Solar farm developers in Queensland have had to come face to face with the cost of battery storage as they compete for a slice of the major 400MW of large-scale renewable contracts put up for tender by the state government.
The Queensland government is hoping to commission at least 100MW/MWh of storage as part of the tender, but is requiring all solar farms – but not potential wind projects – to add storage to their projects.
The first round of registrations attracted enquiries from more than 200 different proponents, and will announce in the next couple of days how many responded to the EOI (expressions of interest) process that closed on Tuesday. A formal tender will follow in November.
Solar project developers were required to provide equivalent storage for around 20 per cent of their average daily output.
So, if a 100MW wind farm with a capacity factor of 25 per cent produced an average 400MWh a day, it would have to come up with 120MWh of storage – about the same size as the Tesla big battery. A 30MW solar farm – the minimum allowed under the EOI – would need around 39MWh of battery storage.
Any separate battery storage installations must have a dispatchable rating of at least 5MW/5MWh.
Solar developers have been scratching their heads about this requirement for a bunch of reasons.
One is that Queensland is probably the state with the least amount of storage needs – given its surplus of coal and gas fired capacity.
But maybe the government in planning for the future, although they could wait two years and see storage costs fall dramatically. It would likely make sense for South Australia, but that is going to be a call for AEMO and the new Energy Security Board.
Secondly, they question why wind farms are not required to do add storage to their plants. The theory is that the tender has been structured to encourage more wind, as there are already more than 20 large-scale solar projects being developed or about to reach financial close.
Thirdly, this could be a heaven-sent opportunity for the Kidston solar and pumped hydro storage plant. The project already has an ARENA grant and a state-based PPA for the first stage of the solar project (50MW and the state government seems keen on helping out with transmission lines for the second stage).
Still, given the fact that losses during the process of pumping water up to the top dam, before letting it flow back into the pit will likely be around 20 per cent, then Kidston could be facing the same storage costs as the mob looking at batteries. It is going to be fascinating to find out.
The government is also keeping its options open on how it will structure any contract. It has indicated that projects will only require a contract for part of their facility, meaning the process could drive significantly more than 400MW of renewables.
For renewable energy projects the contract could include a fixed price for all output out to 2030, or a “sculpted” price that would presumably allow for higher payments in peak periods (courtesy of the storage, if need be).
A third option is a “cap and floor” structure which would see governments make up any difference if the market price fell below a floor, and the developer returning excess revenue if the market price rose above an agreed cap. The ACT government has a similar arrangement, but only for the deviations from a fixed price rather than a band.
That, presumably, has given the project developers much to think about, particularly as they grapple with the cost of battery storage, and its anticipated falls, and how the various “value streams” of battery storage can be extracted,
Their EOIs are not final, but the government and its advisors will study them closely before defining the terms of its final tender – hopefully getting the whole process locked in and contracted before the state heads for the polls.