Assessing the impact of battery storage on Australian electricity markets

This paper empirically examines the impacts of grid-scale battery storage facilities on the frequency control ancillary services (FCAS) market that is used by energy market operators to maintain the frequency of the system within the normal operating band. Using a staggered introduction of grid-scale batteries in two Australian states, our difference-in-differences analysis shows that grid-scale batteries can significantly lower overall FCAS costs. We further show that the reduced FCAS costs are accentuated by the battery storage capacity, and that their impacts are most pronounced in reducing the costs of short-term FCAS markets (such as the regulation and 6-second services). These FCAS markets typically displace more expensive fossil-fuel participation. Given the large scale of both battery and renewable adoption in Australia, our results have policy implications for global energy markets.