The Economic Regulation Authority (ERA) of Western Australia has issued a warning to the operators of large-scale batteries in the state, citing “unusual” market behavior that seems to be inflating electricity prices. Steve Edwell, chair of the ERA, confirmed that the agency is currently investigating the pricing practices of these batteries within the wholesale electricity market (WEM) in WA.
This investigation comes amidst increasing scrutiny regarding the impact of large batteries, which are primarily owned by the state-run utility Synergy and the French company Neoen. The situation has also drawn the attention of the Australian Energy Market Operator (AEMO).
In recent years, the capacity of large-scale batteries integrated into WA’s main grid has surged to approximately 1400MW, a significant increase from previous levels. These batteries now contribute to over 20 percent of the demand during peak power times and can occasionally supply more than a third of the grid’s needs. Notably, they are responsible for setting pricing in WA’s main grid over 90 percent of the time.
Mr. Edwell emphasized that batteries have quickly become a vital component of the state’s energy infrastructure. He noted that this technology offers considerable advantages to consumers by enabling the storage of renewable energy during periods of surplus for later use during shortages. However, he indicated these benefits are not guaranteed, stating, “We have been actively undertaking inquiries on these matters, as we always do when we see unusual behaviors or unexpected outcomes in the wholesale electricity market.”
He added, “Where we suspect non-compliance with the Electricity System and Market Rules, we will investigate and take compliance action. Large-scale batteries represent the latest technology in the wholesale market. These batteries play a crucial role in the energy transition, but it is essential to maintain a well-functioning market.”
Recent reports from the ABC have highlighted that these batteries have seemingly been contributing to rising prices in the WA market. One notable incident involved the coordinated charging of Synergy’s batteries just after midnight, which caused spot prices to spike from $120 to over $350 per megawatt-hour. An anonymous market participant remarked that this event was one of several instances where Synergy’s batteries appeared to be significantly raising prices.
While the short-term market prices in WA account for only about 10 percent of overall electricity transactions, most of which occur through direct contracts, experts agree that these prices serve as an important indicator of market conditions. Elevated prices in the short-term market can signal an imbalance in supply and demand, particularly during winter months when both factors are often at their tightest due to lower wind and solar generation.
Ralph Sarich, a senior vice-president at the global energy consultancy Rystad, noted that while batteries have effectively flattened price fluctuations throughout the day, they do not necessarily lower prices in scenarios where overall energy generation is insufficient. “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,” Sarich explained. “But remember, batteries are not really generators; they primarily shift demand throughout the day.”
The ERA has been working to understand the implications of battery technology on the wholesale market, expressing its concerns in a recent white paper. The report highlighted that batteries are increasingly influencing the market dynamics, behaving differently compared to traditional generators like coal, gas, and wind facilities. Unlike conventional generators that bid based on fuel and maintenance costs, batteries often face unique economic considerations, most notably the opportunity cost associated with not capitalizing on higher future prices.
The ERA plans to examine various aspects of battery pricing, including the appropriate lead times for setting prices, how to factor in charging costs alongside discharging, and the frequency with which they can amend their bids. The authority is also looking into the practice of “portfolio bidding,” where batteries might be used to artificially elevate wholesale prices to benefit a company’s other generating assets.
Concerns raised by the ERA have been echoed by industry experts who argue that Synergy, in particular, has been managing its battery operations in ways that raise questions about market fairness. Peter Tickler, co-founder of the energy analysis firm Gridcog, suggested on social media that there are only two plausible explanations for Synergy’s management of its batteries: either they lack efficiency in optimizing their assets or they are intentionally manipulating the market to elevate prices for their other resources. “Choose your poison,” he stated. Synergy has been approached for comments regarding these allegations.
