The Tesla big battery in South Australia – officially known as the Hornsdale Power Reserve – has emerged as the most profitable asset amongst the burgeoning renewable energy and storage portfolio of French developer Neoen, and is underpinning its goal of having at least one big battery in ever Australian state.
Neoen released its annual results in Paris overnight, and held a lengthy Capital Day presentation, that included some fascinating insights into its short term goals (more than doubling operating assets to 10GW by 2025), and its assessment of the wind, solar and battery storage markets.
The Hornsdale Power Reserve has already stamped its mark on the Australian electricity market, both in bringing the local gas cartel to heel, and its ability to provide critical grid security. At the same time it has already earned enough money to pay for itself.
In the latest annual accounts, it seems pretty clear that the Hornsdale battery was the single most profitable asset in Neoen’s portfolio across Australia, Europe and the Americas, largely as a result of the key role it played, and the windfall it gained, from holding the South Australia grid together early last year during a lengthy “islanding” event.
That windfall helped it deliver a €30 million ($A46.3 million) operating profit from Australian battery storage in 2020, almost all of which will have come from Hornsdale, even though its revenue from frequency control were lower than expected for the rest of the year.
Neoen also operates a small off grid battery (6MW, 1.4MWh) at the Degrussa mine in Western Australia, and the 20MW/34MWh Tesla battery at the Bulgana wind farm in Victoria, although this battery – to operate “behind the meter” is yet to be fully commissioned.
Neoen’s 80 per cent lift in battery storage earnings in Australia in 2020 compared to a 28 per cent fall in wind earnings in Australia (due to lower prices and the cap on liquidated damages from delayed projects such as Bulgana), and a 15 per cent fall in profits from solar (due to lower prices and lower than expected sunshine).
Neoen’s success with the Hornsdale battery is inspiring it, and other market players, to roll out more battery storage. CEO Xavier Barbaro told investors on Thursday the company aims to have at least one big battery in every state.
It is already building the 300MW/350MWh Victoria Big Battery near Geelong, which will be focused mostly on providing grid security and helping expand the operating capacity of the main link to NSW, and also plans a 500MW battery at the site of the now closed Wallerewang coal generator west of Sydney.
Also in NSW, Neoen is proposing a big battery as part of the big Thunderbolt wind, solar and storage project in New England, and it also has battery storage plans for what will be Australia’s biggest solar farm, the 400 Western Downs solar project in Queensland, and at the Kaban green power hub in north Queensland.
Neoen is also proposing battery storage in two other green power hubs – at Crystal Brook in South Australia and at Kentbrook in Victoria – but the biggest will likely be in the massive Goyder South wind, solar and battery project in South Australia, which received state planning approval in the past week.
That project could host a battery of up to 900MW and 1800MWh, along with 1200MW of wind and up to 600MW of solar, and forms a key part of Neoen’s newly announced ambition of spending more than €5/3 billion ($A8.2 billion) reaching 10GW of assets operating or under construction assets by 2025, up from 4.1GW now.
The annual accounts reveal that €53 million ($A82 million) was spent on the expansion of the Hornsdale battery in 2020, a further €37 million ($A57 million) on the Western Downs solar project, and €25 million ($A38.5 million) on the Victoria Big Battery.
Barbaro said Neoen’s ambitions have grown rapidly since its listing two years ago, when it envisaged rolling out about 700MW of new projects each year. That total has already passed 1GW, and it plans to double this again to 2GW of committed projects a year by 2025. Australia will form a major part of that strategy.
“The core part of this growth will come in countries where we already established,” Barbaro said. “We are on known terrain.”
Barbaro noted that the scale of projects was increasing rapidly, and while Neoen was unlikely to invest in the hydrogen electrolysers, it did see itself as a supplier of cheap wind and solar to those that do.