How much money did Tesla big battery make over summer?

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Market operator releases assessment of wholesale margins made by South Australia’s Tesla big battery in the first three months of 2018.

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The performance and economics of the Tesla big battery – otherwise known as the Hornsdale Power Reserve – continue to fascinate.

It is the first battery of its scale to be connected to Australia’s main grid, it’s the biggest lithium-ion battery installation in the world, and it is the pathfinder for dozens of other large-scale battery projects that will follow, including many under construction.

Further insight into the performance of the Tesla big battery – owned and operated by the privately held (but possibly soon to be floated) French renewable energy developer Neoen – have emerged in a new presentation by the Australian Energy Market Operator.

We’ve already had various assessments from private analysts, and AEMO, on the battery’s speed, accuracy and versatility, the impact of the battery in slashing peak prices in the FCAS market (frequency control and ancillary services), its share of that market, and the price reductions it has delivered to consumers.

But how much money did the Tesla big battery actually make for its owners?

It’s an important question for the battery storage industry, and the wind and solar industries, particularly as the market, indeed the need for time shifting storage emerges in markets such as Queensland, where middle of the day whole-sale prices are already falling below zero.

According to an AEMO presentation made at a Monash University forum last week, and not included in AEMO’s previous documents, the Tesla big battery earned a “gross margin” from wholesale market trading of around $2.5 million in the three months from January 1 to March 31.

Tesla big battery
Source: AEMO

It is important to note that these are AEMO estimates, and not official data from Hornsdale, nor its owner. It is not known what the folk at Neoen make of it, but it’s reasonable to assume that it is “in the ballpark.”

The biggest contributor came from energy arbitrage – buying at low prices and selling at high prices. AEMO estimates that half of this $2.3 million of revenue was generated across three days in January and February, when prices surged to or near the market cap.

It also earned money from FCAS regulation and contingency markets, and according to AEMO was actin e in FCAS markets 99.5 per cent of the time.

Between the Tesla big battery and demand response offered by EnerNOC, they captured 20 per cent of the country’s FCAS market and helped lower prices by around 57 per cent.

AEMO has also recognised – when the Tesla big battery has intervened after the sudden trip of a major coal unit – that the battery responded faster and more accurately than conventional plant.

It admits that this has caused it to rethink some of the management of the grid, and whether Tesla and other batteries should get paid for bringing that super fast response capability (they currently don’t).

The wholesale margin of $2.5 million for the quarter may not seem much for a battery, but it is important to remember that this only relates to the 30MW/90MWh component playing in the wholesale market.

The rest of the battery is reserved for as yet untapped emergency back-up services for the local grid, under an arrangement with the South Australia government that has not been disclosed, but could be as much as $10 million a year.

Previous reports from AEMO have given other insights into the Tesla big battery, including its pattern of charging and discharging (see graph above), and the difference between its average purchase of electricity and sale.

It should be noted however that this figure above – the $91 gap between buying electricity and selling it – is distorted by the extreme variation of prices in those events in January and February. The normal difference, casually observed from data on its website, suggests a range of around $30-$40/MWh.

We may have to wait for the Neoen prospectus to find out more.

Meanwhile, more Tesla Powerpack batteries are being installed at a 25MW/50MWh installation at the Ganawarra solar farm in Victoria, while South Australia’s second big battery – a 30MW/8MWh installation on the Yorke Peninsula, has just begun charging as part of its commissioning phase.

 

 

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49 Comments
  1. MaxG 3 months ago

    Meanwhile … in Australia… the consumer will not see a Cent of savings on their electricity bill.
    I can only say: people, if you want to get shafted, vote for those who privatise our public assets.
    Someone said to me: We make mistakes, we are human; making a mistake once is a mistake, making it a second time is stupidity.

    • Andy Saunders 3 months ago

      Not true. Wholesale prices get passed through by retailers every year. True, there will be a delay, but the benefits will come through.

      As for the privatisation comment, I disagree. I’ve seen the inside story of publicly-owned utilities completely rorting the system. At least privately owned utilities are restricted by a regulator (albeit perhaps somewhat ineffectively), public ones are able to (and do) over-rule the regulator. Never get between a Premier and a bucket of money…

      • MaxG 3 months ago

        Saying ‘not true’ is easy; where is the evidence?
        Can you please refer me to ‘anything’ that could prove that reduced wholesale prices have been reflected in consumer bills in the past?
        For the second point: someone rorting the system, is in my books only human nature (driven by greed). Why should the regulator be less effective for public utilities compared to private utilities?
        Why have costs of services for consumers increased where privatisation o the service took place?

