Impact of Merchant Battery Energy Storage on Electricity Prices: The Case of Australia

Daniel Davi-Arderius, Rabindra Nepal and Tooraj Jamasb

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Whether merchant arbitrage acts as a counter force to the "merit order effect" of solar and wind is important, but little is explored in the Australian National Electricity Market (NEM). This study fills this gap by studying the impact of charging and discharging stand-alone Battery Energy Storage Systems (BESS) on spot electricity prices considering their rapid recent growth in the wholesale electricity market. Australia is a global leader in BESS, and this study context is also relevant to other countries decarbonizing their energy mix. We use 5-minute wholesale price data between 2024 and 2025 and apply Quantile Regressions with instrumental variables. We find that stand-alone BESS has impact on spot-prices, but the effect is asymmetric: charging BESS increases the spot price, while discharging them decreases the spot price and thus driving self-cannibalisation. The net impact of charging and discharging on the electricity prices on consumer prices can be negative, especially under large scale penetration of BESS. The findings also offer some policy recommendations.

Keywords: electricity; storage; batteries; BESS; Australia; arbitrage (search for similar items in EconPapers)
JEL-codes: L50 L94 Q28 (search for similar items in EconPapers)
Pages: 69 pages
Date: 2026-09
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2026-81

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