Oil giant Shell to build its first big battery with massive project in Melbourne

Global oil giant Shell is to build its first big battery project anywhere in the world after committing to a massive new facility to be built on the south-eastern outskirts of Melbourne as the switch to renewables accelerates.

Shell Energy, the local power subsidiary, has teamed up with the Green Investment Group run by Macquarie Asset Management, and a local property group, to  build the 200MW/400MWh Rangebank battery in the Rangebank business park in Melbourne’s south-east.

According to Shell and GIG, the project has already reached financial close and will begin construction soon and be completed in late 2024.

While it is the first big battery project to reach financial close, Shell is also planning even bigger batteries at Wallerewang (500MW/1000MWh) – the site of a shuttered coal fired power station in NSW – and a similar sized battery at Wellington, which it is developing with Ampyr.

Shell Energy Australia boss Greg Joiner says the Rangebank battery is being built to help the company hedge its risk from its significant portfolio of 19 terawatt hours of retail contracts – almost entirely with business customers – and with the rapid switch to renewables driven by state targets.

He told RenewEconomy in an interview it will be the first of many the company will build in Australia, and he expects to roll out one new battery a year as the grid energy mix switches rapidly towards renewables and storage.

“We would be targeting to look to bring that (to finance close) later this year,” Joiner said of the Wallerawang battery. “If we make good progress, given the switch to five minute trading, and the state targets for renewables, we are probably looking at a project a year for the next few years.”

Both Shell and CIG will hold 45 per cent stake in the Rangebank battery, which will cost in the range of $300 million to $400 million, while property owner Perfection Private will hold a 10 per cent stake.

The two companies say that the two hour battery will deliver a range of services, including allowing more renewables into the grid and delivering essential system services.

It will be operated by Shell Energy through a 20-year off take agreement, and will be built, serviced, and maintained by US-based Fluence, using that company’s latest Gridstack product. Fluence is also building the Hazelwood battery in Victoria.

Shell says it is the company’s first direct equity investment in a grid scale battery anywhere in the world.

“This signals Shell Energy’s commitment to accelerating the energy transition and contributing to growth of firming capacity,” Joiner said in a statement.

Joiner says the location was chosen because it was close to a good connection point and close to load, and the battery, and those that follow, will provide a physical asset that – thanks to its rapid response – can replace or support financial hedges now common in the market to manage risk.

He says it will provide arbitrage, hedging and frequency control services.

“As we see more thermal plant retirements (coal and gas), the way you manage risk is going to change. There will be a shift from financial to physical hedge using battery storage. This is very much a response to the generation mix changing.

“Grid-scale batteries are an essential element in the decarbonisation of the energy sector, and the need for storage solutions is growing rapidly,” said Greg Callman the head of energy technology at GIG.

Perfection Private, a real estate company, will be minority shareholder in the project.

GIG will transfer its interest in the project to its newly formed battery storage platform Eku Energy, which has a 4GWh pipeline of utility scale battery projects in the UK, Australia, Japan and Taiwan.

See RenewEconomy’s Big Battery Storage Map of Australia