Australia’s battery market soars as renewables decline

New Clean Energy Council data have revealed a significant increase in the level of investment in large-scale batteries in the last three months, with financial commitments increasing from 150MW of capacity in Q4 2020 to 600MW in Q1 2021. However, Q1 2021 investments in large-scale renewable projects have dropped to 30% lower than the 2020 quarterly average.

“Big batteries have come of age, with investors recognising the increasing cost competitiveness as well as the role they play in providing energy security and supporting renewable energy across Australia,” said Clean Energy Council chief executive, Kane Thornton.

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“The projects committed in this quarter represent a 300% increase in committed large-scale energy storage capacity compared to Q4 2020 and investment to the tune of AUS$400-450 million (US$310-349 million).”

The findings are based on a recent study conducted by the Clean Energy Council that found large-scale battery storage is now the superior choice for electricity peaking services, compared to open cycle gas turbines.

Image credit: Clean Energy Council

According to Clean Energy Council, battery storage outcompetes gas peakers because of its faster reaction time, higher accuracy and flexibility to respond to price variability by both charging and discharging. With the rapid reduction in capital costs complementing its already lower operating costs, battery storage offers this superior performance at much greater commercial value than its gas peaker alternative, and at much lower exposure against future gas, carbon and market reform risk.

Putting brakes on renewables

According to study, this dramatic increase in large-scale battery investment is coupled with decreased financial commitments in large-scale renewable projects, with investments having slowed to the lowest level in the past five years. Just one large-scale renewable energy project was financially committed in the first quarter of 2021, with the 400MW of new capacity 45% lower than the previous quarter and 30% lower than the 2020 quarterly average.

“This is a deeply concerning trend when, in light of the speed of the clean energy transition worldwide, the brakes are being put on Australia’s promise as a renewable energy superpower,” said Thornton.

“Confidence for new investment in the sector is really in limbo at the moment. Projects are experiencing significant and often unanticipated delays through the grid connection process, and as we saw last week with the announcement of a new gas-peaking plant at Kurri Kurri, government intervention in the energy market adds to the uncertainty for investors.”

The single project reaching financial close in the opening quarter of 2021 – the New England Solar Farm in Uralla, New South Wales – marks the lowest number of new projects to reach the milestone in a quarter in the past four years.

The results of the study, Battery storage: The new clean peaker, are available for download.