Batteries FCAS revenues $290,000/MW more lucrative in SA than in Victoria: The Frequency Control Ancillary Services (FCAS) markets are (mostly) created equal, with volumes procured across the National Energy Market (NEM) and prices settling at similar levels across each state most of the time. However, prices can deviate due to contingency events (interconnector failing or a generator tripping), constraints binding or specific local requirements.
The times where prices differed between interconnected regions were analysed by Cornwall Insight Australia to see if there are any benefits of locating storage in particular regions, for FCAS purposes.
The findings showed that in FY20 batteries in South Australia (SA) would have made ~$290,000 more in FCAS (per MW enabled) than if they were in Victoria (VIC)*. Batteries in New South Wales (NSW) would have also been ~$76,000 better off, and NSW batteries would have been ~$50,000 more lucrative than those in Queensland (QLD).
Ben Cerini, Principal Consultant at Cornwall Insight Australia, said:
“Most of the utility-scale battery storage projects in the NEM derive more than 75%-80% of their market revenues from FCAS markets. Of these, the largest contributor in FCAS revenues has been from regulation raise services** usually accounting for 25%-50% of all battery storage revenues.
“Interestingly, if Raise Regulation** was the priority for battery storage assets, then NSW should be the state of choice as it had the highest prices ($37,000 higher than QLD). However, SA has much higher prices in raise 6 second ($66,000 higher than VIC) and all lower services (lower 6 and 60 each ~$83,000 higher than VIC).
“While asset owners cannot predict contingency events occurring, they can review the historic price outcomes from these events. This will help them ensure that when these events happen again (and they will) that their assets are in the best position to take advantage of these FACS price separation events.
“Developing a robust business case for flexible assets in the NEM requires stacking revenues (where possible) and placing assets in the network areas (or states) where they can be most valuable.”
*Assuming they were active in all markets
** Raise FCAS services are responses from generators or demand response units that increase generation or decrease load in response to frequency deviations (there are four raise services with differing response time requirements)
Batteries FCAS revenues $290,000/MW more lucrative in SA than in Victoria – Post kindly contributed by Cornwall Insight Australia