Who killed FCAS?

One of the stories of 2025 was the continued collapse of FCAS prices across all markets. FCAS prices began declining in late 2023 and then collapsed in 2024, losing multiples of their value, staying low throughout 2025 with no significant signs of recovery.

One of the benefits of a publication like the Generator Statistical Digest 2025 (GSD2025) with its 10-year lookback is the ability to conduct a long-term longitudinal assessment of the state of the NEM and its participants.

So, who – or what – killed FCAS?

A brief intro to FCAS

If FCAS is an unfamiliar acronym to you, here is a very brief introduction to help interpret this article. If you’d like to learn more, Jonathon Dyson has written this article introducing the topic here on WattClarity.

Frequency Control Ancillary Services are a series of 10 individual markets used to manage the frequency of the grid. A very simplistic and somewhat abstracted way to think about the role of these services is as serving three separate functions:

• Contingency Raise – a series of four individual markets which inject power into the grid when the system frequency suddenly falls significantly. The four markets – Very Fast, Fast, Slow and Delayed – are differentiated by the speed at which units are able to respond.
• Contingency Lower – a series of four individual markets which remove power from the grid when the system frequency suddenly rises significantly. The four markets – Very Fast, Fast, Slow and Delayed – are differentiated by the speed at which units are able to respond.
• Regulation – two markets (Raise and Lower) which are used to continuously maintain the frequency within a tight operating band around the nominal system frequency of 50 Hz.

Some further points are worth noting:

1. Each of these markets is a capacity market – units are paid based on their availability, not their delivered response.
2. The individual markets are named based on the time required to deliver a response – e.g. a unit must deliver its full response within 6 seconds in order to participate in the Raise or Lower Fast (6 second) markets.
3. FCAS is as the name suggests, ancillary to the main goal of delivery energy to the grid. The value (i.e. the market prices) are generally one or two orders of magnitude lower than the wholesale spot price.
4. FCAS prices are largely the same across the NEM, but can vary regionally when a region is islanded, or at risk of islanding. Under these conditions FCAS prices increase in the affected region, sometimes substantially (i.e. to the market cap).
5. The FCAS markets started in 2001, with the exception of the Very Fast (1 second) Contingency markets which were introduced in October 2023.

In relation to point 4 above, all of the charts used in this article are shown for New South Wales prices, which are generally the most stable.

One more, final, finnicky note. All of the pricing data below is presented in $/MW/h – because the FCAS markets are capacity-based. Dimensionally this is identical to $/MWh, which is more common to see utilised across industry. However it’s worth flagging for readers here.

Line go down

The chart above shows the monthly average price for each of the Raise Contingency FCAS markets in New South Wales. (Note the varying y-axis scales).

Since late 2023, excepting some elevated pricing during winter, the average monthly prices of all FCAS markets have declined significantly, losing several multiples of their pre-2024 value.

This change is starkest in the Contingency Raise prices, but the trend is similar across all markets and regions. All of the Contingency Raise markets are now well shy of $2/MW/h.

Note that there are still periods of volatility, where the price of one or more markets rises to the market price cap of over $20,000/MW/h, but the macro trend is still clearly downwards.

What happened?

One narrative I’ve seen floated by several pundits is that this collapse in prices has been driven by a large number of units bidding at the floor.

In order to participate in FCAS, units must provide daily offers consisting of volume and price pairs across 10 discrete bands (identical to the requirements of Scheduled, Semi-Scheduled and Bidirectional units offering energy). And like the energy spot price, enablement (dispatch) is on a pay-as-cleared basis (i.e. units bidding at the floor will receive the market price).

The GSD2025 has compiled these FCAS bids on a monthly basis over the last ten years. I’ve rolled up these numbers to show the aggregate monthly bidding patterns for each market.

The chart below shows the aggregate total bid volume on a monthly basis (in MWh) for each of the Contingency Raise FCAS markets. The colours of the bars represent the price bands offered. The black line is the enabled volume in each market.

(Note the varying y-axis scales).

i.e. in January 2016 there was ~1,250,000 MWh of Contingency Raise (6 second) FCAS offered to the market, but  ~300,000 MWh was enabled.

There’s been a clear increase in bidding at the floor over the last decade, but not enough to explain the significant drop in prices in the last two years; nor does the timing of the increase align with the changes in market prices.

Given the average price of FCAS sits entirely within the $0 to $35/MW/h range, we can deduce that some structural changes in bidding have occurred.

Who’s bidding at the floor?

The following chart shows the aggregate bid volumes and enablement for the Contingency Raise 6 Second (Fast) market, split out by the fuel type. (Note the varying y-axis scales). I’ve highlighted a single market, but the broad trends are indicative of the other markets.

