Article: Medium-duration batteries are entering their breakout moment

By Hugo Britt

Medium-duration storage sits at the intersection of reliability, decarbonisation, and system economics. The technology has long been regarded as one of the grid’s missing links, but investment signals suggest this is about to change. 

Quest Events spoke with Rakhesh Martyn, Founder and CEO at Hachiko, and Alex Wonhas, CEO at AMPYR, for their insights into the current market status of medium-duration batteries, the business case for deployment, the barriers that exist, and what the future may bring. 

How would you describe the current state of the medium-duration battery market?

“I would say it’s starting to emerge,” says Wonhas. “Up until the Capacity Investment Scheme, we’ve seen predominantly short-duration batteries coming to market; one-to-two-hour systems that are relatively viable and easy to finance in the current market. AMPYR, for example, has recently achieved financial close on a project called Bulabul 1, a short-duration battery with 300 MW capacity and 600 MWh of energy.” 

Wonhas points to a run of tenders looking for longer-duration storage systems, i.e. 4 hours plus, designed to provide revenue certainty for private investment in new renewable energy generation, firming and long-duration storage (LDS):

• LDS LTESA (Long Duration Storage Long Term Energy Service Agreement) (NSW) 
• Capacity Investment Scheme (Federal)
• FERM (Firm Energy Reliability Mechanism) (SA)

“The investment signal for medium duration storage from the energy market alone is insufficient,” he continues, “This means it’s still difficult to get a medium storage duration project up. But the right incentive schemes for a capacity mechanism are starting to bring in the type of projects we need.”

“Overbuild the cheap stuff that works”

Martyn believes it is highly unlikely that you will see new battery chemistries utilised for projects under these tenders. “Lithium-ion currently dominates by a country mile,” he says. “Two eight-hour projects have been announced (under LTESA) in northern NSW – both lithium-ion. Generally speaking, LI has come a very long way since the Tesla big battery in 2017, putting it in a position to deliver these long-duration projects. They’re not yet funded or built, but they are promised.”

What about other battery chemistries, like sodium-ion? “They’re supposedly good for longer-duration batteries, but not in a position to be viable,” Martyn says. “Having run procurement on battery projects myself, I know that if lithium-ion does it, you buy it, because it’s plentiful. The industry (and public) have become comfortable with it for the most part. I would say you overbuild LI at a site and stack those batteries together to deliver a longer duration outcome. Theoretically, you could have six, four-hour batteries and deliver 24 hours of storage, with a line of sight to around US$100 per kilowatt hour. That’s a third of what it cost three or four years ago. With battery costs coming down 80% in the last decade, the pragmatic outcome is to overbuild the cheap stuff that works.” 

How can we effectively accelerate deployment? 

“The best thing we can do about it (and this is happening),” says Wonhas, “is to create a mechanism that induces longer-duration capacity in the market. The issue is that the longer the storage duration, the less revenue you receive on average per MWh dispatched. Prices are super high when supply is tight but supply constraints are typically short lived, so the longer the duration, the less revenue made per MWh. Capacity mechanisms address this shortfall and provide the necessary top-up. Investors will ultimately follow the investment signals being provided.”

Martyn says that in terms of policy, industry and investors prefer things to be consistent rather than being coherent. “Unnecessary changes in policy can have consequences because whole businesses are set up around policy as it stands,” he says. “It would be awesome if the government got out of the way. Australia has world-leading uptake of rooftop solar and north of $5 billion of private sector money is directed to distributed storage at the moment. That money is available for industry to use, so let’s just get on with it.”

What barriers are currently hindering the deployment of medium-duration batteries? 

Martyn highlights the regulatory thresholds that tend to cap the rate of power of every project that people build. “Building too big takes you into the next threshold for compliance, adding complexity. But you can design a plant in such a way that the amount of power discharged into the grid is limited by the inverter, and the storage capacity can be managed with modules,” he says. 

Martyn also mentions grid operator conservatism. “When you’re connecting a new type of tech, the grid operator needs to get comfortable with that technology, which is why the market tends to stick with what people already know. I’m not anti-innovation, but the pragmatic approach is to deliver grid-connected systems that the gatekeepers already understand, or at least keep changes to a minimum.”  

Is Australia over-fixated on rebuilding the grid to handle renewables? Martyn believes so. 

“The Marinus Link was forecast to cost $3.3 billion in mid-2024 and was budgeted at $5 billion 12 months later. Who will take bets on whether it stays at $5 billion? Consumers will foot the bill either way. If you had taken that money and spent it on point-of-use power with existing grid infrastructure, consumers would be better off.” This could include allocating money to structural reinforcement of rooftops to take advantage of Australia’s 180 GW rooftop solar potential. “All of this would ultimately benefit medium duration storage,” Martyn adds.

Wonhas believes the main barrier is how you make the business case stack up. “Mechanisms help. There are no real technical barriers, but there certainly are some regulatory barriers that could make it easier for projects to get up; particularly environmental and planning approvals – these are easier but not trivial for battery systems, but difficult for other systems like pumped hydro.” 

“Batteries are the least community-impacting projects, but developers still need to work hard and thoughtfully with communities to maintain their social license. This is even more important for larger projects like pumped hydro where there’s a bigger footprint and environmental impact,” he adds. 

What can we expect to see in this space in the near future? 

The Nelson review is tasked with looking at a longer-term mechanism that will eventually take over to drive a consistent investment signal to the market. Wonhas says that at a high level, the review’s initial recommendations are absolutely heading in the right direction … “but the devil will be in the details of getting the implementation plan right”. 

Wonhas also points to the recently announced 2035 emissions reduction target. “It was a useful and welcome clarification of where the country is heading,” he says. “The target reaffirms the pathway we’re on; a very rapid transition of the energy system, to be followed by other sectors.”

Another potential signal for investors, according to Wonhas, would be a mechanism that requires time-matched renewable supply. “The issue with Renewable Energy Certificates (REC) is that they are not time-matched. A data centre, for example, may be running on renewables in the middle of the day, but using coal at night. However, they could claim they are using 100% renewable power because they have RECs. The Renewable Electricity Guarantee of Origin (REGO) scheme to be introduced later this year will provide a mechanism to ensure a MWh consumed actually comes from renewables. A requirement to have a given percentage of supply come from time matched renewables would significantly boost the need for medium-duration storage and be a gamechanger for the market.” 

Continue the conversation

“I think policymakers, all the market and government bodies, would do really well to listen to what investors have to say,” says Martyn. “Capital markets have shifted their focus towards batteries after a few bad years with solar and wind, so let’s listen to them and facilitate deployments.”

Future Grid Summit 2025 is shaping up to be the event where conversations around batteries get real. Join Rakhesh Martyn, Alex Wonhas, and many more of Australia’s energy leaders to be part of the strategic and commercial breakthrough on medium-duration storage.