Queensland’s biggest battery to double in size after AGL signs “virtual” contract

French renewable energy and storage developer Neoen is to double the size of its newly completed Western Downs battery in Queensland after signing a 10-year “virtual battery” contract with AGL Energy, the country’s biggest coal generator.

The contract will prompt Neoen to add a second 270 megawatt (MW), 540 megawatt hour (MWh) stage to the Western Downs battery, taking its total size to 540 MW and 1080 MWh.

The first stage of the battery, which is just entering the commissioning phase, is already the biggest in Queensland – at least for the moment – and is located next to the 400 MW solar farm at the same site, also the biggest in the state.

The “virtual battery” contract was pioneered by Neoen in 2022, which signed up AGL for its newly commissioned 100 MW, 200 MWh Capital battery outside Canberra. It uses complex software that allows AGL to effectively hedge its load and production without actually owning or operating the battery, and provides a revenue stream to Neoen.

The Western Downs contract will be for 200 MW and 400 MWh, and will allow Neoen to operate the remainder of the battery capacity in other markets, including arbitrage and frequency control, and even grid services.

“The ability to virtually charge and dispatch this battery increases the number of tools we can use to support our customers’ needs while also supporting electricity supply into the grid,” Markus Brokhof, the chief operating officer at AGL, said in a statement.

“ Virtual battery agreements provide flexibility within our firming portfolio without the requirement to build, operate, and maintain the physical battery.” 

The deal continues the rush of interest by all the big electricity generation companies in battery storage. AGL, Origin Energy and EnergyAustralia are all investing heavily in the technology – either on their own account, on long term contracts or virtual deals such as this – which will reinforce their ability to control market pricing.

What they are not yet doing is to invest significantly in bulk clean energy – wind and solar – that would help replace the coal capacity that is expected to retire over the coming decade.

That lack of investment is one reason why the Eraring coal generator in NSW has extended for at least another two years at potentially significant cost to the taxpayer.

AGL already operates the Torrens Island battery in South Australia (250MW, one hour) and the newly commissioned Broken Hill battery (50MW, one hour).

It also has contracts to operate third-party batteries at Wandoan in Queensland.building the 500 MW, 1000 MWh big battery at Liddell, and has contracts with the Wandoan battery in Queensland and the Dalrymple battery in South Australia. It has numerous other battery projects in the pipeline.

The deal represents another coup for Neoen, which remains easily the most successful big battery project developer in the country, having built the very first big battery at Hornsdale in South Australia in 2017, and following that with the Victoria Big Battery, the Bulgana battery and the Capital battery projects.

It is also building the 238 MW, 476 MWh Blyth battery in South Australia (which landed a contract with BHP), and what will be Australia’s biggest battery – 560 MW and 2040 MWh – at Collie in Western Australia after landing lucrative contracts to help squash the solar duck in that grid.

It is also a coup for Tesla, which will provide 140 of its Megapack units for the project – as it has done for the Hornsdale, Bulgana, Victoria and Collie batteries. The lead contractor is UGL, owned by the listed Cimic, and the second stage is expected to be operating by 2026.

“Neoen is proud to have developed the “virtual battery” offer in Australia, providing a bespoke, smart, value-added product that meets the increasing needs of our customers,” said Neoen CEO Xavier Barbaro in a statement

“Over the past seven years, Neoen has been a leading player in storage in Australia and around the world, and we will continue to design and deliver integrated solutions to accelerate the energy transition.”

The battery will feature grid forming investors, which can provide critical grid services such as synthetic inertia and system strength, and which are considered essential to the transition away from spinning machines that burn fossil fuels to inverter based systems.

Neoen’s total storage portfolio in Australia now stands at 1,925 MW / 4,709 MWh in operation or under construction. The company, which aims to have 10 GW of capacity built or in operation by 2025, is currently subject to an agreed $11 billion takeover offer by Brookfield, which last year made a failed offer for Origin.

For more information, see Renew Economy’s Big Battery Storage Map of Australia.