Battery Storage Investments at Stake as Australia’s AEMC Consults on Minimum System Load Market Rules

Australia’s energy market regulator has initiated a consultation process on two different proposals regarding how to address the issue of excess solar energy production in the National Electricity Market (NEM), which will directly impact the future of battery storage investments.

The Australian Energy Market Commission (AEMC) has released a consultation paper, seeking comments on the proposals submitted by the AEMC Reliability Panel and the Clean Energy Council (CEC), which aim to resolve the minimum system load (MSL) issue. MSL refers to situations where rooftop solar panels render underlying consumption demand ineffective and network demand falls below the safe operating level.

Network operators require a minimum demand level to keep synchronous generators running and to maintain system power and voltage. Rooftop solar panels can sharply reduce network demand, especially on mild and sunny days, such as spring weekends and public holidays, as they do not respond to wholesale electricity prices.

The AEMC currently manages these situations through market notifications, directions to battery storage operators, and last-resort emergency stop mechanisms. However, according to the Australian Energy Market Operator’s (AEMO) 2025 System Security Transition Plan, South Australia may face up to 135 days of conditions above the most critical MSL threshold (MSL3) by 2031 if transition measures are delayed.

Both proposals offer different solutions. The Reliability Panel suggests that the wholesale energy spot price in the NEM should automatically fall to -AU$1,000/MWh (-US$693/MWh) when an MSL3 event is declared by the AEMO, which could reduce the need for AEMO intervention by encouraging generators to withdraw and increasing consumption by flexible loads and storage.

On the other hand, the CEC proposes a new paid market ancillary service that would allow flexible loads and storage systems to bid for load reserves through a separate market. This would provide the AEMO with a pre-contracted demand response mechanism against forecasted MSL periods.

For battery storage operators, the outcome is of significance beyond operational challenges. The AEMO directed the 250 MW Torrens Island BESS in South Australia multiple times in late 2025 and early 2026 to remain synchronized and follow dispatch targets for MSL management, which prevented the facility from operating economically and charging at the cheapest times. The events in November 2025 alone resulted in the loss of thousands of dollars in arbitrage revenue, and the compensation framework, designed for traditional generators, was not compatible with the different operating economics of storage assets.

The CEC describes this situation as a direct investment risk. Under the current arrangement, reliance on AEMO directions and short-term transition contracts weakens the business case for new battery storage investments. The CEC argues that a transparent and predictable market would lower the cost of capital for storage investments and attract a broader pool of providers.

The AEMC has also identified various complementary or alternative mechanisms for providing load reserves, including extending transition contracts, adapting the existing wholesale demand response mechanism for two-way load increase response, and restructuring the existing frequency control ancillary service markets.

The MSL consultation is part of an ongoing intensive reform program in the NEM. Australia’s NEM wholesale market review recommended better support for energy storage.

Source: Energy Storage News