in South Australia has a modern PPA structure, which requires it to turn down to avoid negative prices. This is known as “economic curtailment”. Tailem Bend was also subject to multiple physical grid constraints, which limited its output. We can see the significant impact this had on the operation of the asset during September in the Energy Synapse Platform. The net result was that the average capacity factor was drastically cut to around 20% in the middle of the day when the natural output of the asset would have been the highest.
Apart from building more big batteries, there is also an opportunity to encourage more demand side resources to “flex up”. This can come from a wide variety of technologies such as hot water systems, residential batteries, and even new industries like green hydrogen.
Author: Marija Petkovic, Founder & Managing Director of Energy Synapse
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Batteries in South Australia earn $1 million over two days
December 24, 2019
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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.
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).
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.
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.