        • Andy Saunders 3 months ago

          Well, my retailer this morning e-mailed me saying their prices would be dropping July 1st due to lower wholesale energy prices.

          It’s law that retailers pass through wholesale costs.

          Don’t believe me, try the RBA: https://www.rba.gov.au/information/foi/disclosure-log/pdf/101115.pdf

          • MaxG 3 months ago

            Maybe you tell me in July how much the price actually dropped on your bill.
            No doubt about “the law”, but since the other 55% can as easily increase (as the 45% wholesale can decrease), the electricity cost spreadsheet I have been keeping for 23 years shows only a year-after-year increase (except for 2 half years out of the 46).

          • Ertimus J Waffle 3 months ago

            1% reduction in the whole sale price while the retail price goes up by 20%, another joke.

      • handbaskets'r'us 3 months ago

        I think the privatisation of Telstra and the Comm bank are not good examples of privatisation being a big win for all. There a re plenty more.

        • Andy Saunders 3 months ago

          My point was that utilities are often worse for consumers in public ownership.

          imagine the conversations coming up to budget time, the Premier (or Treasurer) says “I need more dividends, surely our electricity companies are good for a bit more”, the Treasury bod has a quiet lunch with the utility CEO and says(off the record, of course) “just do it, it will be good for your RAB, and maybe there will be a gong in it for you in a few years” (or many other possible inducements), the CEO goes into a huddle with the pricing boffins who then later have a Friday-afternoon BBQ and decide they can get away with another tweak to some of the murkier areas of the WACC calculation or somesuch, and… higher prices! If the regulator objects, they are “courageous” as Sir Humphrey would say, as the utility shareholder is also in the cabinet. And if the regulation minister decides to make an issue of it (he won’t) then the Premier will cast a deciding vote or slap him down.

          Much more effective than privately-owned utilities.

          • Ertimus J Waffle 3 months ago

            You have described the Queensland government exactly except the government just mandates the amount the government owned electricity corporations have to pay the treasury in dividends every year. Now the Queensland government has had a windfall this year because it owns all the states base load coal fired power stations and with the rest of Australia in such a renewable mess Queensland generators are making an absolute killing because of the other states stupidity in doing what keating told them to do and sell off and privatise all their utilities and electricity generation and transmission systems. Someone has to benefit from labor governments stupidity and Queensland is by supplying it’s excess coal fired power to NSW so NSW can supply Victoria and Victoria can supply South Australia. . Victorians and New South welshmen are always telling Queenslanders they are one hour and ten years behind the smart
            southern states.ROFLOLOLOLOLOLOL.

          • Andy Saunders 3 months ago

            My example wasn’t Queensland, but could well have been.

            Don’t agree re Queensland being smart. They missed out on the absolute peak sale price, no-one is going to pay top dollar for coal generators for the foreseeable future. NSW and Victoria got unrepeatable prices for their assets.

          • Shilo 3 months ago

            The Queensland Government does not own them all, I believe part of Callide and All of Millmerrian is owned privately. I also believe cost and reliability wise Millmerrian is the best power station in the state. With its Availability over the last 10 or more years being very good.

          • handbaskets'r'us 3 months ago

            Still, as the evil corporate worm grows more and more profit driven and ruthless, prices go up, service goes down, more people are sacked. Like the 8,000 last week. I suppose it’s a matter of ideologies. Sure, if you own a lot of shares, -great!
            “Efficiencies” just mean fewer jobs and lousy service, if that’s what you want. Maybe i’m hallucinating, but I’m sure I see more and more of it every day.

  2. Shilo 3 months ago

    why would it be buying and selling, was it not put in for its use as storage for the wind project?. So its gone from being a great thing for the state of SA, to a speculation device?.
    To make money, buying when low and selling when high. Not for the project to use all the power it generates from wind.
    Would not SouthAustralia want to be trying to bring down the overall cost of their market as the focus. Allowing speculation like this is not the way to bring the prices down.

    • Andy Saunders 3 months ago

      It does bring down the cost of the market – FCAS prices are greatly reduced since they cornered that market.

      They also would have influenced the NEM energy market. Difficult to say by exactly how much without knowing the bid stack during the periods they charged and generated, but likely to be somewhat significant.

      Your comment is perhaps typical of several I’ve heard from non-engineers (and even from some engineers). No individual electron cares where it came from or goes to, it’s only value is as an addition to the grid. Operating the battery commercially (buying low, selling high) is the best way economically to run (they will make money out of it), and also the optimal way to increase consumer value (by influencing prices). Restricting it to only take wind-farm output is less efficient for everyone (except their competitors, I suppose).

