Revenue from Tesla big battery at Hornsdale falls by half in third quarter

Revenue from the Tesla big battery at the Hornsdale Power Reserve fell by half in the third quarter – compared to the same quarter a year earlier – as the market from frequency control and ancillary services contracted, and as the country’s biggest battery took time off to complete its recent expansion.

Figures released by French renewable energy developer Neoen overnight show that battery storage revenue in the third quarter fell by half to  €2.6 million ($A4.2 million) from €5.3 million in the same quarter in 2019, even though accumulated revenue for the first nine months of the calendar year doubled to €27.2 million thanks to the windfall it made when Hornsdale played a critical role – along with the state’s two other big batteries – in keeping the lights on when the South Australia grid was isolated after a storm ripped down the main transmission line.

The latest revenue data from Neoen may be slightly clouded by the new battery storage additions, such as the Degrussa facility in Western Australia and smaller facilities in Europe, and which will soon be joined by the 20MW/24MWh Bulgana battery next to the wind farm of the same name.

But the  bulk of the revenue comes from Hornsdale and the revenue data from Neoen confirms the assessment from the Australian Energy Market Operator in its third quarterly Energy Dynamics report, which noted the fall in FCAS revenues in the latest quarter to their lowest level since 2018.

This poses a challenge for battery storage developers because while big batteries are capable of delivering many different services, few of these services are recognised or rewarded by the market. The FCAS market, once dominated by fossil fuel generators, is limited and batteries need to push into new areas, but falling costs will also help push batteries into bulk storage.

As we reported last week, there are a more than a dozen big battery projects being committed around Australia, with most in NSW as the biggest electricity market in the state prepares for the exit of its coal generators. See: Australian states and utilities go bananas over big battery storage

Neoen, for instance, justified the expansion of Hornsdale by pushing into new services such as synthetic inertia, a crucial development for battery storage that attracted funding from the state government, the Australian Renewable Energy Agency, and the Clean Energy Finance Corp.

Its latest battery storage project, the 300MW and 450MWh Victorian big battery, will earn much of its revenue from a contract with AEMO to provide grid protection services, for which it will earn $12.5 million a year. The project covers 250MW and 125MWh of storage, with the rest of the battery capacity presumably to play in other markets such as FCAS, inertia, and energy arbitrage.

In the latest quarter, Hornsdale was off line for 14 days because of work conducted on the expansion of its capacity from 100MW and 129MWh to 150MW and 194MWh. The battery receives a $4 million annual payment for the essential grid security services it provides to the local grid.

Elsewhere in Neoen’s latest quarterly revenue report, solar revenue rose 12 per cent compared to the third quarter of 2019 as a result of the contribution from the newly commissioned Capella power plant in El Salvador, and the El Llano power plant in Mexico.

However, Neoen said solar revenues were depressed by unfavorable irradiation conditions in Australia and the decline in Australian market prices compared to the third quarter of 2019.