In 2022, we sat down with Marija Petkovic, founder and Managing Director of Energy Synapse, to discuss the challenges and opportunities of incorporating Battery Energy Storage Systems (BESS) in renewable energy projects (Read Part I and Part II). In this new three-part New Energy Expert Insights series, we reconnect with Marija to explore how revenue streams for BESS have evolved over the last three years, the current state of the market and the role of emerging energy storage technologies in the energy transition.
Marija is one of the nation’s leading energy analysts and her advice is often sought by government and major public and private actors in the energy sector. Energy Synapse is an Australian firm specialising in market analytics and market/revenue modelling for renewable and storage projects.
In Part I, we will examine how the revenue streams for BESS projects have changed significantly since 2022. New and previously non-monetised services are emerging as crucial revenue drivers.
What is the current state of the BESS market in Australia?
The BESS market in the National Energy Market (NEM) has expanded rapidly between 2022 and 2025, with registered capacity growing from ~790 MW to over three GW1. This expansion has been driven by declining technology costs, increasing renewable penetration and a growing need for fast, flexible, and decentralised grid support solutions.
What key changes have shaped BESS revenue contracting in the NEM since 2022?
Over the past three years, the NEM’s evolving approach to system services has reshaped BESS revenue structures. The Australian Energy Market Operator’s (AEMO) shift toward flexible procurement and transitional strength measures has enabled shorter, modular contracts with more cost-reflective pricing. Decentralised procurement and faster grid connections are also allowing earlier revenue generation. These changes have improved bankability, with investors responding to clearer stacking opportunities and reduced reliance on single-service contracts. These are summarised in the table below.
| Category | Previous State (2022) | Current State (2025) |
| Network contracting and service allocation |
|
|
| Contract duration and flexibility | Long-term agreements with broad, inflexible commitments. | Shorter, modular contract windows (e.g. seasonal or quarterly) with a greater need for operational flexibility from BESS owners. |
| Revenue stacking compatibility |
|
|
| Settlement and payment structure | Fixed pricing or flat capacity payments, not reflective of service quality or response speed. | Shift toward dynamic or performance-based payments tied to speed, accuracy, or availability of response (e.g. for fast frequency response or fast ramping). |
| Market-readiness and timing | Revenue often delayed until project completion or long-term agreement secured. | Earlier monetisation through staged commissioning, trials, or transitional service markets (e.g. interim system strength measures). |
Table 1: Evolution of revenue-linked contracting models for BESS (2022 – 2025)
What new monetisable services for BESS are in the NEM?
As the NEM continues its transition to high renewables penetration, BESS has been recognised as a more versatile grid asset. This has led to the emergence of new monetisable services and a more sophisticated approach to valuing storage. New and existing services are summarised in the table below.
| Market / Service | Description |
| Wholesale Energy Arbitrage | Charging when electricity prices are low (or even negative) and discharging during high-price periods. Revenue depends on market volatility and price spreads. |
| Frequency Control Ancillary Services (FCAS) | Providing fast response to frequency deviations. Includes regulation and contingency services (including new 1-second markets introduced in October 2023). Once dominant but now facing price compression due to competition. |
| System Strength / Inertia Services | Providing virtual inertia and system strength using advanced grid-forming inverters. Typically accessed under bespoke contracts with the NSP (or AEMO in Victoria) |
| System Integrity Protection Scheme (SIPS) | Acting as “virtual transmission” to support grid reliability during rare, high-impact events. Typically contracted by state governments or market operators to reserve capacity and ensure system integrity. |
Table 2: Recognised revenue streams and monetisable services for BESS in the NEM in 2025
How have operational BESS projects approached revenue stacking to date?
A good example is the Victorian Big Battery, which is a 300 MW/450 MWh BESS that was built in late 2021. The table below shows approximate revenue breakdown for 2024 based on Energy Synapse’s analysis using the Energy Synapse Platform.
| Revenue stream | Registered capacity (MW) | Estimated share of total revenue in 2024 | Details |
| Wholesale energy arbitrage | 300 | 57% | Arbitrage revenues tend to be heavily tilted to winter months. SIPS obligation to keep 250 MW available from Nov-Mar, prevents VBB from fully participating in competitive markets during this time. |
| Contingency FCAS | 171 (in each of the 8 contingency markets) | 9% | Although registered capacity is high, FCAS enabled volumes are much smaller (typically only 23 MW for contingency and 36 MW for regulation) due to small size of FCAS markets. |
| Regulation FCAS | 550 (in lower and raise regulation) | 3% | |
| SIPS | 250 | 31% | Contracted with AEMO to deliver up to 250 MW (for at-least 30 minutes) from 1 November to 31 March each year. Payment of $12.5 million per year (escalated by CPI) for a 10-year period. |
Table 3: Estimated revenue stack breakdown of the Victorian Big Battery
Note that in addition to the above, the Victorian Big Battery has also received $5.72 million of grant funding from ARENA to retrofit the BESS to use grid-forming inverters and demonstrate advanced services such as system strength and virtual inertia.2
How have Network Services and Support Agreements changed over the last three years?
NSP agreements were previously tailored such that the majority of BESS capacity was contracted. Today, these agreements have become much more bespoke and tailored to the specific needs of the NSP. BESS owners are now contracting smaller portions of their BESS capacity for specific months or even shorter operational windows, often with precise availability requirements. For example, a portion of BESS capacity may be reserved for specific daytime periods to firm during peak demand with reduced overnight obligations.3
These arrangements are more cost-efficient for NSPs. While this creates new revenue opportunities for BESS owners, the increased segmentation introduces significant complexity in contract structuring. BESS owners may now be managing multiple overlapping agreements with varying performance obligations, durations, and pricing mechanisms, requiring careful coordination and detailed legal scrutiny. This intricate framework can increase administrative burden and introduce uncertainty around investment and financing, particularly where contract terms are short, and revenue stacking must be actively managed in real time.
In Part II, we will gain Marija’s insights into the current state and trends of Australia’s energy market. As revenue streams diversify and become increasingly complex, understanding the broader market forces behind these shifts is essential.
1Marija Petkovic, ‘Overcoming barriers to battery investment’, Energy Synapse (online, 10 April 2025) https://energysynapse.com.au/overcoming-barriers-to-battery-investment/.
2Australian Renewable Energy Agency, ‘Neoen Victorian Big Battery (Moorabool) Retrofit’ (online, 6 March 2024) <https://arena.gov.au/projects/neoen-victorian-big-battery-moorabool/>.
3EnergyCo, ‘Waratah Super Battery’ (online, 2025) <https://www.energyco.nsw.gov.au/projects/waratah-super-battery>.