      Adam Smith called this the invisible hand – worth a read even though it’s 242 years old.

      • Shilo 3 months ago

        Andy, I was making a point, that was my view. It is not worth while saying that I am this or that. Make your opinion back, its much nicer.
        If everyone does what you are talking about without controls the prices are going to be all over the shop.
        Currently the prices are all over the shop due to demand, if you add in mass speculation, in my opinion its not going to be good.
        Restrictions should be placed on the battery’s to operate in a project, not within the market.
        My opinion. nothing more.

        • Mike Westerman 3 months ago

          Shilo there is nothing speculative about arbitrage, otherwise the project wouldn’t have been financed. It is quite obvious that solar is only available during the day, and as it increases, its value will fall. That will drive other forms of generation out of the market during the day, so that the forms able to bear the cost and make up for it at night (ie lignite) or able to shut down during the day and start up quickly at night (ie hydro and gas) will fill in the gap. So the price curve can be fairly readily and statistically determine.

          Over time more PHES in the system will start to displace gas, so that the much cheaper PHES will set the evening prices with lignite mainly determining overnight prices. Again, not speculative, merely the statistics of a working market. No different to surge pricing on Uber.

          • Shilo 3 months ago

            Still looks like speculation to me, buying in electricity, when you are generating it as a project, to then sell it, when the price goes up. Anyway projects hedge the prices and thats speculation. So i agree. I am wrong. Batterys should be allowed to do whatever makes it economic to the owner of it.

          • Andy Saunders 3 months ago

            In a sense, a battery is a physical hedge rather than a financial one.

          • Shilo 3 months ago

            Yep and its cost is its losses, getting it into the battery and then out. Vs the Hedge contract that does the same with the price.

          • Andy Saunders 3 months ago

            Have a look at the diagram (labelled Fig 18) above. They are selling power at twice the cost.

            Excellent business to be in! takes care of a modest amount of round-trip losses.

          • Shilo 3 months ago

            Yes like the right hedge contract

        • Andy Saunders 3 months ago

          “If everyone does what you are talking about without controls the prices are going to be all over the shop.”

          Actually the speculation dampens the price swings. They soak up energy at low prices (so tending to raise the price) and deliver it at high prices (so tending to reduce the price).

          “Restrictions should be placed on the battery’s to operate in a project, not within the market.”

          That wouldn’t be logical or putting the asset to the greatest use. It would be of less benefit to consumers.

        • Jim Roth 3 months ago

          Your opinion is not based on facts. Educate yourself.

          • Shilo 3 months ago

            Good point, I will try better next time to educate myself.

    • Chris Fraser 3 months ago

      Why not soak up unused coal (& possibly wind) energy ? As a side benefit, charging in the early morning extends the life of those ‘unswitchable’ coal burners and avoids them wasting their own generation.

      • Shilo 3 months ago

        Good idea. The coal burners could put them in and spec the market.
        All of a sudden just not bid because they have been building up a heap of MW’s in battery’s. Send the price up, then bid and supply.
        Be fantasic for them. Not so great for the market.

        • Chris Fraser 3 months ago

          Somewhere, in the bowels of the insane asylum, somebody is trying to work out if they have a successful generation business with Powerpack arbitrage, and a clapped out coal burner ….

          • Shilo 3 months ago

            heheheheheheheheheeh like it

          • Andy Saunders 3 months ago

            Well, I don’t know if the insane asylum is a registered NEM participant, but if it is it may make some money!

            If you think about it, you don’t need a coal generator to play this game, just a battery and charge and discharge from the grid (much of which is coal-fired anyway). If you see wholesale prices then you’ll make money. And of course a licence – not easy to come by.

      • Cooma Doug 3 months ago

        Its a long and technical story but pumping coal is a dud idea and circumstances that initiate it are not regular and it will completely disappear soon. Using a battery to store and shift coal gen energy is several times more difficult to justify.
        Market bidding results in shut down windows for coal.

    • John Saint-Smith 3 months ago

      By what divination do you ‘know’ that the Hornsdale Power Reserve bought power from coal generators in order to ‘sell high’ and rip off the consumers? In future, it may benefit from excess wind generation at night as well. Has it not occurred to you that without this moderating influence, the existing gentailers would have ‘wasted’ the early morning power snapped up by the battery, knowing that they would cash in by bidding much higher during the evening pea?. Now they can’t bid so high because the HPR will always beat them to the punch with cheaper electricity – for once the consumer will benefit from lower prices during the peaks – only noticeable over a 12 month cycle as the retailers set their fixed prices for the next year. If you didn’t have some competition amongst retailers the cost savings wouldn’t be passed on.

