“A completely new world:” Major new big battery deal lays down challenge to energy market order

A major new “capacity swap” deal between a big battery developer and a new “non-traditional” off-taker is being hailed as the start of a shift to a more competitive Australian energy market landscape – and an answer to the call for more innovative and enduring financial contracting.

Ampyr Australia has signed a 15-year battery storage agreement with the Denmark-based energy trading outfit, InCommodities, for the 300 megawatt (MW), 600 megawatt-hour (MWh) Bulabul Battery Energy Storage System (BESS) in Wellington, New South Wales.

For the Singapore-based Ampyr, the deal marks a major win for the Bulabul BESS, which earlier this year was the subject of a landmark deal giving the Wambal Bila indigenous community corporation the option to take a 5 per cent equity stake in the $450 million project.

The battery, which is to be built next to two existing solar farms, owned by other parties, is designed to soak up excess solar and discharge for two hours during peak demand periods, helping to stabilise the NSW grid as coal exits and renewables penetration continues to grow.

The agreement involves an innovative Capacity Swap Agreement of up to 120 MW of the Bulabul’s capacity, and is worth more than $300 million. It will leverage InCommodities’ global trading, spot market and energy-tech experience along with Ampyr’s asset management expertise.

But the deal is also big painted as a win for the broader renewables industry, and a warning to the large incumbent retailers that their domination of the market for long-term power purchase contracts may be coming to an end.

InCommodities – a company that describes itself as a “non-traditional global player” focused on long-term trading commitments and bringing a new identity to the energy market – says the deal is its “first significant footprint” in Australia.

“To be honest, I’ve spent a year-and-a-half trying to find the right collaboration partners across solar, wind and batteries across all states,” InCommodoties’ head of power trading for Australia and New Zealand, Andrew Koscharsky, told Renew Economy in an interview this week.

“Quite often you come across a person who might own a piece of property and they call themselves a battery developer … with Ampyr, we’ve found people who are capable, honest and transparent, which is critical for us – someone who we’re happy to enter such a long-term partnership.”

The length of the deal, 15 years, is not insignificant. There has been plenty of collective hand-wringing about the absence of willing or deep-pocketed enough offtakers – beyond the incumbent gentailers – to support the kind of deep investment Australia needs to meet its 82 per cent by 2030 renewable energy target.

A key recommendation from the Nelson Review of the National Electricity Market (NEM) has been to address the fundamental issue of “tenor” – the problem developers have in getting certainty over the sort of long-term revenues that are essential to land finance for their projects.

“The Nelson review seeks to find solutions on that mid-term and long-term [financing gap], and that’s something that InCommodities has been focused on,” Koscharsky says.

“There aren’t too many energy traders out there that go beyond three years; we’re going 10 and up to 15, and that’s a genuine commitment to the Australian power market from our founders.

“And so that, in itself, is a really important piece that helps underpin new assets that come to market … and again, that’s helping asset owners with risk management solutions that make them bankable.

“We’re able to take a long-term view thanks to the financial position that we hold,” he says. “And so that, for us, means long-term PPAs across solar, wind and batteries, and because we’re primarily a tech company just as much as we are a trading company, we’re able to help asset managers extract a lot of short-term value.”

In Australia, InCommodities is currently based out of Sydney, with a small staff of around six employees. But Koscharsky says the plan is to keep growing and hiring – with a focus on tech and database specialists.

“If you walk into our office in Århus in Denmark, out of the 250 people there, I’d say about 100 to 150 are software developers and people with maths PhD backgrounds who are building algorithmic models and trying to modernise energy trading.

“And that’s a very similar philosophy to what we’d like to bring to Australia,” he says.

Koscharsky also believes that collaboration – the bringing together of completely different skill sets – will be crucial to solve and rethink energy trading.

“I think, to to achieve what the government wants to achieve on a long-term pathway, I don’t think there’s any one company that can do this themselves,” he says.

“Regardless of who you are, how big you are, it’s going to require collaboration. And I think the collaboration between InCommodities and Ampyr is a really great example of that.”

Ampyr CEO Alex Wonhas, a former senior engineer with the Australian Energy Market Operator before moving to the private sector, says the new partnership continues Ampyr’s own efforts to be ambitious and innovative.

“We are not your normal independent power producer,” Wonhas tells Renew Economy. “We love innovation, and I have been really impressed by the innovation that InCommodities is bringing on the market.

“With the advent of batteries, with the advent of variable renewables … in five to maximum 10 years’ time, there will be practically no conventional generation left, and it will all be either weather driven or algorithmically driven dispatch.

“So it’s going to be a completely new world. And we believe, to win in this world, you need to do exactly what InCommodities is doing.

“Ultimately [we] are an infrastructure developer, owner and operator, so … we need to provide our investors a sort of stable, guaranteed return.

“And therefore this partnership has been really phenomenal because it allowed us to give that to our investors and provide the basis for [InCommodities] to really put this innovation on top and and deliver novel products to the market.

“InCommodities’ entry at scale into the Australian battery and storage market … will enhance competition and drive better, more innovative outcomes for consumers,” Wonhas adds.

“This shift is not only necessary, but it also reflects a fundamental shift in the structure of the energy market, driven by agile, market-shaping participants.”

Koscharsky says that while regulatory reform and supporting policies are welcome and needed, there is an onus on market participants to continue to rethink energy trading and reinvent the market as new as new types of assets come into play.

“That’s certainly what we’re trying to do,” he tells Renew Economy. “Whenever I go to Denmark, I’m amazed at how little I know about energy trading, after 25 years in the industry…. [about] the European style … and the way they do stuff over there.

“And so we would like to import some of that tech and some of that rethink into Australia.

“We’re at about 700 MW, so far, of long term PPAs [across Australia], and we feel like we’re nearly halfway to where we want to be by the end of next year.”

If you wish to support independent media, and accurate information, please consider making a one off donation or becoming a regular supporter of Renew Economy. Please click here. Your support is invaluable.