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<\/p>\nIn the wee hours of a cold night last month, as most West Australians slept in their beds, a strange thing happened in the state’s biggest and most important electricity system.<\/p>\n
About 1am, prices on the spot market started to soar.<\/p>\n
They had been hovering at an elevated level of roughly $120 per megawatt-hour (MWh) but suddenly began to climb to extreme highs of more than $350\/MWh.<\/p>\n
Driving that jump in prices was no catastrophic loss of a high-voltage power line or a major coal-fired plant.<\/p>\n
It was a spike in demand and it was coming from an unexpected source.<\/p>\n
The surge was coming from batteries, the very things supposedly designed to prevent just such a breakout in prices.<\/p>\n
Why it happened \u2014 in the middle of the night when there was seemingly no obvious reason \u2014 is still unclear.<\/p>\n
But experts say the episode highlights how the way batteries are managed will determine their impact on prices as Australia transitions away from fossil fuels.<\/p>\n
A midnight mystery<\/p>\n
One person who has been seeking answers is Marcus Freese, an analyst at Modo Energy.<\/p>\n
He says a few things are known based on publicly available data.<\/p>\n
For one, the batteries that charged between 1am and 2am on July 12 were all owned by state-owned WA power provider Synergy.<\/p>\n
Freese says the effect was significant.<\/p>\n
Combined, Synergy’s four big batteries added more than 30 per cent to demand for power from the grid at a time when prices were already high.<\/p>\n
“The market was not tight because of demand or renewable output,” Freese wrote in a report.<\/p>\n
“Underlying demand was unremarkable for the time of day, in line with the July average for that hour, and wind generation was close to its July average.<\/p>\n
“The price rise instead coincided with Synergy increasing charging from 229 (megawatts) to 640MW, which added around a third to system demand at the overnight trough.”<\/p>\n
<\/p>\n
Synergy built its first battery three years ago. (ABC News: Glyn Jones)<\/p>\n
Freese says it is not the first time Synergy has materially pushed up prices in the market through the “coordinated charging” of its battery fleet.<\/p>\n
He says it appears to make little sense as a tactic.<\/p>\n
Not only does it push up prices that will ultimately be borne by everyone, Freese says it is not even profitable for Synergy’s batteries.<\/p>\n
In this case, on July 12, he says Synergy’s battery fleet lost $383,000 across the day.<\/p>\n
In the past 13 months, Freese says Synergy has lost more than $100\/MWh on 54 days, while it has earned more than $100\/MWh on just 31 days.<\/p>\n
By contrast, the company that owns WA’s other two mega batteries, French firm Neoen, has made money much more often than not.<\/p>\n
“We’ve now observed this dynamic across April, June, and July,” Freese noted.<\/p>\n
“Synergy’s coordinated charging adds material load (demand) at the wrong time, lifts prices, and then buys into the spike it helped create.”<\/p>\n
Big bets on batteries<\/p>\n
The events in WA are being watched closely by energy observers across the country.<\/p>\n
More than anywhere else in Australia \u2014 and, by some measures, the world \u2014 the state has led the charge into big batteries as a way to balance an electricity system turning towards renewable energy.<\/p>\n
From practically nothing three years ago, the amount of large-scale battery capacity in WA’s main grid has risen to about 1400MW.<\/p>\n
Collectively, those batteries regularly meet more than 20 per cent of demand for power at peak times and can sometimes provide more than a third.<\/p>\n
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Batteries are a key part of plans for WA to exit coal-fired power in coming years. (ABC News: Daniel Mercer)<\/p>\n
Michael Sarich, a senior vice-president of global energy consultancy Rystad, says WA has bet big on batteries, partly because of a very real vulnerability.<\/p>\n
Its main electricity grid is an island, cut off from the rest of the world and unable to tap imports when times get tough.<\/p>\n
Those batteries, he says, are aimed at safeguarding that system.<\/p>\n
Sarich says the daily flood of rooftop solar was previously pushing daytime prices \u2014 and demand for power from the grid \u2014 to ever lower levels.<\/p>\n
But when the sun set and the solar panels stopped generating, he says prices were rising to highs that were even more extreme.<\/p>\n
Bills hit by power price whiplash<\/a><\/p>\n The benefits of extremely low energy prices during the day are “washed away” by extremely high ones after dark. But there is light at the end of the tunnel.<\/p>\n Sarich says batteries had flattened this price curve by soaking up excess renewable energy at times of surplus and discharging in times of scarcity.<\/p>\n “The role the batteries have done really well is meet that evening demand, which is why you’re seeing the price curve is a lot flatter across the day,” he explains.<\/p>\n “But the other thing you need to remember is batteries are not really generators. They’re really just moving demand around throughout the day.”<\/p>\n Battery behaviour compounds winter woes<\/p>\n The strengths and weaknesses of batteries have been brought into sharp relief in WA in recent months.<\/p>\n In its most recent snapshot of WA’s “wholesale electricity market”, or WEM, the market operator noted batteries had indeed smoothed prices in the three months to June 30.<\/p>\n Those prices, however, had flattened out at record high levels of almost $120\/MWh.<\/p>\n According to the Australian Energy Market Operator, coal plant and wind farm outages partly caused the price pain.<\/p>\n But so too did increased battery charging during the middle of the day and overnight, AEMO noted.<\/p>\n Sarich says these factors ran headlong into other inconveniences.<\/p>\n He says demand for electricity in winter is simply higher, while output from wind and solar is almost invariably lower.<\/p>\n For Sarich, winter, not summer, is now the biggest test of electricity systems and the people who run them.<\/p>\n He says WA, like the rest of the country, is moving to a system powered by renewable energy.<\/p>\n As such, it needs to be able to cope with extended periods in winter where the wind does not blow and the sun does not shine.<\/p>\n “Our view is over the next few years that wholesale prices are going to remain elevated because fundamentally it’s all about supply and demand,” Sarich says.<\/p>\n “You need to have enough supply from whatever source you’ve got.”<\/p>\n Sarich says WA’s safety net at the moment is gas-fired power, a relatively pricey form of power.<\/p>\n But he also notes that batteries are increasingly “mirroring” the behaviour of gas plants when they offer to supply their power to the market.<\/p>\n