New forecasts from Cornwall Insight Australia reveal a lucrative and enduring role for batteries in the recently launched Very Fast Frequency Control Ancillary Services (VF FCAS) markets. The price forecasts show participants in the Raise-1 market are predicted to make an average of $9.64/MW/hr out to 2026 and $10.95/MW/hr in the Lower 1-second. This compares very favourably to other markets currently forecast to make less than a dollar/MW/hr.
Even as prices stabilise in the long run, batteries are expected to see sustained gains, averaging around $5.5/MW/hr 1 over the 20-year forecasts.
The VF FCAS markets are designed to ensure grid stability by responding to rapid frequency fluctuations.
Maintaining grid stability requires sufficient energy to ensure consistent frequency, especially when unexpected events like power plant outages occur. Traditionally, coal-powered generators provided this inertia, but with coal’s phase-out by 2038, VF FCAS markets and their battery participants are stepping in to fill the gap.
As VF FCAS markets were only introduced on 9 October 2023, they are currently in a transition period, meaning they have a low maximum volume requirement (175MW for Raise-1 and 100MW for Lower-1). However, this will increase as more participants, including existing batteries, join the market, with over 1GW of response expected to be available by 2026. The high projected revenues could make participation highly attractive, suggesting a surge in battery involvement.
Quarterly average price forecast and average daily P10 to P90 price spreads – Raise 1 sec
Source: Cornwall Insight Australia
Quarterly average price forecast and average daily P10 to P90 price spreads – Lower 1 sec
Source: Cornwall Insight Australia
Ben Tudman, Modelling Manager, Cornwall Insight Australia:
“Our forecasts show the future of Very Fast FCAS markets looks bright for batteries. The potential for substantial profits, combined with the vital role batteries play in ensuring grid stability, means they are poised to be a driving force in this revolutionary energy landscape.
“With coal slowly fading out of the picture, VF FCAS markets will hopefully offer the contingency needed to maintain the stabilisation of the grid. We are optimistic that the higher prices available will see appetite grow for involvement in the markets, enticing both new players and existing battery assets to actively participate and contribute to these evolving energy markets.”
Reference:
- Over the 20-year forecast period, quarterly prices average approximately $5.95/MW/hr for the Lower-1 market and $5.08/MW/hr in the Raise-1 Market.
For more information, please contact: Verity Sinclair at v.sinclair@cornwall-insight.com
To link to our website, please use: https://www.cornwall-insight.com/au/
About the Cornwall Insight Group
Cornwall Insight is the pre-eminent provider of research, modelling, analysis, consulting and training to businesses and stakeholders engaged in the Australian, Great British, and Irish energy markets. To support our customers, we leverage a powerful combination of analytical capability, a detailed appreciation of regulation codes and policy frameworks, and a practical understanding of how markets function.
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"The potential for substantial profits, combined with the vital role batteries play in ensuring grid stability, means they are poised to be a driving force in this revolutionary energy landscape."
Ben Tudman Modelling Manager
