AGL plans 250MW pumped hydro plant in South Australia as replacement for gas

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AGL wins tender to use an old copper mine near Adelaide to provide 250MW of pumped hydro capacity and eight hours of storage, and help the shift from fossil fuels in the grid.

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AGL Energy, the owner of the biggest gas generation fleet in South Australia, has announced plans to build a massive 250MW/2000MWh pumped hydro energy storage project in an old copper mine about 55km south-east of Adelaide.

The company said on Tuesday that it has agreed to pay $31 million for the rights to develop the pumped hydro project at the old Kanmantoo mine from Hillgrove Resources, using the existing open mine pit, with a new upper pond to be built on nearby land.

The move reflects the major shift to a state grid that will be nearly all renewable energy within 10 years.

“It would help us to meet the changing needs of the South Australian energy market, in which energy storage assets are likely to be needed to provide dispatchable capacity as renewables generation increases over coming years,” head of wholesale markets Richard Wrightson said.

South Australia is already sourcing more than half its energy needs from wind and solar, and this is expected to grow as it adds yet more projects – to more than 70 per cent by 2021 and close to 100 per cent as early as 2026/27.

AGL is already building the 210MW fast-start peaking plant at Barkers Inlet to reflect the changing energy system, the need for maximum flexibility and the shift to 5-minute settlement periods.

It is expected that if a new link to NSW from Robertstown to Wagga Wagga is built, then both its Torrens Island A and the more modern Torrens Island B gas units will be retired, and so too will other gas generators in the state.

The Kamnantoo mine is nearing the end of its life, and Hillgrove spied an opportunity to sell the rights to its mining pit, located in the Adelaide hills and providing a rare opportunity to develop a pumped hydro project. AGL won the tender it organised.

The final payment is dependent on a range of milestones, including eliminating any pollution concerns, getting a grid connection and financial investment approval. The complex agreement will see Hillgrove obtain neighbouring land and sell it free-hold to AGL to host an upper pond, while retaining other elements of the mine under its ownership.

The AGL pumped hydro plans, however, are just one of a number of pumped hydro projects mooted by various parties, and it is not clear that all will find a place in the market. Some analysts suggest there will be room for two, may be three at most, at least over the short to medium term.

These include UK billionaire Sanjeev Gupta’s proposal to build more than 1GW of solar and storage – both battery storage and pumped hydro – to help power the Whyalla steelworks and other large energy users in the region.

His project – comprising the Cultana solar plant, the Playford battery at Port Augusta and a pumped hydro project in an old iron ore mine in the Middleback Ranges – was recently shortlisted by the federal government’s underwriting new generation investment program, although the fate of this is not clear after the election.

Also shortlisted were Rise Renewables’ pumped hydro project in South Australia, and another pumped hydro project proposed by St Baker’s Delta Energy at Lincoln Gap, while Energy Australia is looking at its own pumped hydro project at Cultana. Tilt Renewables is thought to have walked away from a plan to use pumped hydro in an old quarry – also in the Adelaide Hills.

“If we proceed and the project is approved, it would be an important addition to our technology mix in South Australia, where we have significant wind and thermal generation,” AGKL’s Wrightson said in the statement

AGL would now begin a multiple stage process to progress the project, including the lodgement of a development application in 2020. AGL would buy the land required for the project from Hillgrove shortly after a final investment decision, which is expected to be made after the completion of processing at Kanmantoo.

“If all approvals are received, we expect the project to be complete and operating by 2024,” Wrightson said.

Hillgrove said it identified the opportunity for pumped hydro in 2017, noting the shift to renewables and the rising cost of gas.

Managing director Steve McLare said it will transform a former mining site into one of the lowest cost electricity storage projects in Australia, at a time when “synchronous generation and bulk storage is critically needed.

“Although the progression of the PHES will prevent long term mining of the portion of the underground exploration target directly beneath the existing pit, the Board determined the AGL PHES offer represented a lower risk and higher value proposition to shareholders.”

The plan was welcome by South Australia energy minister Dan van Holst Pellekaan, who said the project “aligns with the Marshall Government’s policy of matching storage capacity with renewable energy resources to deliver cheaper, more reliable and cleaner electricity for South Australian households and businesses.”

 

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