There’s been a lot of discussion about the Tesla big battery since the company announced last Friday that it would build a 100MW/129MWh lithium-ion battery storage installation – the world’s biggest – after winning the state government tender.
The battery will be owned and operated by French renewable energy developer Neoen (which stands for “new energy”), and will be located right next to the 309MW Hornsdale wind farm currently being completed near Jamestown.
But what exactly is it? And what can it do? And how much will it cost? We try to answer some of the main questions, and dispel some of the myths.
How big is it?
At 100MW/129MWh it is the biggest lithium-ion battery storage installation in the world. As Tesla founder and CEO Elon Musk says, it will be three times larger than the next biggest (although bigger ones are on the way).
Why is storage needed?
Two reasons – grid stability, and managing varying renewables like wind and solar.
Imagine a brick wall built without insufficient cement to keep it together. That’s probably a pretty good analogy for how our ageing grid, with its slow moving machines, operates at the moment. Battery storage can be the glue that helps keep it together, mostly through incredibly fast response to system faults – such as transmission failures and tripping gas plants that can make the grid sway like a drunk walking down the road.
And storage will also be able to smooth the output of wind and solar, and allow those operators to store excess output for use at times of peak demand, or when the sun is not needed and the wind is not blowing.
What can this array do?
Battery storage can do a bunch of different things – smooth out the output from renewables when clouds come over or the wind dies down, store power for sale at peak times or high prices, or for night-time use, and even remove the need for new grid infrastructure.
They can also provide a whole range of what are called “network services” – and providing frequency control and “synthetic inertia” are the top of that list. In all, there are about 20 different things it can do in its “value stack” – think of it as the Swiss army knife of the energy system. In practice, one installation may focus on only one or just a few of those pitons.
Will it solve South Australia’s electricity problems?
Some, but not all. It will provide much needed network support, so if there are more network failures, or if the big gas generators trip again like they did in March then battery storage will play a critical role in keeping the grid stable and the lights on, particularly with its fast response capabilities.
It can respond to faults in an instant – in milliseconds – while the big gas generators are still asleep in the back of the bus. The gas generators take at least six seconds before responding at all, and up to 10 minutes to get dressed.
Over the longer term, South Australia and other grids will need more battery storage, but also more forms of storage that is longer term (hours and days) and bigger capacity. This could come from pumped hydro, solar thermal, and even hydrogen. Battery storage will likely remain the quickest to respond, and the cheapest over short periods, so will play a critical role.
Would it have prevented the System Black?
Possibly. The battery storage systems has been configured on what would have been required to ride through some of the events that happened last year, including the system black. That event threw up a whole bunch of issues, including the way the system was managed, the un-known fault ride through settings on wind farms, and the lax governor controls on the big gas and coal generators, and a bunch of other things.
But work by Lloyds Register found that a battery of around 100MW could have been sufficient to do the job of dealing with those sudden changes in frequency and voltage in those dramatic seconds when one tower after another collapsed and three major transmission lines failed. Whether the system would have been able to ride through the remaining issues is not known, but batteries would have given it a fighting chance.
How will it change the energy market?
Enormously. This is as significant as the start of the shift from analogue to digital, from a landline to a mobile, from film to digital photos, from switching from a manual gearbox to an automatic, or from a petrol car to an electric vehicle.
It will change the way we think about energy, from the old baseload, peak load paradigm, to a new one based around the cheapest form of new generation “base cost renewables” (wind and solar), and then flexible or dispatchable generation to fill in the gaps. (See graph above).
That transition won’t happen overnight, but this battery storage installation – and the many others planned for the state and elsewhere, will allow for significant new investments in wind and solar.
In South Australia, this level of wind and solar had reached saturation point with wind and solar accounting already for 50 per cent of demand. But storage will allow those penetrations to jump significantly.
More importantly, it reduces the ability of the big fossil fuel generators to dominate the market and manipulate prices as they have. South Australia has paid dearly for this lack of competition for more than a decade, and the rest of the nation is starting to pay the price too, hence the huge rises in electricity bills.
How is this battery storage array being configured?
