Infigen says first big battery ready soon, looking at more “firming” technology

Listed renewables developer Infigen Energy says it is still seriously considering investing in a broader range of energy firming technologies to complement its wind and solar power assets, as its first major spend on physical firming – the Tesla big battery next to the Lake Bonney wind farm – nears completion.

Infigen – Australia’s largest listed wind power generator, with an installed capacity of 557MW, and a further 113MW set to begin commercial operations later this month – released its interim results for the 2019 financial year on Thursday.

The company posted a reduced profit for the period – down $5.7 million on the same time last year – but stable earnings (EBIDTA) of $88.2 million, and a slight increase in net revenue to $119.2 million.

In comments on the result and strategy going forward, Infigen said the under construction 25MW/52MWh Lake Bonney battery system would allow for an additional 18MW of firm energy to be sold – targeting commercial operations in Q4 FY19.

And it noted that its continued success in growing its commercial and industrial customer base – and resulting increased contracted production sales – meant that a range of further firming solutions were under “active consideration.”

According to the company’s results, 65 per cent of the renewable electricity sold over the reporting period was sold through contracts – 41 per cent of those being via C&I or wholesale contracts, and 24 per cent via power purchase agreements.

“Infigen will respond to the business and market requirements for firm capacity and the price signals for new sources of generation,” the company said in an ASX statement.

“Firming can be inherent in the portfolio, but as contracted sales increase, Infigen is seeking both financial and physical firming solutions,” it said.

In comments at a results briefing on Thursday morning, Paul Simshauser – Infigen’s executive general manager of corporate development – said the company had been spending an “inordinate amount of time” focused on the issue of firming.

“Will we need to get our hands on … the firming instruments that we need to maintain our run-rate in the C&I market? Absolutely, that is the case.

“(We’re) looking at the range of solutions … There’s obviously generation plant with both an accelerator and a brake, you know, gas turbines and so on,” Simshauser said.

“But also, as you’ll see with out results, the battery will be important for us. They’re obviously moving energy around, rather than adding supply, but nonetheless they’re obviously fabulous for protecting positions in a volatile and choppy market.

“The other thing too that we have managed to do quite well so far with our existing portfolio of customers is also get some good physical demand-side response as well, that sort of coincides with more-so price events, rather than intermittent supply events.

“We don’t worry so much about intermittent supply, it’s the risk that you’ve got low production and high price that we need to manage.

“I guess across those three physical firming channels you can manage that. And of course we tap the financial markets to make sure we cover any other residual risk we can’t absorb through those other mechanisms,” he said.

Asked specifically about whether the company had plans to acquire gas turbines or pumped hydro capacity, CEO Ross Rolfe said it was something that the company had been thinking about and working on “quite a lot.”

“We do believe that it will be possible for us to meet that need, but of course the cost of that is something which we need to consider carefully and also be confident that it’s going to deliver across the portfolio of assets the sort of returns and risk management function that we require,” Rolfe said.

“We probably do see a sort of mix of different technologies there, as you know we’ve got a battery in place which has got a very high fast-start capability, and that becomes increasingly important when the 5-minute settlement rule is introduced.

“But we’re also looking at other different options, as well, and we certainly hope that we’re going to be able to find a very viable solution.

“But as Paul mentioned we’re not totally dependent on that, we have other mechanisms at our disposal including buying caps in the market more generally and also structuring our C&I contracts to be able to work with our partners on managing the demand side to limit our exposure to those high price events.”

On national energy policy, Rolfe said this “remained in disarray … (with) little prospect of a sound policy framework emerging in the near term that can deliver the trifecta of affordability, reliability and lower emissions.”

Indeed, he added, “we seem to be further away from a policy outcome that enjoys bipartisan support than we’ve been since the inception of the NEM.

“While policy and sentiment are regularly debated, the reality is that Australia is transitioning to a lower emissions electricity future and substantial amounts of new generation will be required to replace the ageing fleet of thermal generators.

“We expect that, without government intervention, the preponderance of replacement generation will be based on renewable fuels and that flexible fast-start machines as well as storage will play an increasingly important role in the emerging market,” Rolfe said.