Prices fall as first pumped hydro and two eight hour battery projects win landmark storage tender

A pumped hydro storage project has emerged as a winner of a NSW government long duration storage tender for the first time, in a landmark result that will also see another two eight-hour big batteries built in the state in coming years.

The winning pumped hydro project is the 800 megawatt (MW), 15 hour (11,900 MWh) Pheonix project next to Lake Burrendong, near Mudgee in the central west renewable energy zone.

It is being developed by Philippine-controlled Acen Renewables, which is showing a dab hand at winning government tenders.

It has previously won previous state generation tenders with the massive 720 MW New England solar farm, and the 400 MW Stubbo solar project, and was also successful with the 936 MW Valley of the Winds project in the federal government’s first tender under the Capacity Investment Scheme.

The other winners of the latest NSW long duration storage tender are the 125 MW, 1,000 MWh Stoney Creek battery to be built near Narrabri by Enervest, and the 100 MW, 800 MWh Griffith battery to be built near the town of the same name by Macquarie Group battery offshoot Eku Energy.

The tenders are a key part of the NSW roadmap to ensure that enough wind, solar and storage capacity is in place to allow the retirement of the state’s remaining coal fired power stations over the next decade.

All told, there will be more than a gigawatt and 14,000 MWh of storage capacity, and $3.5 billion of investment from this tender.

NSW energy minister Penny Sharpe says it means the state has locked in nearly half of its 2030 capacity target of 2 GW and two thirds of its 2035 storage target of 28 GWh (the pumped hydro project is expected to be on line in 2031). Another long duration storage tender is expected to be launched before the end of June.

“NSW is already powered by around 35% renewable energy. These projects will help ensure NSW households and businesses have access to affordable and reliable electricity as we continue transform our grid,” she said in a statement.

But it is the Phoenix battery that will be the biggest talking point – and the most pleasing for the state government – even though it is in the very early stages of the planning process.

Pumped hydro storage had failed in the state government’s two previous tenders, with contracts going out to just three eight-hour battery projects – at Limondale, Richmond Valley and Goulburn River – and the country’s first advanced compressed air storage project at a mine near Broken Hill.

Indeed, pumped hydro has been a struggle. A number of proposed projects for South Australia failed to get off the ground, the Snowy 2.0 project has suffered a massive blow out in costs and timelines, and only the Kidston project in north Queensland, which will be the first pumped hydro project in nearly four decades, appears to be going smoothly.

Acen says it plans to build two reservoirs near Lake Burrendong – with a vertical drop of around 350 metres between them. The two reservoirs – quite separate to the lake itself – will each hold up to 19,000 megalitres and be connected by underground tunnels. A 17 km 330 kV transmission line will connect the power generation facilities to the grid.

David Pollington, the managing director of Acen Australia said the Long Term Energy Service Agreements, known as LTESAs, offered by the government as a form of underwriting, help de-risk big and complex projects such as Phoenix, and provide greater revenue certainty.

“Large scale pumped hydro projects will help deliver positive outcomes for electricity market consumers in terms of reliable, renewable and affordable electricity,” Pollington said in a statement.

The LTESAs are designed to fill the gap between the projected returns and the investment required to build and operate the facilities.

AEMO Services, which ran the tender, says pricing had become “increasingly competitive” and some of the bidders had offered more favourable terms – such as reduced annuity caps and shorter contract periods – than the pro-forma. That will reduce costs for the government.

These prices did not include benefits which would include wholesale market price suppression, improved reliability outcomes, reduced curtailment of renewable generation, essential system services including frequency control, and providing system strength.

It also noted that the outcome was a “clear signal” of its willingness to select earlier stage projects with longer lead times. Phoenix is six years away from likely commissioning.

“Under the NSW legislation, we have the flexibility to pursue those earlier stage opportunities where it supports meeting the state’s future energy needs and is in the interest of consumers,” AEMO Services executive general manager Nevenka Codevelle said in a statement.

The Griffith Battery is the latest win for Eku Energy, which has already built the Hazelwood and Rangebank batteries in Victoria, is building the Williamsdale battery in the ACT (after winning another government tender), and is looking to add the Tramway Road battery near Hazelwood.

Griffith will cost around $300 to $350 million, indicating a continuing fall in battery storage costs. It will be built just 500 metres from the Griffith substation and Eku says it will help reduce the amount of curtailment of solar farms in the local region.

“This project underscores our commitment to accelerating the energy transition by delivering safe and reliable energy storage solutions, through providing cost-effective clean energy to existing and future generations, whilst also supporting New South Wales’ transition to a sustainable energy future,” CEO Daniel Burrows said in a statement.

The Stoney Creek battery, next to the Narrabri sub-station, is one of 17 battery storage projects under development from the Melbourne-based Enervest, and will likely be its first to market. Last year it announced it had contracted Swiss-domiciled and California based storage company Energy Vault to build the battery.

Managing director Ross Warby says the company also has a rapidly growing portfolio of more than 8 GW, including some wind and solar, that is being progressively unveiled and rolled out.

“We worked very closely with Energy Vault for this project, and we expect to be in early works by the end of the year,” Warby told Renew Economy.

“We have a lot of confidence in eight hour storage, particularly in NSW. Having the support of downside protection, and the upside opportunities, accelerates the conviction for investors.”

See Renew Economy’s Big Battery Storage Map of Australia for further details.