Australia’s biggest battery developer plans to maintain lead despite fall in storage earnings, project delay

French renewable energy and storage developer Neoen says its earnings from its portfolio of big battery projects in Australia fell €16.1 million ($A27 million) in 2023, as the market returned to more normal conditions after the wild events of 2022 and the so-called energy crisis.

Neoen is the biggest operator of battery storage projects in Australia, a position it has enjoyed since opening the country’s very first big battery at Hornsdale in South Australia in late 2017.

It currently operates three big battery projects in Australia – the now 150 W/ 194 MWh Hornsdale facility, the 300 MW, 450 MWh Victoria Big Battery in Victoria, and the smaller 20 MW, 32 MWh Bulgana battery in western Victoria.

It has another four big batteries under construction, all of which reflect the trend towards longer storage duration, and new markets, including specifically shifting the output of solar from the middle of the day to the where the new demand peaks are now found in the evening demand.

These include its first four-hour battery at Collie in Western Australia, initially sized at 219 MW and 876 MWh, which could grow to 1GW and 4 GWh, along with the 270 MW, 540 MWh Western Downs battery in Queensland, the 117 MW, 234 MWh Capital battery in the ACT, and the 239 MW, 477 MWh Blyth battery in South Australia.

Neoen on Thursday flagged yet another battery project in the pipeline, a 100 MW facility (storage not yet specified) that could be built next to the 400 MW Culcairn solar farm that has begun construction in NSW, adding to a growing pipeline of potential battery projects that could be built in coming years.

“Our ambition is … to grow in storage,” CEO Xavier Barbaro told investors in the company’s 2023 earnings call on Thursday morning (Australia time).

“It’s already today roughly 20% of what we do it, and it could be more. We will still be big in solar and wind, but storage is really something that Neoen does on a large scale and very successfully, not only industrially speaking but also economically or financially speaking.

“We we want to keep to keep this lead in storage. We want to invent new services, we want to explore new geographies.

“Storage in a way has become a bit more classic now in the eastern part of Australia than it was a few years ago but as you know we have moved to Western Australia, we are now adding storage capacity in Sweden and Finland.”

Neoen said there is increased competition in the storage market in the eastern states of Australia, but made the point that – unlike wind and solar project – it was not just about scale.

“It’s not a matter of gigawatts,” he said. “Storage is very interesting because with solar or wind assets, they are pretty much the same thing … but it’s a different story for storage. It’s really really what you do with those gigawatts, what you do with your procedures, and your intellectual property.”

Barbaro said that battery storage prices are falling, thanks to the lowest cost off lithium, which is opening up new geographies and new markets.

The one blot on Neoen’s storage market is ongoing delays with the Capital battery in the ACT, which is in the hands of the contractor Doosan. It is understood that the issues surround compliance with the grid connection process.

But he noted that many other battery projects from other companies had, for various reasons including supply bottlenecks, suffered delays of 12 months or more.

The company’s battery storage earnings in Australia fell to €45.7 million in 2023, from €61.9 million in 2022, a year when wholesale prices were particularly high, and even more volatile.

Still, storage earnings are expected to soar in coming years, as new projects are connected, and particularly the l Collie battery, which appears to have gained a lucrative role time-shifting solar in the W.A. grid which is facing a surplus of rooftop PV output, and the impending closure of several coal generators.

The two-year contract for Collie was one of the main reasons why Neoen was able to upgrade its annual earnings forecasts for 2025 from around €600 million to more than €700 million.

The company’s overall operating earnings in 2023 were €478 million, including €208 million from solar, €198 million from wind, and €53 million from storage, including its overseas assets.

Barbaro held out the possibility of lower power purchase agreement prices, particularly for solar thanks to the falling cost of modules.

It had only a couple of write downs, including €3.9 million from the closure and packing up of the Degrussa solar and battery facility in Western Australia. The project was “in the middle of nowhere”, and so after the contract ended for the local mine it found no other customer, so the project was impaired.