Australia’s volatile electricity market needs more storage – Power Engineering International

Australia’s electricity market is the most volatile in the world, and more energy storage including pumped hydro is needed to handle fluctuations in capacity, according to Rystad Energy research.
The country’s National Electricity Market (NEM), which interconnects power markets in Queensland, New South Wales (NSW), Victoria, Tasmania and South Australia, is experiencing the most fluctuations in daily prices of any system worldwide.
The market volatility is attributed to unexpected supply losses from unplanned coal generation outages and transmission line issues related to natural disasters, which lead to huge price fluctuations, according to Rystad Energy.
Rystad Energy analyzed public price data from 39 electricity markets globally and concluded that Australia’s NEM holds the unwanted title of “most volatile,” with domestic price spreads for Queensland and South Australia being the widest of all markets.
The key metric used to measure volatility is the average one-hour intraday spread for a year of data, i.e., the difference between the highest and lowest price during a given hour.
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Volatility is driven by significant supply issues, including unplanned coal plant outages or transmission line problems caused by natural disasters, which have become more frequent and devastating in recent years.
Extreme price fluctuations are also attributed to high solar power penetration. High daytime generation pushes prices down, while elevated natural gas prices are causing soaring rates in the evenings and at night when solar generation falls and gas-fired generation is needed.
To handle these fluctuations, increased storage capacity is required. A total of 46GW/640 GWh of pumped hydro and utility-scale battery storage capacity will be needed to balance the market by 2050, a significant increase from the current 2.8GW.
Outside Australia, the other markets that exhibited high volatility were Japan and the Philippines, plus select regions of the US such as California and Texas.
“Volatility can be unsettling for retailers who lack proper hedging strategies and for consumers who bear the brunt of resulting cost fluctuations,” said David Dixon, senior analyst, Rystad Energy. “To tackle this, Australia should prioritize the enhancement of transmission infrastructure and invest in storage solutions to mitigate the impact of volatility.”
In September 2023, renewable energy generation in the NEM grew to 7TWh, up 13% year-on-year. Solar accounted for most of this increase, generating 1TWh more than in September 2022. Wind generation remained steady year-on-year, while hydro generation dipped slightly.
Coal-fired generation in the NEM and Western Australia’s Wholesale Electricity Market (WEM) remained low in September this year, compared to recent norms. This was due to a combination of seasonal factors, increased renewable generation and outages at some coal-fired facilities.
Just one of the pumped storage hydro projects was proposed for development in Australia is 335MW Lake Lyell Pumped Hydro Project, to be located near Lithgow in NSW. EnergyAustralia said in August 2023 that it will commence technical and environmental studies for the project.
Originally published on hydroreview.com
Power Engineering International examines the drivers that are changing the global power generation sector. It delivers up-to-date news and in-depth articles on industry trends, new technologies and cutting-edge projects impacting the global energy transition. It is a hub for thought leadership from industry experts who are shaping the 4th Industrial Revolution.

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