Battery trading complexity demands software solutions as the Australian market matures

“It’s relatively easy to hire a modern data science graduate and put them in the room. They’ll figure out how to develop a good optimisation model that works well in a kind of simulation environment. But being good at operating in Australia’s NEM requires a lot more than just that.”

Ownership diversification drives NEM competition

The Australian energy storage landscape has witnessed a transformation in ownership structures, with BESS increasingly controlled by diverse market participants rather than concentrated among a few major players. This diversification has created heightened competition that benefits overall market dynamics and pricing.

“The batteries that are being built and commissioned at the moment are increasingly in the hands of new market participants,” Grover notes.

“There’s an increasing diversity of participants controlling these batteries, and a resultant increase in competition. As you’re getting more and more batteries, we’re seeing not a concentration of ownership, but a diversification of ownership, which can only be good for competition and for market prices.”

The competitive landscape has produced measurable impacts on grid operations and pricing mechanisms. During peak demand periods, particularly throughout the recent winter season, BESS fleets have demonstrated clear price suppression effects when competing against traditional gas peaking generators.

This competitive dynamic operates within Australia’s sophisticated regulatory framework, where AEMO manages the electricity and gas markets while ensuring reliable, affordable, and secure energy through system security maintenance, market management, and future energy system planning.

Recent rule changes have specifically targeted battery integration challenges. The Integrating Energy Storage Systems (IESS) rule and Enhancing Reserve Information (ERI) reform are designed to better integrate BESS and improve market transparency for all participants.

Looking ahead, upcoming regulatory developments promise to reshape battery trading strategies further. The Integrating Price-Responsive Resources (IPRR) initiative and reforms to the Consumer Energy Resources (CER) framework will change how battery storage systems interact with the market, potentially creating new trading opportunities through more flexible, real-time energy management capabilities.

“Very clearly, when the battery fleet ran out of energy at the end of three or four hours of going hard, that’s when the price spiked, and that’s when the lower price capacity from batteries is out of the merit order, and you’re left with the gas units as the last unit standing,” Grover observes.

The emergence of negative spot pricing in the NEM, traditionally viewed as a market inefficiency, represents opportunities for battery storage systems. These pricing signals indicate periods when the grid requires additional load to balance surplus generation, particularly from renewable energy sources.

“Negative prices are a signal from the market that we need more load relative to the amount of generation at certain times of day and particularly certain times of year,” Grover explains.

“That is the market crying out for more load right now. With all this cheap surplus generation, we need more load. And batteries are the fastest, easiest, cheapest, and most flexible ways to put load right into those time periods when the market needs it.”

Virtual contracts emerge as an alternative financing mechanism

The Australian market has witnessed the emergence of virtual battery contracts or virtual tolling arrangements, representing a major development in battery project financing and market participation.

These contracts enable new market participants to gain exposure to spot price movements without the complexities of physical asset ownership and development.

“A virtual battery contract allows an asset owner, or someone with the expertise and experience to build a battery project, to sign a financial agreement with another party,” Grover begins.

This could be anyone, like a commodities trader, who believes in the potential of the NEM and is interested in the arbitrage opportunity as an investment thesis, but who doesn’t have the capability or desire to build their own battery project.”

Technology solutions and operational complexity

The sophistication required for modern battery trading has created a burgeoning market for specialised software platforms, as operators recognise that manual trading strategies cannot compete in today’s complex electricity markets.

“It has become an accepted truth in the industry that you’d be crazy to try and bid a battery into the market and operate your battery without some kind of automation and algorithmic tool helping you keep track of all the numbers,” Grover emphasises.

Market participants require systems capable of processing multiple variables simultaneously, including price forecasts, physical battery constraints, changing market conditions, and regulatory requirements. This has led to the development of comprehensive software suites that integrate asset management with trading optimisation.

Fluence addresses these industry needs through two primary software products. The first is Nispera, an asset performance management platform that allows users to monitor and manage battery storage and renewable energy assets in a single interface. Energy-Storage.news recently spoke with Andrés Barberán, Fluence’s energy storage product manager, about this technology.

The company’s second offering is the Mosaic platform, a bid optimisation and trading tool that helps market participants navigate the complex decision-making processes required for revenue maximisation.

