Neon’s 150 MW / 194 MWh Hornsdale Power Reserve, SA

Five ARENA-funded large-scale battery storage system (BESS) projects, equipped with grid-forming (GFM) inverters, are now connected to the National Energy Market (NEM), with three more expected online within the next year. These aren’t just storage units soaking up excess solar and wind, they are active players stabilising the grid and rewriting the rules of how modern power systems operate. For an industry that has long debated the role of batteries in providing “system strength,” this milestone is significant. It marks the moment batteries stopped being a supporting act and became central to keeping the lights on.

Two reports, one learning journey

To capture lessons from this journey, ARENA commissioned Ekistica to produce a two-part report series. The first report, Lessons Learnt and Future Directions from ARENA’s Grid-Forming Battery Portfolio (June 2025), examined four pioneering projects: Hornsdale Power Reserve Expansion, Wallgrove Grid Battery, Broken Hill BESS, and Darlington Point BESS. These early demonstrations proved that grid-forming inverters could deliver synthetic inertia (crucial for frequency stability), provide system strength to weak parts of the grid, and operate alongside renewable generation without destabilising the system. They also surfaced the tough realities: negotiating Generator Performance Standards under rules designed without consideration for grid forming technology, overcoming opaque OEM models, and finding commercial value in services not yet recognised by markets.

The second report, Early Findings from ARENA’s Second Round of Grid-Forming Battery Projects: Update Report (October 2025) (update report) builds on these learnings, showing how industry has begun to standardise approaches, regulators have adjusted rules, and developers now treat GFM as a default capability rather than a speculative add-on.

Why this moment matters

Australia’s grid has traditionally relied on conventional synchronous generators, like coal and gas fired power stations, to provide system strength: the stable voltage waveforms and inertia needed to keep the lights on. As these facilities retire, the grid becomes more vulnerable to disruption.

Historically, options for replacing system strength have been limited. Synchronous condensers are a well-understood technology, but are costly, inflexible and slow to deploy. Grid-following batteries are cheaper and more flexible, but incapable of providing the same stabilising services.

Grid-forming inverters change the game, enabling batteries to maintain a stable and secure frequency and voltage, making them a cornerstone of a renewable-dominated power system.

With nine ARENA-backed grid-forming battery projects committed to deploying this technology at scale, Australia is sending a clear signal to the global market that GFM batteries have moved from experimental to investable.

Case Study: Western Downs Battery

One of the clearest examples of this transition is Neoen’s Western Downs Battery in Queensland. Originally commissioned as a grid-following asset, the project was upgraded to grid-forming mode in March 2025 with $21 million in ARENA funding. By September 2025, its capacity doubled to 540 MW / 1,080 MWh, making it the largest operating grid-forming battery in the Southern Hemisphere.

The project demonstrated that firmware upgrades and careful tuning could unlock grid-forming capability, while showing regulators and developers that this technology can be deployed at unprecedented scale. Western Downs stands as a powerful example of how ARENA’s vision translates from policy and funding support, into real-world system strength.

The impact of this project extends well beyond Australia. Global inverter manufacturers are watching closely, adapting their products to meet the demanding requirements of the NEM. Australia’s unique grid challenges such as long distances, weak connections, and high renewable penetration, make it a great case-study for the rest of the world. Lessons learned at Western Downs are already informing international standards and influencing the design of next-generation inverters. In doing so, Australia is not only decarbonising its own grid but also shaping how advanced power systems everywhere will integrate renewables.

And the benefits flow back home. By pushing the global supply chain to evolve faster, Australian developers now have access to more mature and competitive inverter technologies that might not otherwise exist. Growing international interest also attracts greater private investment into local projects, giving Australian developers a first-mover advantage and reinforcing the country’s position as a global leader in grid-forming technology.

How we got here

This moment has been a long time coming. For much of the past decade, developers avoided grid-forming technology. The reasons were clear:

• Regulatory uncertainty: Grid connection approvals were slow and unpredictable, with no consistent framework for advanced inverters causing bottlenecks and lengthy approval negotiations.
• Technology risk: Few OEMs had proven grid-forming products, let alone experience navigating Australia’s stringent connection process.
• Market signals: There was no incentive to shoulder the extra cost or risk. Grid-forming technology was considered higher-risk with potential to cause delays on connection approvals, so market participants preferred grid-following technology.

Both Ekistica reports highlight how this changed:

• Regulatory reform: The introduction of system strength charges in 2021 meant new batteries could either pay a penalty if they could not contribute to system strength, or self-remediate with grid-forming capability. Suddenly, choosing grid-following technology came with a financial burden and flipped the commercial logic.
• OEM innovation: ARENA’s intervention through a specifically designed funding program required inverter suppliers to accelerate development of their grid-forming products. Where once there were none, now four top-tier OEMs are competing, a remarkable shift in just a few years.
• Experience compounds: Each project built upon the last. Neoen’s Western Downs Battery benefited directly from lessons learned at Hornsdale and the Victorian Big Battery. AGL and Origin hired teams with prior GFM experience to de-risk their projects.
• Institutional learning: AEMO and NSPs have become more confident and pragmatic in applying the rules, aided by knowledge gained from these ARENA-backed first movers.
• Market appetite grew: The attraction of ARENA’s $100 million funding pool initially drove applications. But now, projects are reaching FID without additional subsidies; a sign that the risk profile has improved and the business case is emerging.

