Thought-Leadership Piece: Australian BESS Market Insights

We can’t predict the future, but we can learn valuable insights about what’s in store for Europe’s battery energy storage systems (BESS) developers by looking to the global market frontrunner, Australia.

Australia’s BESS market is trailblazing, with over 50 live projects (>6 GW) across five markets, and another 5 GW committed to come online over the next 2 years. The pipeline beyond this still retains enormous interest, with over 120 GW in development. Among the earliest large-scale adopters, the country has faced many challenges now emerging across European markets.

This offers a valuable preview of what lies ahead for Europe, and a blueprint for BESS developers, owners, and investors looking to build bankable BESS projects in Europe’s high-renewable penetration grids such as Greece and the Nordics.

Let’s break down how Europe’s BESS developers can leverage the Australian experience to ensure success with their own battery storage projects.

As in Australia, Europe’s early BESS development was driven by the market value of grid stability and flexibility services, but constrained by an uncertain policy landscape and financing challenges. Australia’s first large-scale batteries demonstrated the potential to deliver exceptional returns, but also how quickly early opportunities can narrow.

Ancillary service markets are shallow; their size is determined (mostly) by fixed, technical grid stability requirements, not by market demand. As new BESS projects flood the market, they compete for a finite volume of services, leading to revenue cannibalization and predictable price collapse.

The Nordic market is at this junction now.

The Hornsdale Power Reserve (150 MW / 194 MWh) commissioned in 2017, was the world’s first large-scale BESS, and has since become known globally as the Tesla Big Battery. It achieved outrageous early profits by providing shallow frequency services in the early years of its operation.

The rapid development of BESS projects quickly led to saturation in frequency markets, prompting an evolution in market and trading strategies to capture revenues. Relying solely on ancillary services exposes investors to predictable revenue collapse and is an unbankable long-term strategy.

The solution to market saturation is multi-market co-optimisation, or revenue stacking. Instead of depending on flexibility markets where the batteries commit capacity in advance, BESS operators must evolve to participate in deeper, more liquid markets, primarily wholesale energy arbitrage, and develop intelligent, high-frequency strategies, which maximise the total value of the revenue stack.

Australia’s leaders quickly adapted their business models to manage saturation and volatility. Hornsdale adapted to saturation by pivoting to wholesale energy markets, shifting the frequency response share of its revenue stack from over 85% to below 50%. In other Australian market regions, energy arbitrage now accounts for up to 90% of BESS revenues.

Although arbitrage is the backbone, maintaining the stack's diversity is essential for optimised performance, especially for capturing extreme, high-value events. For example, a single weather event in South Australia in July saw previously saturated frequency services temporarily jump to over 60% of the month's total returns.

This complexity demands a sophisticated optimisation partner with deep data insights, predictive analytics, and flexible dispatch strategies to maximize revenues and preserve battery health.

While revenue stacking maximises potential income, it does not change the underlying volatile market risks that deter large-scale debt financing for buildouts over 50MW.

As the market matured, Australia’s developers evolved from opportunistic early projects to larger and more sophisticated, contract-backed approaches that reduce risk and attract large-scale financing. Initially, this relied on simple structures that transferred volatile revenue risk from the asset owner to the optimiser, who paid a fixed fee, or a minimum guarantee, in return for the trading upside. This created a predictable, bond-like cash flow stream that lenders can finance against, increasing the debt share of capital to upwards of 70%.

Australia has continued to advance in commercial structures and is now pioneering highly sophisticated models for financing BESS projects.

Virtual tolling is now one of the most common financing instruments, and is defined by the developer retaining operation while the counterparty trades a price-taking "shadow" battery. Revenue Swap Agreements are being signed by large financial players, offering an insurance-like revenue guarantee against market movements, with no trading required on their part. Bespoke hedging products, such as ‘inverse-solar shape’, ‘super-peak caps’ and ‘virtual storage swaps’ that further de-risk price exposure are emerging from local market leaders. A strong battery business case in Australia uses a diversified stack of contracts with various tenures and types to optimise investor returns while enabling high-leverage project financing.

European markets are still far from requiring such complexity, but we expect the market to continue evolving toward it. Revenues are still incredibly attractive, and the desire to optimise commercial structures is outweighed by the requirement to get built and access to the markets.

Australia's experience shows that the path to a storage-powered grid is paved with financial innovation. European markets are now experiencing the predictable saturation of early ancillary service markets and must leapfrog the painful trial-and-error of the pioneer markets.

Europe's BESS leaders need smarter, more flexible approaches to project finance and revenue stacking to maximize their assets. This requires partnering with the right optimisersop.

Sympower helps BESS developers unlock more from this opportunity. We combine multi-market optimisation capabilities with deep knowledge of Europe’s regional markets to help developers structure revenue guarantees and sophisticated commercial models that unlock long-term, bankable debt financing.

Will European BESS developers learn these lessons in time to secure the necessary capital?