Batteries raise power prices in midnight charging mystery

Batteries

Western Australia is using batteries to help move away from coal and gas, but the change will not be easy in the near future.

In the early hours of a cold night last month, while most people in Western Australia were sleeping, something odd happened in the state’s largest electricity system.

Around 1 am, spot‑market prices began to rise sharply.

Prices had been steady at about $120 per megawatt‑hour, then jumped to over $350 per megawatt‑hour.

The rise was not caused by a broken power line or a big coal plant outage.

It was a sudden increase in demand from an unexpected source.

The extra demand came from batteries, which are supposed to stop price spikes.

Why this happened in the middle of the night, when there was no clear reason, is still unknown.

Experts say the event shows that how batteries are used will affect prices as Australia moves away from fossil fuels.

A midnight mystery

One person looking for answers is Marcus Freese, an analyst at Modo Energy.

He says a few things are known from public data.

All the batteries that charged between 1 am and 2 am on 12 July belong to the state‑owned WA power company Synergy.

Freese says the impact was large.

Together, Synergy’s four big batteries added more than 30 % to grid demand when prices were already high.

“The market was not tight because of demand or renewable output,” Freese wrote.

“Underlying demand was normal for that time of day, matching the July average, and wind generation was close to its July average.

“The price rise happened as Synergy increased charging from 229 MW to 640 MW, adding about a third of system demand at the overnight low.”

Synergy built its first battery three years ago (ABC News: Glyn Jones).

Freese says this is not the first time Synergy has pushed prices up by “coordinated charging” of its battery fleet.

He says the tactic seems illogical.

It raises prices for everyone and is not even profitable for Synergy’s batteries.

On 12 July, Synergy’s battery fleet lost $383,000 for the day.

In the past 13 months, Synergy lost more than $100 per MWh on 54 days, but earned more than $100 per MWh on only 31 days.

By contrast, the French firm Neoen, which owns WA’s other two mega‑batteries, has made money more often than not.

“We have seen this pattern in April, June and July,” Freese noted.

“Synergy’s coordinated charging adds a large load at the wrong time, lifts prices, and then buys the power it helped make more expensive.”

Big bets on batteries

The events in WA are being watched closely by energy observers nationwide.

Western Australia leads Australia – and perhaps the world – in using large batteries to balance a grid that is moving toward renewable energy.

From almost nothing three years ago, large‑scale battery capacity in WA’s main grid has grown to about 1,400 MW.

Those batteries regularly supply more than 20 % of peak demand and sometimes over a third.

Batteries are a key part of WA’s plan to close coal‑fired power plants in the coming years (ABC News: Daniel Mercer).

Michael Sarich, senior vice‑president at global energy consultancy Rystad, says WA has bet heavily on batteries because the state’s grid is isolated and cannot import power when needed.

He says the batteries are meant to protect that isolated system.

Sarich says the daily flow of rooftop solar had been pushing daytime prices – and grid demand – lower and lower.

But when the sun set and solar stopped, prices rose to even higher levels.

The benefit of very low daytime prices is “washed away” by very high night prices, but there is hope ahead.

Sarich says batteries have flattened this price curve by soaking up excess renewable energy when it is abundant and releasing it when it is scarce.

“The batteries do a good job meeting evening demand, which is why the price curve is much flatter across the day,” he explained.

“But remember, batteries are not generators. They simply move demand around during the day.”

Battery behaviour compounds winter woes

The strengths and weaknesses of batteries have become very clear in WA in recent months.

In its latest review of WA’s wholesale electricity market (WEM), the market operator said batteries had indeed smoothed prices in the three months to 30 June.

Those prices, however, were still at record‑high levels of almost $120 per MWh.

The Australian Energy Market Operator said coal plant and wind farm outages partly caused the high prices.

It also said increased battery charging during the day and night added to the price pressure.

Sarich says these factors clash with other problems.

