FCAS Islanding

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Check out our explainer on FCAS Islanding on the Modo Energy platform here: https://modoenergy.com/research/

What is FCAS Islanding?

FCAS islanding refers to price spike events in specific frequency control ancillary services (FCAS) markets when a region becomes disconnected (or "islanded") from the broader NEM grid, or is at risk of this occurring. When a region's ability to import power through interconnectors plus available battery FCAS capacity falls below critical thresholds, FCAS prices spike to incentivise local frequency control resources. Islanding events usually happen in South Australia and Queensland, which are at the edges of the grid.

These events create significant revenue opportunities for batteries that can provide rapid frequency response during islanding conditions.

How do we model it?

The model identifies islanding conditions and applies price spikes based on real-time grid capacity:

• FCAS service supply: Regional import capacities and Battery FCAS supply are monitored in real-time
• Islanding Detection: Flag intervals where combined interconnector import capacity + battery FCAS capacity falls below the state-specific thresholds
• Price Spike Application: Replace base FCAS price forecasts with spike prices during detected islanding conditions

How does this affect prices?

This results in higher FCAS prices in both SA and QLD as they are both frequently islanded from their neighbouring states. However, this is not expected to persist long after 2026. With more batteries competing for contingency FCAS markets, islanding conditions should ease, before disappearing entirely after interconnector upgrades such as Project Energy Connect Stage 2.