Batteries Are Taking the Gas Peaker’s Best Hours
Gas peakers have always had one decisive economic advantage: they were relatively cheap to build. A peaking plant could sit idle for most of the year, then start when demand and electricity prices surged. Its fuel was expensive and its efficiency often mediocre, but low upfront costs made that acceptable. The owner did not need thousands of operating hours to recover an enormous initial…
Gas peaker plants have long held an economic edge due to their low upfront costs, even if their fuel efficiency was mediocre. However, Australia has recently reached a significant point where batteries are now cheaper than gas for meeting routine peak demand. This shift has occurred as four-hour battery systems have fallen below open-cycle gas turbines in terms of capital cost, while their operational characteristics are better suited to the increasingly common short, sharp evening peaks caused by abundant daytime solar.
Batteries are taking over the flexibility market segment that gas peakers were traditionally paid to provide. While gas peakers were relatively cheap to build and could sit idle most of the year, batteries offer superior flexibility. They can respond to electricity price fluctuations, support frequency, stabilize voltage, absorb surplus solar power, and relieve network congestion. Gas turbines, on the other hand, are more sluggish and can only inject power during an evening peak but cannot consume excess electricity.
The cost curves for batteries and gas turbines have crossed, but the implications go beyond a simple comparison. Gas peaker plants were able to offset their ongoing fuel costs with their low construction expenses. In contrast, batteries have no conventional fuel costs and instead rely on buying electricity when prices are low and selling it when prices are high. This allows batteries to earn revenue through multiple markets in a single day, making them more attractive investments.
Australia's investment pipeline shows the rapid response to the changing market dynamics. Grid-scale batteries now account for roughly half of all proposed new capacity, with a 79% increase in one year alone. Additionally, around 18.2 GW of battery projects are designed with grid-forming capabilities, meaning they can provide some of the system-strength services traditionally associated with spinning thermal machines.
While gas peakers will likely remain necessary during prolonged renewable droughts or extreme weather events, their role in the energy market is expected to diminish as batteries take over more responsibilities. Gas peakers generate electricity when called upon, but batteries can also help move existing grid electricity around. As battery storage capacity grows, the energy market may no longer compensate gas plants for their capacity, as the flexibility provided by batteries becomes increasingly valuable.
Written by urgent.news from OilPrice's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
