AGL pulls plug on pumped hydro project shortlisted for ARENA grant

AGL Energy has pulled the plug on the proposed Kanmantoo pumped hydro project in the Adelaide hills after failing to come to an agreement with its mining company joint venture partner over the use of a mining pit that would have been a key part of the storage facility.

AGL and Hillgrove Resources announced in separate statements late on Friday that they were walking away from a joint agreement to look at the 250MW, 2000MWh pumped hydro plant, which had even been shortlisted with three other pumped hydro projects for a potential major grant by the Australian Renewable Energy Agency.

The two companies didn’t say why the proposal unravelled, but it seems that the reason may have been that Hillgrove conducted drilling that revealed a new mineral resource, and wanted to continue operations at the mine. But the two companies couldn’t agree on how to deal with the mine pit that was going to be used in the pumped hydro proposal.

Kanmantoo was one of half a dozen different pumped hydro projects under consideration in South Australia, a state that will require more storage facilities as its share of wind and solar increases from its current levels of more than 50 per cent to the state Liberal government’s target of “net 100 per cent” by 2030.

The other projects shortlisted in the ARENA funding program – of up to $40 million – are Sunset Power and Delta Energy’s 242MW/1,835MW Goat Hill project near Port Augusta, Rise Renewables’ 250MW/2,000MWh Baroota project in which UPC bought a majority stake in this week , and EnergyAustralia’s  225MW/1800MWh Cultana sea-water project  north of Whyalla.

Two of those projects – Goat Hill and Baroota – have also been shortlisted for the federal government’s Underwriting New Generation Investment program, along with Sanjeev Gupta’s proposals for his steel plant near Whyalla, which is also on the UNGI shortlist.

Like everything else in Australia’s electricity sector, things are running very late. There has been no word about the pumped hydro projects in the UNGI program, even though the shortlist of 12 projects was announced after a hurried selection process nearly a year ago, and the ARENA program is also delayed, having announced in August that a winner would be chosen before the end of 2019.

Analysts expect that the South Australia grid probably has room for one, or maybe two, pumped hydro projects in the short to medium term, and maybe more over the long term. However, the case for multiple pumped hydro projects is weakened by plans to build a new interconnector to NSW, which should be complete by 2024, and the push to more big batteries.

AGL is looking at a variety of big battery projects in other states, having announced a deal with Maoneng for 200MW/400MWh of battery storage in NSW and with Vena Energy for a 100MW/150MWh battery at Wandoan in NSW, and declaring the “dawn of a new battery age”. It is also looking at a pumped hydro project in NSW.

AGL’s head of wholesale markets Richard Wrightson said Hillgrove and AGL could not reach agreement on a way forward to progress the Kanmantoo project.

“The signing was the start of a multiple stage process to progress the project and the agreements were subject to a number of conditions which needed to be satisfied within specified timeframes,” Wrightson said in a statement.

“As a result, Hillgrove and AGL have mutually agreed to terminate the PHES Project Agreement without any ongoing obligation on either party.”

In its statement, Hillgrove said: “As Hillgrove is no longer bound by the PHES restrictions it will now progress the approved additional drilling programme, mine design, optimisation and feasibility studies for an underground mining project beneath the Giant Pit, and continue advancing its regional exploration.”