The pace of investment and uptake of new technologies in Australia’s battery storage market has seen notable growth, driven in part by lower costs, higher availability of renewable energy, and efforts to reduce operational emissions.
The National Electricity Market (NEM) is projected to need 19 gigawatts/55 gigawatt-hours of dispatchable BESS storage by 2030, but on track to commission 21 gigawatts/45 gigawatt hours, leaving a shortfall of about 10 gigawatt-hours in storage capacity.
Recent critical mineral oversupply and subsequent drop in prices – a result of mineral production exceeding growth in battery production – is expected to keep battery storage costs competitive in the short-term, though growth in battery production in 2024 did not meet forecasts despite the significant global uptake.
An analysis of battery storage investments in Australia published by Wood Mackenzie late last year indicated a positive outlook for battery storage profitability, driven by higher power price volatility and changing market dynamics.
The report also detailed a growing battery market in the NEM, with a pipeline of 60 gigawatts of projects in development representing more than $80 billion of potential investment.
Assessing both the base case and scenarios with increased price volatility, Wood Mackenzie estimated that investment returns for four-hour battery systems would exceed 10 per cent in the top three NEM regions of Queensland, Victoria, and New South Wales.
Notably, the results showed that four-hour duration battery systems would have higher profitability going forward, compared to the typical 1.6-hour duration of projects currently operating.
Sooraj Narayan, Principal Analyst at Wood Mackenzie, said that significant shifts in the energy landscape would drive demand for flexible technologies like batteries, to address capacity gaps and stabilise the grid.
He said: “As renewable generation share is expected to exceed 60 per cent by 2030, volatility and sharp daily price swings will create ideal conditions for batteries.
“Battery storage will be crucial in Australia’s energy transition, influenced by the growth of renewable energy and market volatility.
“Investors can anticipate strong returns across different scenarios, making this an opportunity to capitalise on the changing dynamics of the NEM.”
Battery storage solutions enable businesses to store electricity when demand is low and dispatch it when high, providing significant advantages and allowing them to operate more efficiently and sustainably.
A key benefit is resilience and reliability through uninterrupted operations, essential for organisations that rely on a constant power supply such as hospitals, refrigerated facilities, and manufacturers.
Stored energy can be derived from the grid during offpeak hours or from renewable generation such as solar or wind, then dispatched during peak hours to reduce energy costs, held as backup power for outages, or potentially even fed back into the grid.
Even when paired with non-renewable energy generation, battery storage allows for greater optimisation and can help reduce energy costs, reduce grid dependence, and enable frequency control.
Battery systems co-located with solar, wind and gas generation technologies can also maximise land use and improve efficiency, share infrastructure expenditure, balance generation intermittency, lower costs; and maximise the national grid capacity.
Recent BESS developments around the country representative of the market’s growth include the completion of the second big battery at Kwinana in Western Australia late last year, coinciding with the state achieving a new renewable energy record of 85.1 per cent of energy production.
The two Kwinana batteries together have the capacityto power 450,000 households for up to four hours and complement Neoen’s 560-megawatt/2,240-megawatt-hour battery and Synergy’s 500-megawatt/2,000-megawatthour battery in the southwest town of Collie.
In a sign of the market technologically maturing, an innovative new project was the recipient of funding from the federal government’s Industry Growth Program (IGP) earlier this year, with Allegro Energy granted $1.85 million to scale their redox flow battery technology to mass production.
IGP funding is designed to scale up early-stage businesses so they can apply for National Reconstruction Fund (NRF) co-investment during later phases of development and aligns with the National Battery Strategy, which builds on a range of existing initiatives to grow Australian industry such as the IGP, NRF, Solar Sunshot and Critical Minerals Facility.
Federal Minister for Industry Ed Husic said the government was backing businesses to make the jump from start-up to fully-fledged enterprise, creating new jobs and new industries in the process.
He said: “We’ve got world-leading know-how in agricultural and mining gear, low emission technologies and batteries – the challenge is to get a better economic return on these national strengths.
“As these companies continue to grow, our $15 billion NRF is there to support bigger projects that can create even more jobs and more economic opportunities.”
There are several kinds of battery chemistries used in BESS, with lithium-ion batteries such as lithium iron phosphate and lithium nickel manganese cobalt oxide the most common.
Lithium-ion batteries are popular due to their small and lightweight design, as well as high capacity and energy density which requires minimal maintenance and provides a long lifespan.
While they can be rapidly charged and have a low self-discharge rate, lithium-ion batteries can be cost prohibitive and have specific risks such as inflammability and intolerance to extreme temperatures.
Lead-acid batteries are widely available, low-cost, recyclable, and can perform effectively in both hot and cold temperatures, but compared to lithium-ion technology they have a low energy density and are slow to charge.
Other battery chemistries that have emerging applications for commercial energy generation include molten salt-based sodium-sulphur batteries, flow batteries such as the vanadium redox battery, and zinc-bromine batteries, which were developed as an alternative to lithium-ion for stationary power applications of all sizes.
Vanadium flow batteries in particular show promise as a notable step up from lithium-ion, with unique advantages including high lifecycles, no capacity loss over time, simple scalability, improved safety, and immediate and rapid energy release.
