Batteries send power prices up in midnight charging mystery

An unusual event in Western Australia's electricity system saw prices skyrocket in the early hours of July 12, baffling energy experts. Around 1 a.m., prices on the spot market, which had been hovering near $120 per megawatt-hour, suddenly climbed to extreme highs exceeding $350/MWh.

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The market was not tight because of demand or renewable output. Underlying demand was unremarkable for the time of day, in line with the July average for that hour, and wind generation was close to its July average.

This dramatic surge was not caused by a major power line failure or the shutdown of a large power plant. Instead, the increased demand originated from batteries, the very technology designed to stabilize prices. The reason for this midnight charging surge, occurring when demand was otherwise unremarkable and wind generation was average, remains unclear. However, analysts point to the coordinated charging of batteries owned by the state-owned utility Synergy as the primary driver.

Marcus Freese, an analyst at Modo Energy, noted that Synergy's four large batteries increased their charging from 229 megawatts to 640 megawatts between 1 a.m. and 2 a.m. This action alone added more than 30% to the system's demand during an overnight low. Freese's analysis indicates that Synergy's batteries lost approximately $383,000 on July 12 due to this strategy. Over the past 13 months, Synergy has reportedly lost money on 54 days while profiting on only 31 days, a stark contrast to the performance of batteries owned by French firm Neoen.

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The price rise instead coincided with Synergy increasing charging from 229 (megawatts) to 640MW, which added around a third to system demand at the overnight trough.

Freese described this pattern as "coordinated charging" that adds "material load (demand) at the wrong time, lifts prices, and then buys into the spike it helped create." This behavior raises questions about battery management strategies and their impact on market prices, particularly as Australia navigates its transition away from fossil fuels. The events in Western Australia are being closely monitored nationwide as other regions also increase their reliance on battery storage.

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We've now observed this dynamic across April, June, and July. Synergy's coordinated charging adds material load (demand) at the wrong time, lifts prices, and then buys into the spike it helped create.