Prospects for Battery Investment Under More Spatially Granular Electricity Spot Pricing

The energy arbitrage prospects for battery energy storage systems differ under zonal and nodal market designs. We emphasize that batteries that relieve congestion are able to privately capture the economic benefit they create from their actions under nodal market designs. We show that in Australia’s zonal National Electricity Market (NEM), energy arbitrage opportunities have been increasing, coincident with renewable energy penetration. Further, we find that substantially greater energy arbitrage opportunities would exist if the NEM is to transition to a nodal market design. We conclude by discussing the investment drivers behind the five pioneering batteries in the NEM and future challenges regarding the economics and regulation of storage and flexible load assets.