Australian Energy & Environmental Market Update - February 2025

Features

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Feature 1

NSW invests $1b in energy storage

The Energy Security Corporation created by the NSW Government in 2024, was given $1b in seed funding and a mandate to co-invest with the private sector in storage and renewable projects..

• In mid-February, the NSW Government announced the Energy Security Corporation’s first Investment Mandate and seed funding of $1b to co-invest with the private sector on clean energy technologies that are based in New South Wales.¹
• The initiative is aimed to tackle the urgent need for new transmission infrastructure and long-duration storage to ensure grid stability, as per AEMO’s 2024 Electricity Statement of Opportunities (ESOO) report.
• The Energy Security Corporation’s investments will be designed to spur private investment in clean energy projects and infrastructure upgrades, delivering affordable, clean, and reliable energy to homes and businesses across NSW.

What is covered in the investment mandate?

• The Energy Security Corporation plans to invest in energy storage projects such as: large-scale batteries, community batteries, pumped hydro, and virtual power plants.
• The Investment mandate specifically excludes investment in carbon capture and storage technologies, nuclear technology, nuclear power, and other technologies prescribed by the regulations.²

How will this affect the energy market?

• NSW currently generates 53% of its total energy capacity from renewable energy sources.³
• After a decade of privatisation of the electricity sector in NSW, the Energy Security Corporation is expected to fill in the funding gap and thus is expected to accelerate NSW’s renewable transition. Therefore, for energy producers to utilise this investment, there will likely be an accelerated shift to clean energy generation across NSW.
• Increased investment in power transmission and long-duration storage is expected to lower energy prices and ensure a stable, reliable clean energy supply for NSW residents.

¹pv magazine, NSW invests $1 billion to boost energy storage and infrastructure upgrades

²NSW Government, Key investment priorities for the Energy Security Corporation

³NSW Climate and Energy Action, Renewable energy in NSW

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Feature 2

ARENA re-opens Community Battery Fund

In late February, the Australian Renewable Energy Agency (ARENA) announced $46.3m in funding for Round 2 of the Community Batteries Funding Program.

• Building on the success of round 1, ARENA has put out a call for applications for a share of $46.3m in grants to increase the security and reliability of the energy grid.
• The grant aims to expand the deployment of community batteries across Australia and enhance solar energy storage capabilities. This will enable higher penetrations of rooftop solar, reduce energy bills, and ease pressure on local electricity grids.
• To be eligible, the community battery must be between 50 kW and 5 MW in size and connected to the distribution network. Applications can be submitted from 17 March 2025 to 30 April 2025. Grants between $5m and $20m will be available, however the grant funding will not exceed 50% of the battery capex.

What are the eligibility criteria?

• The project must involve the deployment of community batteries, which are chemical batteries that are ready for full commercial deployment, ranging from 50 kW to 5 MW in nameplate capacity, connected to the distribution network. Batteries that are co-located or share a connection point will be considered a single community battery, with a total size equal to the combined nameplate capacities.
• Proposals must include the deployment of at least ten community batteries.
• Proposals may be co-located with other generators or loads; however, the grant funding can only be used for the community battery component.

¹ARENA, Community Battery Market Snapshot

²Projects that encompass multiple states or territories, rather than being confined to a single location.

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Feature 3

Australia announces the Green Iron Fund

The Australian Government announced a $1b investment fund to boost green iron manufacturing and supply chains.

The fund

• The $1b Green Iron Fund aims to support early green iron projects and unlock private investment, with up to $500 million allocated for the Whyalla steelworks transformation.
• South Australia is seen as a part of Australia’s roadmap to green iron and potentially green steel as it has access to a deep water port, plentiful reserves of high-grade magnetite ore, a steel plant and a high proportion of renewable energy generation in its power grid.
• The fund seeks to enhance Australia’s iron ore industry, secure future demand for lower-emissions iron and steel, and support global emissions reduction.
• The fund is available for both existing facilities and new projects in the iron and steel sectors.

Industry lead green and low carbon iron initiatives

• Fortescue plans to produce 1,500 tonnes of green iron using hydrogen at its Christmas Creek operations by the end of this year.
• BHP, Rio Tinto, and BlueScope Steel will jointly develop a pilot plant to produce low-carbon iron from Pilbara ores in December.
• Companies such as Calix, Australia’s Element Zero, and Israel-based Helios Project are involved in early-stage green iron technology.

Overall Impact

• The fund is expected to enable significant economic growth, by accelerating industry initiatives and helping to secure future demand for Australia’s iron ore as the market moves towards lower-emissions iron and steel.

What this month’s developments mean for market participants

Energy market

Despite lower average monthly demand across the NEM, electricity prices and volatility increased in February (as compared to January) in most states except QLD.

Even with the lower average demand, 3 Lack of Reserve (LOR) notices were issued for VIC and SA, indicating tightening of supply-demand at discreet intervals during the month.

To appropriately hedge against market price risks and volatility, strategic planning remains key for both demand and supply side market participants – especially as we head into autumn.  

The CORE Markets team works with renewable energy developers and corporate buyers to manage market risks.  Get in touch to explore how we can support your energy market approach.

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Carbon market

The Australian carbon market continued to see healthy traded volumes in February. While lower than those in January, these volumes were ~1M higher compared to February 2024. ACCU prices continued to be subdued as market participants evaluate options in an actively evolving policy and regulatory space.

The notable first trades of Safeguard Mechanism Credits – as facilitated by CORE Markets – are an exciting step in the evolution of the Australian carbon market. Ongoing SMC activity, including issuances and trades, will be closely monitored by market participants.

The CORE Markets team works with demand and supply side market participants to help navigate complexities of the carbon market. Get in touch to see how we can help with your strategic and transactional needs.

Do you need help navigating renewable energy and carbon markets?

The events outlined in this month's update highlight the evolving nature of carbon, environmental and energy markets and the complexity of the net zero transition.

To discuss your unique requirements, get in touch with our team today to see how we can help.