Things are starting to get a little more interesting; some observations:

• Battery Storage (i.e. utility scale batteries greater than 5 MW in size) have always offered large volumes of bids at the floor. It’s only in the last three years that significant volumes have been offered at non-zero prices.
• The ‘Electricity’ fuel type, which consists of demand response and virtual power plants (which generally includes smaller batteries) makes up a much larger proportion of enabled FCAS than many market observers appreciate.
• Black coal units have responded to these changing bid dynamics, increasing the volume of bids at the floor price in order to ensure their enablement.
• Interestingly, Hydro and Gas units have largely refused to bid at the floor. As primarily peaking units these units offer much less FCAS capability, and are more frequently marginal bidders.

Trending enablements

Switching the analysis slightly and just looking at enablement trends, we can get a clearer picture of the types of units offering FCAS into the market.

The chart below shows total enablement for each Raise Contingency FCAS market, coloured by fuel type. (Note the varying y-axis scales).

There are a few observations to make:

• We can very clearly see the rise of utility scale storage, demand response and virtual power plants over the last decade, as well as the significance of FCAS revenues to the business case of these technologies.
• The Very Fast (1 second) market is dominated by two technology types – large batteries and demand response/VPPs (‘Electricity’).
• In 2019 AEMO made changes to how ‘load relief’ is calculated. This had the effect of significantly increasing the volume of FCAS procured in the Fast (6 second) and Slow (60 second) markets (for both Raise and Lower services)
• Monthly enablement volumes correspond to around 500 MW of Fast and Slow, and 400 MW of Delayed Contingency Raise FCAS procured in a given dispatch interval

For comparison, it’s also worth looking at the same chart for the Regulation services.

The key difference is the lack of the DR and VPPs – the Regulation markets are only accessible to Scheduled and Bidirectional units. (There have been some trials with Semi-Scheduled units).

• The inexorable rise of utility scale storage is present here too.
• Hydro units feature more strongly in the enablement mix.
• In 2019 AEMO also increased the volumes of Regulation FCAS procured from 120 / 130 MW of Lower / Raise Regulation to 210 / 220 MW.

Line go up

There’s one last chart to present – the total registered quantity of FCAS.

The chart below shows the total registered quantity in each of the Raise Contingency FCAS markets over the last two decades. (Note the varying y-axis scales).

There are two key takeaways from this chart. The first is to put some perspective around just how shallow the FCAS markets actually are. At any given time over the last two decades there has been a minimum of 5 GW of registered capacity in the Fast Contingency Raise market… but only around 300-500 MW is procured in a given interval. The slower markets, with less onerous technical requirements, have double the capacity and roughly the same procured volumes.

Now, there are plenty of caveats to this, including the fact that a lot of units have much larger FCAS capabilities registered than they would ever actually deliver. But the overarching narrative is clear – the FCAS markets are incredibly shallow, and there are literally hundreds of units capable of providing that capacity.

The second point is that line go up. This chart provides a clear explanation for why FCAS prices have collapsed recently – the most rapid ramp up of units registered for FCAS since the beginning of the markets. Several gigawatts of new FCAS capacity has entered the system with the rise of grid scale batteries.

WattClarity readers are a detail orientated bunch, so for completeness there’s a couple of interesting details in the chart worth noting:

• There was a general reduction in Raise Contingency capability around 2014. This included the retirement of Northern and Anglesea Power Stations as well as the Point Henry smelter (Playford B was also retired in this time period, but was not registered for FCAS).
• Likewise Hazelwood’s retirement in 2017 saw a corresponding drop in FCAS capacity.
• The entry of Hornsdale and the first aggregated demand response portfolios began later in 2017, and registered volumes began climbing.
• In October 2023 there are very significant drops in registered FCAS quantities – this was due to changed registration requirements in the Market Ancillary Service Specification version 8.1 which removed the so-called ‘multiplier effect’.
• The large step up in the Slow and Delayed markets in May 2025 was due to significant increases in Tumut (TUMUT3 DUID)

Before we sentence utility scale storage as the killer of FCAS, consider what the last two charts represent together.

Over a period from roughly 2014 to 2018 the total capacity of registered FCAS was reduced relative to historical averages as several units retired. From roughly 2018 to 2023 the total capacity of registered FCAS began climbing again as batteries, demand response and virtual power plants entered the market. But this period overlaps with the point when AEMO significantly increased procurement of additional FCAS volumes across all Contingency and Regulation markets. These changes to FCAS procurement had the effect of offsetting the increased number of units providing FCAS.

The bigger picture

In fact, if we zoom out on pricing over the same period, we can quite clearly see these effects.

Prior to 2016 Raise Contingency FCAS prices were generally low. But changes in the units offering FCAS led to structural changes in the bidding dynamics, elevating prices, which were then sustained by increases in the procured volumes even as new entrants increased the total capacity available.

Instead of asking ‘who killed FCAS?’, the better question is ‘why were prices high at all?’

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