Neoen secures finance for its “virtual” big battery in Canberra

French renewables giant Neoen has completed financial close on its Capital Battery, a 100MW/200MWh lithium-ion battery storage facility it is developing next to the Queanbeyan substation in the ACT.

The milestone for the so-called “virtual battery” project was announced on Wednesday, achieved through a mix of Neoen’s equity and senior debt facilities provided by the federal government’s Clean Energy Finance Corporation (CEFC) and Infradebt.

Neoen Australia is building the Capital Battery as part of its winning bid in the ACT’s 2020 renewable energy auction, that will also see it build the first 412MW wind stage of the massive Goyder South hybrid project in South Australia.

The project is currently under construction and, unlike the Tesla technology used Neoen’s other big battery sites, is using Doosan as the tech partner. Neoen says the project is on track to commence operations in the first half of 2023.

Neoen will be the long-term owner and operator of the Capital Battery and, once it is operational, will launch a Community Co-investment Scheme, offering ACT residents an opportunity to become financial stakeholders in the project.

“Virtual battery” deal to manage the solar duck curve

As RenewEconomy has reported, the Capital Battery project is also underpinned by what Neoen describes as a “virtual battery” deal with AGL Energy, that will allow the big utility access to 70MW/140MWh of the facility’s capacity.

The seven-year agreement, described as a first for Australia, gave a new take on how battery storage developers can offer their services to big energy companies and other off-takers, as AGL will be able to “virtually” charge and discharge the battery “as and when it chooses.”

“This offtake will enable AGL to hedge its customer load by virtually charging or discharging the battery at any time over 5 minutes trading intervals,” Neoen said in a statement at the time.

“It is ideally suited to managing the increasing challenges of the ‘duck curve’ and evening peaks faced by large electricity users and retailers.”

A sound economic and grid stability investment

For the CEFC, the $35.5 in finance for the Capital Battery marks the green bank’s third large-scale battery storage investment – but the first time it has introduced a co-lender, in Infradebt, which is also committing $35.5 million to the project.

“Our commitment to the Capital Battery adds to our previous work with Neoen on the Victorian Big Battery and Hornsdale Power Reserve in helping demonstrate the economic and grid stability case for large-scale batteries,” said CEFC CEO Ian Learmonth on Wednesday.

“These projects require substantial, tailored investment solutions, reflecting their high start-up capital costs and emerging and untested revenue models, alongside the ongoing development of the market for the risk mitigation services that batteries can provide.

“By encouraging the participation of co-investor Infradebt, the CEFC has crowded in capital to further build confidence in the sector,” Learmonth says.

Battery number three for Neoen Australia

For Neoen, the Capital Battery marks the company’s third large-scale energy storage system in Australia, alongside the 300 MW/450 MWh Victorian Big Battery near Geelong, and the trail-blazing 150MW/193.5 MWh Hornsdale Power Reserve in South Australia.

Neoen chair and CEO Xavier Barbaro said the financing of the Capital Battery demonstrated investor confidence in the innovative grid solutions Neoen is pioneering.

“Our portfolio of storage assets in operation or under construction exceeds 640MW worldwide, and we have a strong pipeline of battery projects in development on three continents.

“As a market leader in the storage sector, Neoen is all the more determined to play a central role in the energy transition across Australia and around the world.”