Big batteries enjoy record revenues, but pumped hydro struggles | RenewEconomy

Big batteries enjoy record revenues, but pumped hydro struggles

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Grid scale batteries enjoy record revenues in fourth quarter, but pumped hydro storage struggles to deliver profits.

The Ballarat Battery Energy Storage System. Source: Spotless Group.
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Australia’s growing number of grid-scale big batteries lifted revenues to record levels in the fourth quarter of 2019, but the country’s pumped hydro facilities struggled to deliver profits because of lower volatility in market prices.

The quarterly Energy Dynamics report from the Australian Energy Market Operator shows that the biggest growth in revenues for grid-scale batteries were the multiple frequency control ancillary services (FCAS) markets, driven mostly by issue with coal generators and tighter guidelines imposed by AEMO to deal with the changing nature of customer loads.

According to the AEMO data, the five big batteries in operation – Hornsdale, Dalrymple North, Ballarat, Gannawarra and the newly completed Lake Bonney took in revenue of $20 million in the fourth quarter alone, a 70 per cent increase from the previous record,

Revenue from energy arbitrage (buying at low prices and selling at higher prices) increased slightly from the previous quarter, but remained a small proportion – 12 per cent – of battery market revenue. (Some batteries like Hornsdale also receive payments from state governments for grid security).

But the situation at the country’s various pumped hydro facilities was not quite so rosy. Combined net revenue for the quarter actually fell by $3 million, driven by a 63 per cent fall in the dispatch from Origin Energy’s Shoalhaven facility, as well as a narrowing of energy arbitrage values.

AEMO says the difference between the buy and sell prices (pumping and generation) for the pumped hydro facilities fell to $59/MWh from $82/MWh. Pumped hydro facilities rely on a big difference between the buy and sell prices because of the losses in the energy used to pump the water uphill to a higher reservoir for storage.

One pumped hydro facility to increase its output was the Wivenhoe facility in Queensland, which had been little used when part of the portfolio of the coal dominated CS Energy, but has been more active since it was transferred to the newly created CleanCo on October 31.

As we reported at the time, the change in charging patterns was almost immediate, taking a much more active role in addressing negative prices and excess solar output during the day, and less pumping at night (when it would normally favour coal generators).

According to the AEMO data, average generation increased from 10 to 18 MW in the two months it was run by CleanCo, and the time of pumping shifted from predominantly overnight to the middle of the day when prices were low.

“Pumping during negative prices increased,” AEMO noted. ‘In November 2019, Wivenhoe was pumping 83% of the time when Queensland had negative prices, a significant increase from 20% in October 2019.”

The increase in the share of FCAS revenue mopped up by batteries is shown in this graph above, and it is displacing mostly black coal nd gas, at last in the “raise” FCAS market.

AEMO notes that there were two very high priced FCAS events in South Australia – islanding of South Australia (or risk of islanding) led to local FCAS requirements and $14 million in FCAS costs. During these events, South Australian batteries provided high levels of FCAS and received an estimated $6.8 million in FCAS revenue.

The current quarter will be interesting to watch. The “islanding” of South Australia, caused by the storms that tore down one of the main transmission lines in Victoria, is expected to last two weeks, and FCAS costs have remained near the market cap for much of the time.

Batteries, however, may not have been able to capture much of this revenue because they have been directed by AEMO to stand by and deliver fast response for system security issues in the case of a gas generator trip, or another unexpected development.

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