Energy markets rarely move in straight lines. They evolve in steps, often quietly, when the economics of a technology shift from theoretical to practical. One day the numbers don’t quite stack up; the next, they start to look difficult to ignore.
For battery storage, one of those moments arrived last year in the National Electricity Market, when a sharp price event in New South Wales illustrated how volatility is increasingly translating into revenue.
The importance of the event wasn’t simply the headline price. The NEM has always experienced spikes. What mattered was why the spike occurred and what it revealed about the future earnings profile of flexible assets.
Because the forces behind it are no longer rare. They’re structural.
The Event: October’s Extreme Price Swing
On 10 October 2025, during the evening demand ramp, wholesale electricity prices in NSW surged dramatically, with multiple dispatch intervals clearing around $20,000/MWh.
An initial spike to roughly $20,300/MWh created significant revenue opportunities for assets able to discharge at short notice. Later in the evening, as supply conditions loosened, the market swung in the opposite direction, with prices briefly dropping below –$600/MWh.
The speed and scale of that movement captured the essence of a grid in transition: one where supply and demand are increasingly shaped by weather, renewable output, and tightening firm capacity margins.
From a system perspective, this was actually a typical stress test. And that’s precisely why it matters.
What Drove the Price Spike?
Four converging factors explain the event, each of which is becoming more common.
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1 – The Solar Ramp
Strong daytime solar output suppressed prices earlier in the day, but as the sun set, supply dropped rapidly while demand remained elevated. This “duck curve” dynamic continues to steepen as rooftop PV penetration grows.
2 – Tighter Firm Capacity
Several dispatchable generators were unavailable or operating conservatively, leaving the system with less buffer as demand climbed.
3 – Low Wind Contribution
Wind generation across the region was modest during the peak window, removing a key source of low-cost supply that would typically soften the price response.
4 – Network Constraints
Limits on interconnector flows reduced the ability to import cheaper electricity, forcing higher-cost local generation to set the marginal price.
None of these conditions were extraordinary. Together, they formed a perfect illustration of how modern electricity markets behave under pressure.
Why Events Like This Are Becoming More Frequent
The October spike reflects a broader structural shift in the NEM:
- Renewable penetration continues to rise
- Coal plant availability is becoming less predictable
- Supply is increasingly weather-dependent
- Demand peaks remain stubbornly high
The result is a market with widening spreads between low-price and high-price periods.
For storage assets, that spread is everything. Batteries don’t rely on high prices alone; they rely on the difference between when energy is abundant and when it’s scarce.
And those differences are becoming more pronounced.
Translating the Event Into Real-World Economics
To put the volatility into practical terms, consider a modest front-of-the-meter battery:
- Capacity: 1 MW
- Energy storage: 2 MWh
- Round-trip efficiency: 95%
- Charging price: –$40/MWh
- Discharge price during event: ~$20,000/MWh
This isn’t a large utility-scale asset; it’s closer to the scale being considered by many commercial and distributed projects.
Event Dispatch Economics
If the battery charged during negative pricing earlier in the day and discharged into the evening spike:
Energy discharged: 2 MWh
Gross revenue:
2 MWh × $20,000 = $40,000
To supply that energy, the battery would need to charge approximately 2.10 MWh.
At –$40/MWh, the battery is effectively paid to absorb excess energy:
Charging revenue: ≈ $84
👉 Net margin from the event:
≈ $40,084
One volatility window does not justify an investment on its own.
But it demonstrates how value is created in a system where flexibility is scarce at critical moments.
Why Extreme Events Matter, Even If They’re Rare
Battery investment cases are rarely built on repeated price-cap events. Instead, they rely on a combination of:
- Frequent moderate spreads
- Occasional high-price intervals
- Additional service revenues
However, a small number of extreme events can contribute disproportionately to annual returns. They provide a financial “tailwind” that can materially improve project economics.
As renewable penetration increases, the market is likely to see:
- More negative pricing during periods of surplus generation
- More scarcity pricing during tight supply windows
That combination strengthens the long-term revenue outlook for storage.
The Bigger Signal From October
The real takeaway from the October event isn’t the $20,000 price.
It’s that the drivers behind it were entirely predictable.
Demand rose. Solar faded. Wind was subdued. Capacity was tight.
Prices responded accordingly.
Predictable volatility is investable volatility.
And that predictability is what gives investors confidence that storage revenues aren’t purely speculative; they’re grounded in observable market behaviour.
Why the Timing Question Has Shifted
For years, the key question around batteries was technological:
Will they work reliably, and will costs fall enough?
Today, that question has largely been answered. Attention has shifted to timing: when the economics justify action.
Several trends suggest the window is opening:
Economics Improving From Both Sides
Capital costs have declined while revenue opportunities from volatility and services have increased.
Flexibility Is Being Explicitly Valued
Markets are evolving to reward fast-response capacity, improving revenue visibility.
Better Data, Better Forecasting
A decade of operational experience now allows far more robust modelling of spreads and utilisation.
Together, these factors reduce uncertainty, historically one of the biggest barriers to investment.
Conclusion: From Curiosity to Commercial Reality
The October price event wasn’t a once-in-a-generation anomaly. It was a snapshot of a grid adapting to a new generation mix, one where flexibility is increasingly valuable.
For commercial energy users and investors, the implication is clear. Batteries are no longer just a hedge against volatility; they are a means of monetising it.
The question is shifting from whether storage will play a role to when organisations should seriously evaluate the opportunity.
With spreads widening, revenue streams diversifying, and technology costs continuing to ease, the alignment between market conditions and project economics is stronger than it has been before.
Which makes now not just an interesting time to talk about batteries, but a logical time to review them.
Be sure to register for our upcoming webinar going into all the details about commercial battery systems and how your business can benefit.
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