Australia’s most powerful battery has been set free from most of its unique “shock absorber” obligations, to allow it to trade freely on the electricity market, earn extra money and potentially slash the cost of the landmark but now largely redundant contract.
In a decision that has significant implications for the National Electricity Market and other big batteries in the market, the Australian Energy Regulator has approved a “modification” to the System Integrity Protection Scheme (SIPS) contract that was awarded four years ago to the now newly completed Waratah Super Battery in NSW.
Waratah is sized at 850 megawatts (the most powerful machine ever connected to the Australian grid) and 1680 megawatt hours (MWh), and was to act as a kind of giant “shock absorber” that would allow key transmission lines feeding into the state’s major cities and industrial areas to operate at greater capacity.
The 5.5 year contract – originally estimated at more than $600 million – was signed in 2022 and was deemed crucial to help fill the gap that would be created by the anticipated closure in August, 2025, of the country’s biggest coal fired generator, the 2.88 GW Eraring facility, which is located just up the road.
But the closure date for Eraring has been pushed back twice, now to April 2029, and it appears that the SIPS contract for the Waratah battery, which was also delayed by 18 months, is no longer required as originally stated.
The original contract called for the Waratah battery to reserve 700 MW and 1,400 MWh of its capacity between 5am and sunset each day, and smaller amounts at other times – putting its huge capacity on standby.
The new contract design requires it only to provide that capacity “when needed”, and with at least 24 hours notice, and it is free to trade its full capacity in the wholesale market in the meantime.
The idea is that Akaysha Energy, which owns and operates the Waratah battery, will share some of the revenues with customers, effectively using an unspecified amount of the money earned in merchant trading and deducting it from the payments to be received under the original contract.
The exact payments for that contract have never been revealed, although it is appears to be worth around $100 million a year according to AER documentation.
The payments have already been amended twice because of delays to the battery’s completion, and the AER says it will release the details in June next year, although it is not clear why it is waiting that long.
“The modified SIPS agreement, developed collaboratively by EnergyCo, Transgrid and Akaysha Energy, preserves the battery’s role in delivering the 700MW SIPS service while enabling greater participation in the National Electricity Market when the service is not required,” Akaysha said in a statement.
“Importantly, profits generated through the battery’s market participation will be shared with NSW electricity customers through a revenue-sharing arrangement, ensuring customers benefit from the additional flexibility.”
It will also have an impact on the electricity market, suddenly introducing a major new facility that had been expected to be largely dormant under the previous terms of the SIPS.
“The agreement is expected to increase the availability of dispatchable capacity, and improve market competition, while maintaining the security and reliability benefits the project was designed to deliver,” the company said.
Paul Curnow, Akaysha’s chief commercial officer and managing director, said the modification ensures the battery will continue to deliver its critical reliability function while unlocking additional value for electricity customers.
“What makes this arrangement significant is that it enables the battery to support the grid when needed and participate in the market when it is not, improving utilisation of critical infrastructure without compromising system security.”
The AER documentation reveals that the modification was put forward by transmission company Transgrid in late August, just as the Waratah battery was gearing up to reach full operations after the delivery and connection of a new transformer to replace the one that was damaged in a “catastrophic” incident a year earlier, and which caused its delays.
It appears designed to get around the regulatory and legal restrictions of the contract, and to slash the cost to consumers of a facility that has been made largely redundant by the decision to extend the life of Eraring.
“Akaysha Energy will continue to receive the Service Charge while providing the Alternative Service,”the AER says.
“However, a portion of merchant revenue, earned while providing the Alternative Service and calculated under the Revenue Sharing Amount, will be applied to reduce future Service Charges payable by Transgrid to Akaysha Energy.
“This reduces the Amounts Payable by the Scheme Financial Vehicle (SFV) to Transgrid and, all else being equal, is expected to lower contribution orders payable by distribution network service providers under the Electricity Infrastructure Roadmap, thereby lowering costs for NSW electricity customers.”
The AER says the benefits also include freeing up more capacity in the open market, and putting downward pressure on prices, and providing more flexibility.
Akaysha’s Curnow said the modified deal highlights how government bodies and the private sector partners can structure battery storage to support reliability, competition and better market outcomes.
“The Waratah Super Battery Project demonstrates a model with relevance well beyond NSW, offering important lessons for jurisdictions globally as they accelerate their own energy transition journeys,” he said.
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Giant shock absorber battery free to trade on market after major contract change due to coal closure delay
