With the commencement this month of construction on two new utility-scale battery projects in the Australian states of Queensland and New South Wales, 2024 set new records for BESS project construction in the country. The two projects brought the total of new big batteries that have broken ground in 2024 to 4.9 GW/13 GWh.

The development is an encouraging one, with a combination of tenders and market dynamics like pronounced and increasing wholesale price volatility helping a host of projects right around the country achieve final investment decision. But it remains insufficient to avoid escalating curtailment rates.

“It just continues on the trend from 2023, which was widely stated as the year of the battery. Volatility in the market is still super high in Australia. And in all honesty, we’re not going to see reprieve of that until a lot of the battery capacity comes online,” Rystad Energy’s David Dixon tells ESS News.

A reduction in market volatility will be welcomed by Australia’s electricity planners, with the volume of battery storage coming online able to both provide ancillary services to the grid while also shifting meaningful volumes of solar energy from the day to the evening and night.

“We have around 3 GW operational at the moment, but about half of that is still in commissioning. So you still only have 1.5 GW on the market where the average load is 23 GW,” says Dixon. “Over the next two years, that 1.5 GW will go to 8 or 9 GW and that is when you will start to see a shift in the dynamics of the market.”

Curtailment conundrum

While impactful, Australia’s growing fleet of utility-scale batteries is unlikely to overcome, in the short term, the biggest challenge facing renewable energy projects: relatively high and growing rates of curtailment.  Sydney-based Dixon says that curtailment is likely to continue even as the batteries under construction come online.

“In September, 27% of utility solar was curtailed for the month and for wind it was about 11%,” reports the Rystad analyst.

There is a high level of seasonality in Australia’s renewable curtailment rates, with spring seeing the highest rates as days begin to get longer, yet temperatures remain cool with plentiful wind. The result being that the country’s world-leading fleet of rooftop solar arrays crowds out utility scale renewables.

While curtailment was particularly high in September, Rystad tracks that over the year the average rate was 13% for solar and 6% from wind.

Distributed PV is not immune from curtailment. Given the increasing frequency of events when grid load is very low – with electricity demand being overwhelmingly supplied by distributed PV – the Australia Electricity Market Operator has been petitioning for an extension of its powers to remotely shutdown rooftop solar systems as a “backstop measure.” The regulator argues that while it will be seldomly used, the capability is required as rooftop solar cumulative capacity continues to grow in the country.

Room for storage

The ongoing strength of the small-scale rooftop market segment in Australia is a significant factor as to why renewable curtailment is growing. While utility-scale BESS project capacity commencing construction this year almost doubles that of big solar and wind, with 3.5 GW, an additional 2.5 to 3 GW of rooftop PV largely squares up the ledger.

“We are still going to be increasing solar generation to the grid, even despite how much capacity of battery we are building. So curtailment will actually get worse, despite this. It is crazy to think about,” says Dixon.

Given this need to shift solar production, pumped hydro is playing an increasingly important role. The three existing pumped hydro facilities in operation in the country have reported skyrocketing utilisation in 2024, Rystad finds. 

However, it has not all been smooth sailing for new pumped hydro projects. The 2.2 GW / 350 GWh Snowy 2.0 pumped hydro project in New South Wales was originally slated for completion in 2024 at a cost of AUD2 billion ($1.24 billion). That date has now been pushed out to 2028 at an expected cost of AUD12 billion.

In Queensland, the freshly elected conservative government was quick to scrap the 5 GW / 120 GWh Pioneer-Burdekin pumped hydro project. It pointed to an expected cost blow out from AUD12 billion to almost AUD37 billion.

Smaller projects may fare better, with the Queensland government saying that it was looking for other more-manageable pumped hydro sites. Rystad tracks some 171 GW of pumped hydro projects under development in the state, although 115 GW of them are pending financial close.

With falling battery-system costs and ample market opportunity there is ample reason to believe large-scale BESS construction will accelerate in 2025.

Energy analysts Wood Mackenzie published modelling this month that demonstrated that 4-hour batteries on Australia’s National Electricity Market are set to reap healthy returns – in scenarios in which both low and high price volatility is a feature. In Queensland, Victoria and New South Wales WoodMac found that 4-hour battery system returns exceed 10%.

“This underscores the profitability of battery storage across various market conditions,” said Max Whiteman, from WoodMac’s APAC Power and Renewables team in a statement. “Our 30-minute price forecasts show daily price spreads consistently over AUD100/MWh, with an increasing number of spikes up to AUD400 or more. By 2030 over 80% of battery project revenues will come from energy arbitrage, as FCAS [ancillary services] markets saturate.”

WoodMac tracks a pipeline of more than 60 GW of battery projects currently under development in Australia, worth more than AUD80 billion.

Rystad reports that battery project capex fell 33% in 12 months from August 2023. The analyst calculates battery project capex of between AUD450 and AUD600/kWh in 2024 – which aligns Australia’s national science agency’s estimate of AUD423/kWh – in the latest draft of its GenCost report.