What was once too risky and expensive, is now achievable and increasingly expected as the default choice.

ARENA’s role in shaping the market

This shift did not happen by accident. ARENA’s early intervention was critical in de-risking adoption and accelerating the supply chain. By covering the incremental cost of grid-forming capability through funding grants in early projects, ARENA created a safe space for developers to test the technology and take the plunge.

The Large Scale Battery Funding Round also sparked healthy competition. Where there was once a single OEM solution, there are now four, each driven to innovate by ARENA’s funding requirements. Furthermore, it gave developers the cover they needed to navigate regulatory uncertainty. By requiring every project to share insights and data, ARENA ensured that knowledge generated through public funding flowed across the entire industry.

The result? What began as a niche program is now reshaping the entire market. Developers are increasingly confident in choosing grid-forming inverters, and private capital is following. Several projects have already reached financial investment decision without additional financial support, a textbook example of how strategic public investment can unlock private capital and accelerate technology transition.

Knowledge sharing: building an industry, not just projects

Australia’s operating fleet of grid-forming batteries is small but globally significant. Each new project is a vital learning opportunity. The update report captures the detail of how this transition has played out. Among the key insights:

• Integration is hard. Projects that relied on multiple OEMs for inverters, controllers and system design ran into compatibility issues, slowing commissioning and limiting market participation. Those that chose a single integrated solution fared better.
• Model tuning is iterative. Early developers described the process as “time-consuming trial and error”, balancing network needs, performance standards and commercial headroom.
• Data gaps matter. A lack of location-specific network data delayed tuning, with developers calling for AEMO and NSPs to provide earlier, more transparent wide-area studies.
• Regulation is improving, but uneven. The May 2025 AEMC rule change eased some of the most difficult generator performance requirements, such as reactive current settling times. But inconsistencies remain across NSPs, and the NER still categorises grid-forming inverters as “asynchronous,” not reflecting their synchronous-like behaviour.

Essential market insights

One of the clearest findings from the update report is that grid-forming technology is fast becoming the norm. Nearly all new battery projects applying for grid connection are now proposing this capability. Choosing otherwise exposes projects to greater approval risk, higher system strength penalties, connection challenges, and even rejection. Grid-forming technology has shifted from a high risk innovation, to a key tool for risk mitigation.

The commercial case however is still evolving. For now, system strength remediation is still the primary driver. Developers noted that they often tune inverters conservatively to minimise degradation unless a contract is in place. As one proponent put it: “GFM is already essential simply to get connected, not just to reduce costs”.

For OEMs, the message is equally clear. Developers favour suppliers with a proven record of successful NEM connections and transparent modelling practices. Those unwilling to share IP, or unable to integrate seamlessly with plant controllers, have caused costly delays. Thanks to the competition created by ARENA’s funding program, industry standards have already lifted and the market now expects nothing less.

Looking ahead

The update report makes clear that while progress is real, grid-forming technology is still young and challenges remain. There are still open debates:

• How far can we rely on inverter-based technologies versus traditional network infrastructure for system strength?
• What new regulatory frameworks are needed to drive efficient design and use of grid-forming batteries?
• Where will further innovation in inverter technology take us?

What’s clear is that the direction is set. Grid-forming batteries are no longer theoretical. The first wave of projects has proven that the technology is real, financeable, and scalable. These batteries are being built, financed, and connected. They are redefining what the future electricity system looks like.

Only a handful of projects globally have demonstrated true grid-forming capability. Australia’s portfolio will add some of the largest, most sophisticated examples anywhere in the world.

The big picture: building the operating system for renewables

Australia’s journey with grid-forming batteries is a story of deliberate progression. From pioneering steps captured in the first report, which proved the concept and exposed barriers, to the insights in the update report showing how lessons have been internalised by industry, regulators, and developers, each stage has strengthened the foundations of a modern grid. Projects like Western Downs demonstrate how policy and innovation translate into real assets that actively reshape the grid’s operating reality.

This isn’t just about storage, it’s about resilience. Grid-forming batteries provide the invisible scaffolding for a secure, renewable powered grid. They are the cornerstone of the future operating system for the energy transition, enabling renewables to become the dominant form of generation without compromising stability.

Australia is leading the world in deploying these technologies at scale. The five ARENA-funded projects profiled are among the largest and most advanced batteries anywhere, reshaping how regulators, OEMs, and developers think about the grid. Thanks to structured knowledge sharing, these insights are available to the whole market. What happens next in Australia will be closely watched worldwide, as the lessons learned here will influence how every advanced power system integrates renewables in the decade ahead, setting benchmarks for the rest of the world to follow.

Download the full Ekistica ARENA Grid-Forming Battery Portfolio Update Report to explore the detailed findings, lessons and future directions from Australia’s grid-forming battery portfolio.

For anyone investing in, building, or regulating the next generation of storage, this report is more than an update. It is a roadmap for the future of power systems.

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