As a Wood Mackenzie report details how Australia is leading in the battery energy storage systems market, one of the country’s TSOs, Transgrid, has announced it will be inviting tenders for battery operators to support the reliability of electricity supply in New South Wales (NSW).
Transgrid is entering a competitive procurement process to buy services from new battery projects before finalising contracts with successful proponents in the Bathurst, Orange and Parkes region as well as NSW.
Grid-scale batteries have been identified as part of the preferred options for maintaining reliable supply for the regions. Both regions are forecast to experience significant increases to electricity demand due to increasing industrial loads.
Commenting on the battery projects announcement was Transgrid executive general manager of network Marie Jordan, who stated how the procurement: “marks a doubly significant milestone because when they were compared to other options grid-scale batteries came out on top in both regions in terms of providing the biggest benefits.
“Our grid is changing, which is why we’re going beyond the traditional poles and wires approach and embracing new technologies and business models to meet the needs of consumers and keep the system reliable.
“We’re looking to purchase services from providers who own and operate battery storage. This approach helps meet growing demand in both regions faster than upgrading the existing network.
Jordan added how the benefits offered by grid-scale batteries will unlock new capacity on the transmission grid; service providers will also be able to use said batteries to trade in the energy market when not in use.
Specifically, states the research company, the country’s total pipeline of announced battery projects now exceeds 40GW.
“The recent surge in renewable energy and competitive market design has made Australia one of the most attractive markets for grid-scale energy storage globally,” states Kashish Shah, senior research analyst at Wood Mackenzie.
“Helped by the presence of competitive wholesale and frequency control markets offering diverse revenue streams for battery storage, and significant funding from the Australian government providing revenue certainty to storage projects. Because of this, we expect a 28% increase in the country’s battery storage capacity from now until 2032.”
According to their analysis, two-hour grid-scale batteries are currently the most prevalent technology in Australia as project owners mainly target the high-value frequency control and ancillary services (FCAS) market.
Battery module pricing is expected to decline by more than 40% in Australia and South Korea by 2032 for both LFP and NMC chemistries. This in turn will drive overall system costs down by 18% to 21% on a US$ KWh basis over the next ten years – becoming the largest cost reduction driver of CAPEX.
Current pricing conditions are due to softening electric vehicle (EV) demand growth and a downturn in lithium prices, which has seen nearly a 46% decrease since November 2022.
Further systemic price declines from additional refining and production capacity are expected by 2025. Wood Mackenzie expects the commodity price declines and technology improvements to also reduce battery module prices in the coming years.