Grid Batteries Drive Up Midday Electricity Prices In Australia

Electricity spot prices in Australia’s National Electricity Market (NEM) have risen over the past month, with midday prices climbing from near zero to between $25 and $30 per MWh. This shift follows a period where grid-scale battery storage capacity expanded from 5.5 GWh to 27.1 GWh, creating a new source of demand that is currently outpacing the growth of both utility-scale and rooftop solar generation.

Data analysis indicates that the rise in midday prices has outweighed a decline in evening peak prices, which dropped from approximately $130 per MWh to $95 per MWh. While lower evening prices have historically had a greater impact on annual averages, the recent trend shows that battery charging activity is significantly influencing market dynamics. The growth in grid battery demand is estimated to have added $29 per MWh to midday prices while reducing evening prices by $63 per MWh.

In addition to grid-scale batteries, household storage is also affecting market patterns. Underlying demand, calculated as grid demand plus rooftop solar output, has increased by 1.5 GW during the middle of the day. While electric vehicle charging contributes to this rise, it accounts for only about 0.05 GW of the total increase. This suggests that home batteries charging from rooftop solar are reducing exports and increasing demand during hours that previously experienced the lowest prices.

Despite these shifts, solar price levels remain a challenge for developers. Current seasonally adjusted trends show solar prices at $43 per MWh in New South Wales, $27 per MWh in Queensland, and $22 per MWh in Victoria. Further price increases are considered necessary to incentivize new solar project development, with analysts noting that even the potential closure of coal-fired plants like Yallourn may not be sufficient to drive the required price lift in certain regions.