AGL commits to new giant 2,000 MWh battery after big fall in battery prices

Australia’s biggest coal generation company has committed to another giant battery project, this time on land adjacent to the huge Tomago aluminium smelter, the biggest single consumer of electricity in New South Wales.

AGL will build a 500 megawatt (MW), 2,000 megawatt hour (MWh) battery at Tomago, featuring twice the storage capacity of the 500 MW, 1,000 MWh Liddell battery, which is being built up the highway at the site of the shuttered coal fired generator.

As it did for Liddell, AGL has chosen US-based Fluence as the main supplier and builder for the Tomago battery, which is expected to start operations in late 2027, with construction work due to begin later this year.

But the most interesting part of the Tomago battery is the fall in battery costs. AGL committed just 18 months ago to spending $750 million for the Liddell battery, but now says that the Tomago battery will cost just $800 million for twice the storage capacity.

That reflects the plunging cost of battery storage, driven by efficiency and density gains and manufacturing improvements in China, which is significant as the costs of most other technologies – with the exception of solar – is rising, according to the latest CSIRO GenCost report.

It will also be a welcome contract for Fluence, which – like other big battery suppliers, including the recently failed Powin – has been struggling in its home market because of the impact and uncertainties of tariffs announced and threatened by the Trump administration. It is the company’s largest ever project transaction.

Liddell is the latest in a series of big battery projects announced by AGL, which include the already completed Torrens Island and Broken Hill batteries, and a number of other projects with which it has signed operational or “virtual tolling” agreements.

“The Final Investment Decision on the Tomago battery project marks yet another significant milestone in AGL’s delivery of its strategy and the transition and decarbonisation of its energy portfolio,” AGL managing director and CEO Damien Nicks said in a statement.

“Once operational, the Tomago Battery will expand on AGL’s existing suite of grid scale battery assets and contracted capacity from third parties and further enhance our flexible asset portfolio.

“Importantly, both the 250 MW Torrens Island and 50 MW Broken Hill Batteries have delivered strong performance since they commenced operations, and the 500 MW Liddell Battery remains on track to commence operations in early 2026.”

Nicks says the company has a “clear pathway” to FID for a further 900 MW of grid scale battery projects, as “we aim to accelerate the development of our grid-scale battery portfolio and grow our fleet of flexible assets.” New projects may be announced at the company’s annual results briefing in August.

All the big energy utilities – with the exception of the federal government owned Snowy Hydro – are investing heavily in battery storage, mostly because it means they can retain control of the dispatchable market, even as the growth of wind and solar eat into the operations of their legacy coal generators.

However, this is also resulting in big batteries becoming the major price setter for evening demand peaks and those occasions when wholesale spot prices soar above $10,000/MWh, as documented by the Australian Energy Market Operator.

And rather than burning costly diesel or expensive gas to drive those price settings, the big utilities can discharge power into the grid they likely bought at very low or even negative prices. They will likely continue to do this until policy makers and regulators find a means to put a limit on that market power.

The Tomago battery will be funded on AGL’s balance sheet, utilising operating cash flows and existing debt facilities, including green capex loans.