Energy trader lands first big battery contract, just as competition really starts to bite

Energy trader Optigrid says it has landed its first big battery customer, in an era when home storage and utility-scale competition are beginning to cap the high prices seen a year ago.

Vena Energy is planning to use the newcomer’s battery management and optimisation platform on its 408 megawatt (MW), two hour Bellambi Heights battery when it starts in 2027. 

Optigrid cut its teeth on sub-5 MW batteries for the likes of Lunio and Ampyr, helping factory owners turn their buildings into grid assets.

The Vena project takes the total live or contracted assets on the platform to 1 gigawatts (GW), CEO Sahand Karimi says. 

The company will go live with another utility-scale battery this month as well. 

OptiGrid is the product of the combined research of two of its co-founders: Karimi, a power system engineer who did a PhD on battery operation optimisation at University of Adelaide; and Nam Dinh, a data scientist whose studies focused on electricity price forecasting.

Their move into big batteries comes as the market shifts again and makes the decision of when to dispatch those four or six hours of electricity even more critical.

Last year, batteries emerged as a new force and were using their market dominance to force up peak electricity prices by almost double.

This year, the massive build out of big batteries combined with the equally massive installation of home batteries, thanks to the Cheaper Home Battery rebate, is pushing prices the other way. 

Karimi says that’s making it more difficult for the big ones to make money in the short term.

But it should also be making the market operator comfortable that the National Energy Market (NEM) is now able to handle the coming coal exits. 

“This year we’ve had one of the lowest price spreads and overall prices compared to the last five years, and a big part of that is thanks to batteries,” he tells Renew Economy.

“But now we have many battery owner operators and that has pushed down prices. 

“And while that’s not good for merchant batteries in the short term, it is also a signal the market is ready to retire coal plants.”

Karimi says the number of battery players now, and the competition that is creating, is also a protective factor against market manipulation and distortion.

Last week, Western Australia’s biggest energy retailer and generator, Synergy, copped a $1.2 million fine last week for “profit maximising” and electricity price “distorting,” 

The company said the 2023 behaviour was unintentional and caused by a software error at its first big battery project. 

However, some more guidelines for the rules around communicating what electricity will be put into the NEM and when wouldn’t go amiss, Karimi says. 

“Bidding software has been used for years in the NEM, but as batteries deliver a bigger portion of the electricity there is probably more scrutiny on different software and how they’re submitting the bids,” he says. 

“I think some of the software out there can improve. 

“For example, in some cases the way bids are structured means pre-dispatch doesn’t reflect what actually gets dispatched, which makes it harder for everyone to plan.”

The Australian Energy Regulator (AER) is looking into rebidding, which is when batteries and generators change their electricity supply offers as the dispatch time gets closer.

Karimi hopes this will result in better guidelines as to what is compliant, and what is not.

He says the rules were also written in a different era and new guidelines about what is compliant communication “would be helpful”.

“Frankly, I think the guidelines just need to be a bit clearer overall, not just for the batteries,” he says.