My current role at Tesla is all about solving the technical and political barriers to replacing thermal generation. Before this, I was in the field of climate adaptation, where you had to confront the compounding and cascading impacts of climate change. This core sense of urgency is reinforced from my experiences volunteering at local environmental and conservation not-for-profits. Working at Tesla provides a sense of optimism in the face of such an existential challenge, given the scale of the organisation’s impact – with over 8 GWh of Megapack and over 100,000 Powerwall operational in Australia. My role involves working alongside some of the best engineers globally to show how batteries can replace coal’s firming capacity while maintaining reliability, system security, and network resilience.
Other than locational and social licence risks, the main (although likely well appreciated) risk is fundamentally whether the project economics stack up. While underwriting programs like the Capacity Investment Scheme and Long-Term Energy Service Agreements have supported a range of projects, they alone do not provide sufficient long-term revenue certainty. We’ve seen an evolution in the volume and sophistication of battery offtakes; however, it can still be competitive for sellers to secure offtake opportunities at a price that covers the project costs – especially now, with rising contributions from the balance of plant. On the merchant side, uncertainty around coal closure dates lead to unreliable price curves, which dampens incentives for new supply of generation and storage.
Historically, investors saw most of their returns from Frequency Control Ancillary Services (FCAS), and then from energy arbitrage, and now the market has a keen eye on the impact of the Cheaper Home Batteries Scheme with concerns around flattening price spreads. Looking forward, the opportunity lies in batteries expanding the scope, depth, and tenor of components in their revenue stack through valuing capabilities in grid services beyond price arbitrage, such as grid-forming capability and virtual transmission.
While batteries have demonstrated their grid-forming capability to provide essential system services, we have yet to see standardised commercial services at scale that can be built into the investment case the same way other ancillary services like FCAS are. Virtual transmission, where strategically placed batteries can increase the capacity of existing transmission assets, offers a cost-efficient alternative to network augmentation. However, it is still not taken full advantage of in the National Electricity Market.
I’m watching the Department of Climate Change, Energy, the Environment and Water’s implementation of the NEM Review. For large scale storage, understanding if there may be an impact from the Electricity Services Entry Mechanism’s minimum three year in-market period. Specifically, will this introduce negative consequence by stifling the existing market, where 10-15 year virtual tolling terms are relatively common? Also, with the rise of eight-hour batteries, there should be no artificial barriers prohibiting participating in both shaping and firming tenders – especially as they are cost competitive against gas and avoid fuel price volatility.
Another change needed for investor confidence is addressing planning uncertainty. While genuine community engagement is a non-negotiable for a success, renewables and batteries often face unwarranted ideological objections through channels meant for neighbouring communities. Reforms could include, in NSW, revising the rule that mandates review by the Independent Planning Commission for any project with 50 or more objections. This scheme has led to batteries getting delayed, even when objections have come from outside the state or country.
By 2030, we will have a system with greater household and transport sector electrification (with improved coordination and central visibility); many gigawatts more operational data centres; and, hopefully, 4 GW less coal-fired generation with the closure of Eraring and Yallourn. While electrification creates more dynamic and responsive demand - and data centres may add baseload - batteries’ flexibility and configurability will play a central role in managing demand uncertainty, system reliability, and resilience. Their applications expand even further to enable a greater uptake of renewables to meet system demand, whether in the sub-transmission level, behind-the-meter at data centres, as an alternative to network augmentation, operating at eight hours for reliability concerns, or providing essential system services.