He says winter electricity demand is higher, while wind and solar output is usually lower.

For Sarich, winter – not summer – is now the biggest test for electricity systems and their operators.

He says WA, like the rest of the country, is moving to a renewable‑powered system.

Therefore it must be able to handle long winter periods when wind does not blow and the sun does not shine.

“We think wholesale prices will stay high over the next few years because it is all about supply and demand,” Sarich said.

“You need enough supply from whatever source you have.”

Sarich says WA’s current safety net is gas‑fired power, which is relatively expensive.

He also notes batteries are starting to act like gas plants when they offer power to the market.

Falling battery costs and a rush for gas by data centres have overturned the old belief that gas is the cheapest way to meet peak demand.

When supply is tight, as it has been in WA for much of winter, the prices offered have often been high.

Strangely, energy traders not allowed to speak to the ABC also said gas generators fired up to meet the demand created by Synergy’s batteries.

One trader called the events “crazy.”

“Another point is there are only a few of these batteries,” Sarich said.

“So they have a dominant position.”

With Synergy’s two remaining coal plants set to close next year and in 2029, Sarich says building enough capacity to replace them is urgent.

He is hopeful, pointing to many wind projects under construction or planned.

Synergy would not explain why its batteries were all charged when spot prices were high. A spokeswoman said they are a new technology whose performance will be monitored and improved.

She said “safe, reliable and low‑cost” energy systems need diverse supply sources.

Batteries give flexibility that allows more renewable energy while improving system reliability through fast response to changing conditions.

Growing pains, growing tensions

WA Energy Minister Amber‑Jade Sanderson also declined to comment on Synergy’s trading behaviour.

She did not back away from the state’s plan to close coal plants and rely heavily on green power.

“We have always said the most reliable and affordable future energy mix is renewables backed by batteries and gas,” Ms Sanderson said.

The minister blamed both planned and unplanned outages at coal plants and a wind farm under expansion for recent high prices.

“This shows why we need more renewables to keep prices down,” Ms Sanderson said.

She stressed that households and small businesses in WA would be protected from wholesale market pain because the government regulates their prices.

In the turmoil, Marcus Freese from Modo Energy says the powerful battery fleet needs close scrutiny.

He notes batteries now set prices on WA’s main grid, whether charging or discharging, more than 90 % of the time.

Given this power and weak rules, Freese says Synergy could use batteries to raise wholesale prices to benefit its other coal, gas and wind generators.

He argues this may have happened in recent months, saying Synergy’s batteries “paid $7.3 million to charge while its generation earned $18.4 million” over more than 70 high‑price charging days.

“A high charging offer raises the price paid by the battery, but it can also raise the price earned by generation in the same portfolio,” Freese wrote.

Looking ahead, he says WA’s battery fleet and its management will change.

He says it has already changed a lot in the past year.

Revenue from batteries trading energy has fallen, he notes, driven by Synergy’s losses.

So have revenues for system strength and security services.

Today, WA batteries earn most of their money simply for being available through capacity payments.

These payments act like insurance for generators or batteries that provide reliable capacity when the system needs it.

While WA has a capacity market, the national electricity market on the east coast does not.

On the east coast, batteries earn most of their money by trading energy – buying low and selling high – in the wholesale market.

Freese says WA’s experience shows batteries could hurt prices if not managed carefully.

“In a market with wide price gaps and a clear daily arbitrage window, how you charge matters as much as when you discharge,” Freese wrote.

Western Australia is showing the world that grid‑scale batteries are no longer just a backup but can be central to power grids.

Sarich says batteries are crucial for keeping lights on by storing energy as renewable generation grows.

But their role in lowering prices is another matter.

“I don’t necessarily think they will lower prices,” Sarich said.

“The reason is they are not providing more generation.

“You need to think of them as an enabler.

“It’s like the cost you pay to enable more wind and solar, which adds generation and pushes prices down.

“When you add these batteries, they help the whole system work better.”

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