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‘Fundamental economics’ enabling longer-duration BESS in Australia’s NEM, says Eku Energy

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Battery energy storage developer Eku Energy’s chief technology officer, Elias Saba, believes various factors, including systems’ cost structure, have enabled a shift toward longer-duration battery energy storage systems (BESS) in Australia.

“Long-duration systems on the National Electricity Market (NEM) have been helped by some of the fundamental economics of storage over the past year or two. We’ve seen a significant decline in the cost of lithium but also generally improvements in energy density and the cost of the general equipment, structure, and supply of storage,” Saba says.

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As with other electricity markets that have seen increasing uptake of battery storage, durations of BESS assets in the NEM have gradually lengthened.

Beginning with shorter-duration systems that primarily served high power functions such as playing into the NEM’s Frequency Control Ancillary Services (FCAS) market, BESS developers had then adopted a more typical 2-hour duration model as the shift began towards energy trading. The market is now increasingly seeing 4-hour duration large-scale assets in development or construction.

These longer-duration systems are becoming more lucrative. Research conducted by Wood Mackenzie last year found that a 4-hour duration BESS in 2026 could earn an average of AU$263,000/MW (US$163,461/MW) over its lifetime.

Elias Saba states that this rise in projected earnings from a longer duration of BESS could be due to the rising appetite of offtakers.

“A lot of the large load exposed customers around the NEM, and also some of the commodity traders, whether it’s in the NEM or in a different region, are interested in energy storage, both for the capability and flexibility of the asset, but also the ability to hedge exposure via the trading of the asset in the market, and to also protect the risk positions in their books,” Saba says.

Alongside this, the Eku Energy CTO notes that the increasing price spreads on the NEM and further saturation of ancillary market products favour long-duration systems regarding value creation. Saba also says that energy storage is shifting away from providing grid stability and is more about optimising renewable energy generation via co-location.

“All the incremental storage that’s starting to come on to the NEM is more focused around shifting energy from renewables, and that’s now becoming more of the primary use case. Before, the early storage systems were deriving a lot of value and providing valuable services to grid stability – that’s still being provided. However, the size of those markets is relatively shallow, and the size of the market and the need for energy shifting are much larger and more significant,” Saba states.

Lithium-ion’s role in 8-hour duration systems

There is an ongoing question regarding long-duration batteries: Will lithium-ion technology become the standard for 8-hour duration systems, or will a new technology emerge to meet this challenge?

A report released by the Australian government’s Department of Industry, Science and Resources said that although lithium-ion batteries are likely to dominate stationary storage for under 4-hours, alternative technologies such as sodium-ion and flow batteries could threaten their dominance.

Saba says that although the economic drivers and use cases to drive 8-hour duration systems have not yet been established in Australia, they are becoming more prominent in other markets worldwide, such as Italy. However, to see this duration system be nurtured, there needs to be further demand to spur growth.

He says: “What you typically see is when there’s demand for the product, the OEMs and the integrators will start to create products that are specific to that requirement. Because of this, the cost efficiency of the product improves and becomes more competitive. That, coupled with the decreasing cost of lithium and other elements, makes me think lithium in the 8-hour duration space will be competitive even against sodium-ion, especially in the short term.

“Fundamentally, lithium-ion batteries have an advantage right now because of the investment in the technology and the learning curve we’ve seen over time.”

Despite this belief, Elias Saba questions whether sodium-ion batteries could take the crown from lithium-ion batteries as the technology matures. However, more research and case studies around the globe would need to be conducted before a definitive answer can be given.

“There is a question of whether, as sodium-ion and other technologies mature, how will that competitive dynamic work? Could sodium-ion edge out lithium-ion in that very long-duration storage space? Potentially,” he says.

A need for clarity and consistent policy

Eku CTO Elias Saba notes that energy storage will be a crucial component of Australia’s energy transition and that clarity and consistency in policy will be critical for ensuring that investment confidence in the sector continues to grow.

“We are fundamentally in the middle of a very important transition, and the role of energy storage is critical because it’s one of several different pieces. It can become difficult and vague because we’ve always got changing governments and changing policies,” he says.

“Still, I would just like to emphasise to everyone the importance of what we’re doing, the end goal and what we’re trying to achieve with the decarbonisation of the grid. This is driven by the need to ensure that we have a stable climate for future generations and cost-effective energy solutions.”

Indeed, 2025 is gearing up to be a crucial year for Australia’s energy transition prospects. Western Australia and the Northern Territory will hold state elections, while a federal election is scheduled for May 2025.

Since prime minister Anthony Albanese took office in 2022, the country has seen vast support for renewable energy developments, especially solar PV, through various mechanisms that have been introduced, such as the often-oversubscribed Capacity Investment Scheme (CIS). The results of the first CIS tender saw 3.5GWh of co-located energy storage successful.

In contrast to Albanese’s Labor Party government’s staunch support for renewable energy developments, Opposition leader Peter Dutton of the Liberal Party aims to reduce the Australian public’s energy bills by focusing more on oil and gas, coal-fired power, and nuclear reactors. In the process, he would controversially lift a ban on nuclear power that has been in place since 1983 via the Nuclear Activities (Prohibitions) Act.

With many across the energy industry disputing Dutton’s claims that this will reduce household energy bills, the topic will likely become a focal point for the upcoming election.

Crucially, as mentioned by Elias Saba, the need for a consistent policy scheme for energy storage will be paramount to the country’s energy transition and to ensure that grid stability across Australia is maintained.

Eku Energy’s Elias Saba will speak at our publisher Solar Media’s Energy Storage Summit Australia 2025, which will take place in Sydney from 18-19 March.

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