“Our Mosaic system is a bid optimisation and trading tool for market participants to use to help form and execute trading strategies in the market,” Grover says.

“All generators and battery projects need to bid into AEMO to ask for permission to charge and discharge, and they do that by offering prices. Our system helps batteries decide when it’s optimal to charge and discharge and sell Frequency Control Ancillary Services (FCAS) and how much for maximum overall revenue.”

However, successful battery trading operations require comprehensive capabilities extending far beyond mathematical optimisation models. Effective systems must integrate forecasting of grid constraints, physical battery characteristics, auxiliary load management, and continuous performance analysis.

“You need to be good at bidding and managing IT systems, and forecasting constraints on the power system, and forecasting the physical realities of the battery system, making sure you’ve got a good model of how nuanced things like auxiliary loads flow through to the signals that are coming to the bidding system,” Grover notes.

Operational complexity demands cross-functional coordination between trading teams, operations personnel, and software providers to ensure optimal market outcomes during critical periods.

This has created opportunities for established energy software companies and specialised startups to develop solutions tailored to different market segments and operational requirements.

The Japanese energy storage sector

Fluence is expanding Mosaic operations into Japan, where market structures present greater complexity than Australian operations, Grover notes. The Japanese power system, approximately five times larger than the NEM, requires navigation of multiple market operators and extended bidding timeframes.

“You’ve got different market operators for the ancillary services versus the energy market, where, in contrast to the NEM, you’ve got AEMO that co-optimises everything on behalf of participants and one operator for one market,” Grover explains.

“You actually have two market operators doing two separate things on two different time frames.”

The Japanese market structure requires ancillary service bids submitted one week in advance to one market operator, while energy arbitrage bids are submitted day-ahead to a different operator.

These commitments can lock battery operators out of arbitrage opportunities, creating complex optimisation challenges across extended time horizons. Dr Mahdi Behrengrad, head of energy storage at Pacifico Energy, recently spoke to Energy-Storage.news about the opportunities in the Japanese energy storage sector.

Future market outlook and growth opportunities

Despite concerns about market saturation, growth opportunities remain for battery storage in the Australian market. The ongoing transition from synchronous coal generation to renewable energy sources is expected to increase price spreads and create additional revenue opportunities for storage systems.

“We see lots of room to run for battery projects as the market evolves and we connect more and more wind and solar PV power plants and lose our existing synchronous coal generators,” Grover says.

“We think that price spreads are only going to continue to increase, and that there’s space for a lot more battery capacity in the market than we have today.”

The development of longer-duration battery storage systems will enable storage assets to participate in extended high-price periods, providing additional competitive pressure on traditional peaking generation and delivering consumer benefits through sustained price suppression during peak demand events.

These arrangements address fundamental revenue certainty challenges while expanding market participation beyond traditional infrastructure developers and operators.

Australian market evolution offers global lessons for battery storage trading

As the Australian energy storage market continues its rapid expansion, the sophistication of trading platforms and operational expertise will remain critical factors determining project success and market efficiency.

The evolution from simple arbitrage strategies to comprehensive market participation platforms reflects the maturing nature of the industry and the increasing complexity of modern electricity markets.

The trajectory toward greater market sophistication raises important questions for industry participants.

How will smaller battery operators compete as trading complexity increases? Will the software requirements create barriers to entry that favour larger, well-capitalised players? And as more battery storage systems enter the market, will the current revenue opportunities persist or will new value streams need to emerge?

Grover’s insights suggest the Australian market is still in its early stages despite rapid growth, with fundamental grid transformation creating sustained opportunities for storage assets.

The ongoing retirement of coal-fired generation, combined with the acceleration of renewable energy deployment, points to a market environment in which battery storage will play an increasingly central role in maintaining system reliability and economic efficiency.

However, the message is clear: success in Australia’s evolving energy storage landscape will require not just capital and hardware, but sophisticated software capabilities and deep operational expertise.

Australia’s energy storage sector also offers valuable lessons for other markets undergoing similar transitions. It demonstrates how rapid battery deployment can transform electricity market dynamics and create new requirements for operational sophistication.

As other regions follow Australia’s path toward high renewable energy penetration, the trading complexity challenges identified by Grover are likely to become a global phenomenon requiring similar technological solutions.