Of the 100MW/129MWh in this array, around 70MW of capacity is contracted to the South Australian government to provide grid stability and system security. It will likely mostly provide frequency and ancillary services (FCAS) when needed (such as a major system fault, generator trip or transmission failure).
This part of the battery is designed to last 10 minutes, which sounds short but is long enough to keep the grid stable while slower machines such as gas generators can respond.
The other 30MW of capacity will have three hours storage, and will be used as load shifting by Neoen for the Hornsdale wind farm, where it will be located.
Please note: The 30MW and 70MW ratings mean exactly that – it is the capacity at the connection point.
How much will it cost?
Those details are confidential and media estimates have ranged from $50 million to $200 million. The best indication may have come from Musk himself, who reportedly said that failure to meet the 100-day-we’ll-finish-it-or-it’s-free offer would cost the company about $US50 million. But that refers only to the component contracted to the government, so the 70MW part. So, it is likely to be a number less than $A100 million, but not a lot less.
What is South Australia’s contribution?
We don’t know, but it did flag a sum of $15-$20 million from its newly created Renewable Energy Technologies Fund when the tender was first announced. It is also the contract partner for the grid services, so presumably is making some payments for those. Weatherill has put the total cost to the government – grant and payments – at $50 million over 10 years.
Will it make money?
Yes. Neoen’s strategy is for long term, low yield in investments, and this fits the bill. The battery storage plant being installed by Vector in Alice Springs – to double the amount of solar in what is already the country’s solar capital – will deliver a pay back in less than 5 years on the savings from reduced gas generation. And it is clear that solar and wind couple with storage is cheaper than gas power now.
When will it be finished?
The government wants it finished by December 1 and Tesla and Neoen have committed to doing that. Ironically, the 100-day-or-it’s-free offer will not start until the connection agreement is sealed with the Australian Energy Market Operator. That will likely take a couple of months, so the December 1 deadline will fall before the 100-day deadline.
Will they reduce prices?
Almost certainly. The existence of a new FCAS provider, contracted to the government, will lower FCAS prices, which have jumped sharply in recent years and added tens of millions to consumer bills. Weatherill puts it at $48 million a year. Now, a major new player will enter the FCAS market, so restricts the ability of the existing FCAS providers – the gas generators – from setting any price they want.
Also, the introduction of a new player into the wholesale market – the 30MW component – will have a dampening effect on prices. Not only is there a crucial new player in the market, but it doesn’t take that much to change prices. Really high prices are set when maybe a single, high cost generators sets the marginal cost. If the battery storage can shift that “bidding stack” to the left then it will reduce prices.
Will there be more battery storage installations?
Yes, but by whom and where is still not certain. A whole bunch of different people have projects – Zen Energy, Lyon Group, Carnegie Clean Energy, Reach Energy, but most will reassess their plans in the light of this, and see where their project fits in.
We will see new storage in Victoria, a tender in Queensland, the 5MW capacity in Alice Springs, and lots of behind the meter storage – in households – linked together as “virtual power plants” doing much the same thing as the Tesla battery. Sonnen, Reposit and AGL are doing this and others will surely follow.
Why did Tesla win the tender?
Probably because they offered the cheapest price, but not necessarily. Premier Weatherill said: “There were some great local bids and some exciting ideas but this was just head and shoulders above all the other bids in terms of price, reliability, capability of delivering by 1 December.”
RenewEconomy understands that by partnering with Neoen, they could get access to a connection point which needed no further upgrade, and who were already working on connection points.
And with Tesla and Elon Musk, you can’t buy this much publicity. You get the sense that the mainstream media would get excited if Musk announced the opening of an envelope.
Look at the media interest a week earlier when Neoen announced the country’s biggest battery – 20MW/34MWh – to be built alongside a 196 wind farm to power the country’s largest glasshouse for vegetable growing, that was going to be built overseas because of the high grid and gas prices. The project, attracting $560 million in investment and 1,300 jobs, got virtually no mainstream media coverage.
How long will the batteries last?
Giles Parkinson is a journalist of 30 years experience, a former Business Editor and Deputy Editor of the Financial Review, a columnist for The Bulletin magazine and The Australian, and the former editor of Climate Spectator.