Giant Waratah Super Battery project to receive more than $700m to help fill Eraring gap

A project to build Australia’s biggest “shock absorber” battery and its associated infrastructure – designed to reduce the impact of the grid from the planned closure of the Eraring coal generator in August, 2025 – will cost more than $700 million over six years.

The figure was released late on Friday by the Australian Energy Regulator as it completed a complex series of determinations. But it raises more questions than it answers because so much of the project remains confidential, including the payments to the battery owner itself, and even the identity of other partners.

The Waratah Super Battery – at 850 MW and 1680 MWh – will likely be the biggest battery in Australia when it is connected to the grid in two years, and the biggest of its type in the world. It has been described as the biggest machine of any type to be connected to the Australian grid.

The cost of the actual battery is likely to be much more than $700 million – probably double that – but what is of interest is how much the battery owner will get paid for delivering its services. The answer is we don’t know exactly.

The battery will act as a kind a giant “shock absorber” for the grid, with up to 700 MW and 1400 MWh reserved (for varying parts of the year) to play a specific role that will allow the main transmission lines feeding electricity into the major load centres in Sydney, Newcastle and Wollongong to be run at or near full capacity.

This is important because transmission lines often run at much less than capacity in case of a fault, or a contingency – but the Waratah battery is designed to respond, in a moment’s notice to respond to any contingency and to enable the market operator to find a longer term response.

These contracts are already being used to lesser degrees by the original Tesla big battery at Hornsdale in South Australia, and the Victoria Big Battery near Geelong, which supports the transmission link to NSW.

The details of those contracts and the payments to their owner – Neoen Australia in both cases – have been revealed in full, but not the payment to the Waratah Super Battery and its owners, the Blackrock-backed Akaysha Energy.

The regulator has agreed that the details of the payments must remain commercial in confidence. A total payment has been released, but not the breakdown of the “contestable” part of the contracts.

Indeed, one of the key components of the project is a contract for “paired generation”, which is a payment to eligible generators to lower their output when needed as part of this “shock absorber” response. Even the identify of those two generators is not revealed.

The payments to Akaysha for the Waratah Super Battery – now well under construction – were actually decided last year, but as we reported later the details were blacked out, and remain so.

What we do know is that the battery, and the two generators paid to lower their output when needed, will receive the bulk of these payments – more than $600 million from 2024/25 to 2030/31 (see table above). We don’t know for sure, but we suspect that the actual Waratah Super Battery accounts for the bulk of these payments.

The other payments, totalling $104 million over five years, go to Transgrid for the various non-contestable network upgrades it needs to support the project, as well as a communications system to make sure it works properly. Its non contestable because Transgrid owns the network.

In total, the payments amount to $705.2 million. The big years are from 2025/26 to 2029/30, when the battery and the two contracted generators will average more than $110 million in payments each year.

Is this a lot? It’s hard to say. It’s undoubtedly cheaper than building new network infrastructure, so will repeated to varying degrees around the grid as uses for this and other “virtual transmission” become more popular.

On an annual basis, it’s probably not that much different to the payments being made to the Neoen Collie and the Alinta Wagerup batteries in Western Australia, which has a specific task to soak up solar in the middle of the day and put it back into the grid in the evening peaks.

It is not clear to what extent these payments will be made, or if the services will be needed, if the closure date of Eraring is extended beyond August, 2025, which the state government is exploring, although the AER says the payments can be varied based on needs.

The AER defends this lack of visibility by saying that it had accepted that the schedule of payments and some other information should be kept confidential in the public version of our determination.

“However, we noted that once our determination for the paired generation services had been made, we would aggregate the annual and total revenue amounts for these two determinations and publish them.”