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Genex takes 330MW pumped hydro plan to market

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The company behind plans to convert an abandoned Queensland goldmine into one of Australia’s largest hydro energy storage plants has lodged a prospectus for an initial public offer, ahead of listing on the Australian Securities Exchange (ASX) in July.

Genex Power said on Monday that the IPO to institutional and retail investors was expected to raise a total of $A8 million, based on an offer price of $A0.20 cents per share, with 40 million shares to be issued.

kidston

The site of the historical Kidston Gold Mine. Source: Genex Power

The NSW-based company’s flagship project is the $280 million, 330MW Kidston Pumped Storage Hydro Electricity Project, which proposes to transform the disused Kidston gold mine in northern Queensland into a large-scale hydroelectric power plant, to supply the state during periods of peak demand.

The funds raised by the IPO would be used to finance a feasibility study for the Kidston Project, to provide working capital for Genex and to fund the annual maintenance costs associated with the Kidston project.

If all goes to plan, and the project is successfully completed in 2018, it will be the third largest hydroelectric energy storage project in Australia.

Genex executive director, Simon Kidston told Fairfax Media that pumped storage hydro generation was making a comeback in places like the US because it was the most efficient at being able to store power at a time when solar power and wind generation were expanding.

Indeed, in Australia, the use of large-scale pumped hydro energy storage (PHES) on the electricity grid is being touted by some as a cheaper and easier alternative to battery storage solutions like the much-hyped Tesla Powerwall, as the penetration of renewable energy on NEM grows.

An established and mature technology – according to Kidston, the model they will use in Queensland has been around for more than 100 years, with more than 1,000 examples in use globally and three in Australia – one the the major requirements for the development of PHES projects is holes in the ground for upper and lower ponds.

Like the Tumut 3 section of the Snowy Hydro operations, the technology is based on the “water at height” principle where the reservoirs have a large height differential.

This makes pumped hydro particularly well suited to the Australian energy landscape, with its multitude of retired (and soon-to-be retired) mine sites.

In Victoria, for instance, it has been noted that the Latrobe Valley open-cut brown coal pits could be converted to PHES service as they reach their use-by dates, with below-sea-level mine pits used as lower ponds, and existing cooling water reservoirs used as upper ponds.

A further advantage of a Latrobe Valley PHES facility would be its location, beneath the major electricity transmission lines that supply the Melbourne market.

And while the Kidston mine, 270km north-west of Townsville, does not quite have that same advantage, it does have some of the key, unique characteristics required for a pumped storage power project, including two deep pits 400 metres apart.

“The original mine site has two pits 400 metres apart, with an ideal size and depth,” said Genex managing director Michael Addison.

“Capital expenditure requirements are comparatively low, as the site benefits significantly from mine and electricity infrastructure already in place as well as existing permits. From its time as an operating mine, the Kidston project benefits from having numerous existing approvals in place and a clear approvals pathway.”

Addison said the project was also ideally suited to benefit from peaking power generation challenges facing Queensland and that revenue would flow from the significant electricity price swings that occur between peak and overnight off‐peak periods.

“Queensland has high peak prices and significantly more price volatility than other states in the National Electricity Market and wholesale peak electricity prices are expected to increase even further over the next decade, driven by the increasing gas price,” he said.

“Price volatility is being driven in part by Queensland’s particular generation mix and its principal reliance on gas for peak and shoulder power generation. With increasing demand for electricity and lack of new peak generation projects on the horizon, the peak and off‐peak price differential is expected to remain significant.”

The estimated cost to build the Kidston Project is less than $300 million and Genex has financing options for all three aspects of the project; civils, turbines and transmission.

The project has the support of both the Queensland and local government, while Zhefu Hydro Power, one of the largest hydroelectric electrical and mechanical equipment manufacturers in China, is a cornerstone investor in the company, with a 20 per share holding. Zhefu has already injected $3.8 million into the project.

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  • WR

    The company’s website says that the energy capacity will be 1650 MWh. http://www.genexpower.com.au/projects/The_Kidston_Project

    If the construction cost is $280 million as stated in the article, that gives a storage cost of $170/kWh. Undoubtedly there will be some operating expenses, but that seems like a very inexpensive project. I guess the main cost will be in buying the power at off-peak market rates that will be needed to operate the pumps.

    For Australia to supply its current electricity demand with a 100% renewable energy supply, it would require about 250 GWh of storage. At $170/kWh, the 250 GWh of storage would cost $42.5 billion. That seems like a pretty reasonable price. You would need to build an average of 5 Kidston-sized pumped storage projects each year for 30 years to meet the 250 GWh goal.

    • http://www.reneweconomy.com Giles

      Woah! Steady on. You are basing your calculation on the hydro plant only lasting one year. I think it will be around longer than that.

      • WR

        Haha. I should have made clear that the $170/kWh of capacity was the construction cost, not the operating cost.

        It would probably run through about 90 charge/discharge cycles per year and last for up to 100 years. I think the operating cost that the company would be aiming at would be a few cents per kWh.

  • Stan Hlegeris

    I’m as enthusiastic as the next guy about this sort of project, and I hope it works.

    But investors should remember that every penny of the $8 million to be raised (apart from that which goes to “costs of raising” and fees for those involved) will be spent on the feasibility study. Any actual construction will depend on raising further funds. Given the size of the interested parties, you have to ask why mug investors are being asked to fund this riskiest portion of the entire venture. Usually the answer is because there’s a buck in it for someone, and it’s not you.

    While I would jump at the opportunity to invest in a utility-scale pumped hydro system functioning as a peaking power plant, this isn’t it.