      As more batteries and PHES units come on stream this effect will become stronger, and average prices will fall.

      • Shilo 3 months ago

        Yes I see that this year SA has had a average of $97.90per MWH down currently from last years all time record of $108.66.
        So it seems to be moving in the right direction.

    • john 3 months ago

      True and SA is bringing down wholesale price.
      However the article is about the Hornsdale Power Reserve buying power and selling it.
      As i pointed out above this is a quarter of what they may have to pay to deliver $2.5 m out of $10 m for a year.

  3. harleymackenzie 3 months ago

    For a possible design of a fast start competitive market, we presented a paper at the Berlin Wind Integration Form in OCT 2017 http://public.harley.fastmail.fm/papers/3B_1_WIW16_0150_paper_Wallace_ref.pdf

    • Mike Westerman 3 months ago

      Excellent Harley – thanks for the post. Any thoughts on how to design a reliability market that makes more sense than the NEG?

  4. john 3 months ago

    The aspect of this is this quote.

    The rest of the battery is reserved for as yet untapped emergency back-up services for the local grid, under an arrangement with the South Australia government that has not been disclosed, but could be as much as $10 million a year.

    $10 Million a year !!!!

    So they make some money in 1 quarter like $2.5 Million which equates exactly with what they have to make per quarter to meet $10 million per year.

    I do not think this is in front of the commitment.

    • itdoesntaddup 3 months ago

      The $10 million comes from SA taxpayers.

  5. TheSecretsMillionaire 3 months ago

    “They” have you right where they want you. You know that, right?

    You’re a good person. You work hard, and it never seems to matter. You can’t get ahead.

    Not your fault. The game is rigged and THEY rigged it.

    Now you can un-rig it. Here’s how: http://cryptocurrencyinstitutenew.com

    • Kate 3 months ago

      I have no interest in your tulips, thank you.

      • Mike Westerman 3 months ago

        Giles missed that one! But he’s got enough on his plate without these leeches.

      • Ren Stimpy 3 months ago

        …but I was so close to finding out who ‘THEY’ were, and how THEY rigged it!

        Ah well, better luck next time 🙁

  6. Ertimus J Waffle 3 months ago

    The solution is obvious to Australia’s electricity problem, close down all the coal fired power stations and replace them with batteries.Its a no brainer, why hasn’t Josh Frydenberg seen the bloody obvious, no NEG’s or . LRET’s the answer is BATTERIES.

    • mick 3 months ago

      me think it mazy

    • Rod 3 months ago

      The billions earmarked for Snowjob 2.0 and the associated transmission infrastructure would buy a lot of behind the meter batteries.
      Your facetious suggestion isn’t as silly as it sounds.

    • David Sansom 3 months ago

      We have a 1600Mw coal power station in queensland that will produce the 1600Mw power every hour. A 100Mw battery will provide 100Mw for one hour. How many batteries do you want us to buy to run at night and when the wind isnt blowing.
      Batteries are good for the grid but not the only solution

      • Mike Westerman 3 months ago

        My bicycle has 2 wheels, while my car has 4. For good engineering reasons.

        As far as I know there are no 1600MW power stations in Qld. You have a 1680MW power station that typically runs any one unit up to about 260-270MW and almost never for 24h for technical and economic reasons (this power station is one of the most expensive coalers in Qld, being subcritical and using railed in coal). If the line is flooded then it soon stops. It is a rare coal power station that runs at nameplate 7×24 and certainly not x365. The large unit size means much more spinning reserve needs to be in the system for when these units trip.

        A 100MW battery will provide 100MW for as many hours it has the capacity to do so. You are confusing a power rating with energy stored.

        I don’t think any sane person is suggesting all storage is batteries – this hardly makes economic sense. But neither does all storage need to be electrical. Almost half our energy consumption is heating and cooling, so thermal energy for a fair percentage of this is cheaper than electrical storage. Big quantities of energy storage are best by pumped hydro. Batteries for behind the meter and quick short term response.

    • itdoesntaddup 3 months ago

      Batteries don’t generate any power. Close down generators, and you have a blackout – permanently.

  7. onesecond 3 months ago

    What is the amortisation time of this battery installation? That would really be interesting to know.

  8. Tom 3 months ago

    If the govt funding is undisclosed how do you arrive at $10m p.a.?

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