Investments in battery storage within Australia’s National Electricity Market (NEM) are increasingly profitable due to higher power price volatility and changing market dynamics, according to the latest report by Wood Mackenzie. Going forward, four-hour storage systems are projected to have fastest return on investment.

Australia’s massive pipeline of battery energy storage projects is looking at improved profitability after years of uncertainty, with four-hour battery energy storage systems in some part of the NEM boasting a projected internal rate of return of up to 15%.

These are the findings of Wood Mackenzie’s latest report, which focuses on modelling the profitability of new battery investments in the NEM based on revenues from energy and frequency control and ancillary services (FCAS) markets.

The report shows a growing market for batteries in the NEM, with a massive pipeline of 60 GW of projects under development representing over AUD 80 billion ($50 billion) of potential investment.