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Recent events within the Australian National Electricity Market have demonstrated that the system of an energy-only market (a market that only compensates power that has been produced) is no longer fit for purpose. The rate of change in installed capacity and generation requires better planning to ensure reliability is maintained at the lowest total system cost during the transition to net zero. Australian National Electricity Market participants will need sufficient incentives and confidence to invest in new capacity. This paper assesses a "no constraints" scenario and recommends a range of policy and market mechanisms that could be utilized to achieve a net zero National Electricity Market in Australia by 2050. This paper adopts the perspective of total system cost, which allows multiple factors relating to decision-making to be incorporated. In the absence of a carbon price, this paper seeks to put forward technology-based policy and market mechanisms to incentivise the changes required. The "Modelling Energy and Grid Services" model used in this study has shown that this "no constraints" future grid will need to contain approximately 100 GW of variable renewable energy, almost 20 GW of firm, low-emissions generation, such as carbon capture, utilisation and storage, bioenergy with carbon capture and storage, hydroelectric power, or nuclear power. It will also require more than 10 GW of storage, including pumped hydro energy storage and other energy storage technologies, and over 30 GW of firm, dispatchable peaking plants, including thermal power generation. [ABSTRACT FROM AUTHOR]

Conventional fossil-fuel-based power systems are undergoing rapid transformation via the replacement of coal-fired generation with wind and solar farms. The stochastic and intermittent nature of such renewable sources demands alternative dispatchable technology capable of meeting system stability and reliability needs. Battery energy storage can play a crucial role in enabling the high uptake of wind and solar generation. However, battery life is very sensitive to the way battery energy storage systems (BESS) are operated. In this paper, we propose a framework to analyse battery operation in the Australian National Electricity Market (NEM) electricity spot and contingency reserve markets. We investigate battery operation in different states of Australia under various operating strategies. By considering battery degradation costs within the operating strategy, BESS can generate revenue from the energy market without significantly compromising battery life. Participating in contingency markets, batteries can substantially increase their revenue with almost no impact on battery health. Finally, when battery systems are introduced into highly volatile markets (such as South Australia) more aggressive cycling of batteries leads to accelerated battery aging, which may be justified by increased revenue. The findings also suggest that with falling replacement costs, the operation of battery energy systems can be adjusted, increasing immediate revenues and moving the battery end-of-life conditions closer. [ABSTRACT FROM AUTHOR]