Giant Tomago battery and VPP win new firming tender to fill gaps in supply

The giant Tomago battery and a virtual power plant tapping into the flexibility of business demand in Sydney and Newcastle have won the latest “firming” tender to focus specifically on responding to potential supply shortfalls in major demand peaks.

The Tomago battery – sized at 500 megawatts (MW) and 500 megawatt hours (MWh) is currently being built by AGL Energy near the huge aluminium smelter of the same name, and this is its first major contract.

Enel X, a subsidiary of Italian energy giant Enel that focuses on demand flexibility, will provide 32 MW of VPP capacity, sourced from a range of business customers who have the flexibility to dial down their power needs on occasions and get paid for helping balance the grid.

The two winners were announced on Friday by ASL, which is managing federal and state renewable and storage tenders, and which has also outlined more details about the upcoming tenders, including 2.5 GW of generation that will have a special focus on solar and battery hybrids.

The Tomago battery and Enel VPP will both receive LTESAs (long term energy service agreements) that require them to make capacity available in Lack of Reserve (LOR) 2 and 3 events, which occur when the available electricity supply is at high risk of not meeting demand.

“These contractual obligations ensure the Projects deliver critical supply to NSW electricity customers when the system needs it most and support reliability during periods of system stress,” ASL said in a market briefing note.

It is the second firming tender win for both AGL and Enel, with AGL winning a 2023 tender with its now nearly complete 500 MW, 1,000 MWh Liddell battery, and Enel with 95 MW of VPP capacity from three different projects.

The other winners of that tender – which was expanded after the federal government provided more funding – were Iberdrola’s 65 MW, 130 MWh Smithfield battery and Akaysha Energy’s 415 MW, 1660 MWh Orana battery.

The firming tenders, like the now delayed Waratah Super Battery, have been focused on the needs of the state’s major demand centres – Sydney, Newcastle and Wollongong – which will see the closure of their large coal fired power stations in coming years, and where the market operator has forecast a potential supply shortfall.

Both Tomago and the Enel VPP must be commissioned by the end of November next year, according to the contract. Renew Economy understands that they beat off around a dozen other project proposals to win the tender.

“A key benefit of these contracts is they require projects to support the system when consumers need them most, with performance obligations that require projects to make capacity available during Lack of Reserve 2 and 3 events,” ASL CEO Nevenka Codeville said in a statement.

“Each project’s ability to support the system during these times of need was an important consideration in the tender.”

The tender was the seventh conducted under the NSW Roadmap, and the second to offer Firming Supply and Demand Response LTESAs, and takes the total capacity of winning projects to more than 1.5 GW.

“The successful Bids were competitively priced and had a significantly lower average cost than the successful Bids in Tender 2,” it said in a market briefing.

This is no surprise, given the falling costs of battery storage, highlighted by AGL itself which has said that it has been able to double the storage capacity at Tomago at roughly the same cost of the Liddell battery.

Enel X says the tender win highlights the growing role large energy users can play in supporting a reliable, renewables-led electricity system.

“Flexible demand provides fast, dispatchable capacity without the need to overbuild new peaking generation, demonstrating how businesses can help balance supply and demand while unlocking additional value from their energy flexibility,” it said.

ASL said a third firming tender is likely to be held later this year, or early next year, although the size of that tender is yet to be established.

The results trigger a busy period for ASL, which is expected to soon announce the results of the South Australia firming tender, launch the next round of generation (2.5 GW) and long duration storage (12.5 GWh) tenders in NSW, and declare results of the most recent national tender under the Capacity Investment Scheme.

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