Battery developers and operators in Australia have seen their earnings plummet due to unusually low wholesale power price volatility, which they rely on to make money.

This is now influencing developers’ ability to secure long-term power purchase agreements (PPAs) that are sufficient to cover the cost of construction and allow for a revenue stream to pay financiers.

“The offtake market is a bit of a bloodbath,” Thomas Schmitz, Aquila Clean Energy APAC’s general manager, Energy Markets told the Battery Asset Management Summit in Sydney on Tuesday.

“I can’t get a PPA for solar, battery or wind farms because volatility in the spot market and the paper market is too low.”

He also pointed out new batteries have lifetimes of up to 25 years. He said even if he could get a PPA, it would likely only be for a maximum of up to seven years.

Batteries have several potential sources of revenue, including so called Frequency Control and Ancillary Services. This involves being paid to provide power that maintains the stability of the grid.

But so far the primary source of revenue is simply arbitrage – charging when power is cheap and selling when it is expensive, typically at peak demand times in the morning and evening or during acute power shortages.

Various factors have led to this situation, some short term and some longer term.

One is state governments’ decision to extend the life of aging coal-fired power plants. And unlike in previous years, most have not broken down in 2026. So while demand is rising, it isn’t rising fast enough to offset the old power supply sources still in the market.

The addition of more power storage – both utility scale and behind the meter solar and batteries in households and increasingly C&I scale – is also naturally reducing the floods of solar that has depressed market prices in previous years.

Finally, winter in Australia (from June to August) this year has been one of the warmest on record, reducing heating demand and the peak demand periods that lead to high prices when batteries make most of their money.

Panelists and audience members at the conference complained that the federal Capacity Investment Scheme that was devised to support renewable energy projects, including batteries, with a revenue floor had largely failed.

A new regime is due to be implemented late next year known as the Electricity Services Entry Mechanism (ESEM).

This would embed in the National Electricity Market a government-backed offtake clearing house, with auctions for bulk energy supply and firming capacity.

Offtakes would be signed for between eight and 15 years.

Schmitz, however, argued even if ESEMs were in place now they wouldn’t help battery developers. That is because the regime assumes projects can get short term power purchase agreements (PPAs) and focuses on supplying offtakes in at the 8–15-year life of a project.

But at the moment they can’t get short term ones either, he said.

Sally Torgoman, CEO of battery developer, Ascera Energy, said the hugely popular federal government home battery subsidy scheme and the recent extension of small-scale solar subsidies (SRES) to larger C&I rooftop projects will be a big, long-term competitor for utility scale developers.

“I have to admit that the data that I have seen since that number of distributed batteries got installed is quite frightening for the utility business case,” she said.

“The challenge now is whether the changes to the SRES and whether that continues to then start shifting some of those trends in the residential market to the commercial C&I market, I think that’s the one I’m watching very closely so far.”

She argued that, unlike utility-scale projects, the rooftop solar and battery owners will not provide services that help maintain the stability and reliability of the grid.

At its annual earnings briefing earlier this month, AGL Energy CEO, Damien Nicks, defended the long-term value and forecast returns of its battery portfolio in the face of the low volatility.

He maintained the current calm in wholesale electricity markets was temporary, compared to the decades-long life of the assets. One certainty, he said, was that coal plants will need to close and even if their life is extended, they will start to break down more often, inevitably leading to power price spikes.