Tesla big battery defies skeptics, sends industry bananas over performance

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The Tesla big battery has defied critics and skeptics at every level. It turns out to be the best deal the South Australia government has ever made.

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It’s now been just over 18 months since those famous “billionaire tweets”  – between Australian software pioneer Michael Cannon-Brookes and Tesla founder Elon Musk – set in motion a process that would see South Australia install the largest lithium-ion battery in the world.

The Tesla big battery, officially known as the Hornsdale Power Reserve (it is located next to the 317MW Hornsdale wind farm) has defied skeptics, and even the experts, in almost every conceivable way.

They said it couldn’t be done. Batteries can’t be that big. They can’t be built that quick. They won’t work. Ten months on from its installation, the Tesla big battery has emphatically proven its worth – faster, quicker, more accurate, more reliable and more flexible than even the market operator thought possible.

More importantly, it has given a glimpse of the future, how a grid can be effectively managed with a very high share of wind and solar – not just faster, but also cleaner, smarter and more reliable than the dumb and ageing fossil fuel grid we now depend on, and which has become victim to endless market rorting from the industry incumbents.

So much so that it may turn out to be the best value investment that the South Australia Labor government ever made, although their political opponents may be reluctant to admit it.

As RenewEconomy revealed exclusively last Friday, the Tesla big battery is making money that promises a quick return on investment, something not thought possible when the battery was built on time and on budget.

Share listing documents from its owner, the French renewable energy developer Neoen, reveal the construction price ($A90 million), the government contract ($A4 million a year, paid in monthly instalments, for system security), and total revenue of $A14 million in the first six months of 2018.

One day out from the second anniversary of the state-wide blackout that helped trigger its construction – it is worth reminding ourselves just how skeptical everyone – from the market operator all the way through to the rusted on renewable technology deniers – was about the technology.

There’s a lesson in this, and it is that technology developments are happening faster than most people have imagined. And will continue to do so, no matter how attached conservatives and political ideologues are to the technologies of the past. As we noted at the time of the tweets, it signalled the start of the end of the fossil fuel industry.

And it’s not just the politicians who think that a three word slogan is a de-factor energy policy who have gotten it wrong.

Sure, Prime minister Scott Morrison, enamoured with and lacquered by what he calls “fair dinkum power” (i.e. coal), famously and ridiculously compared the Tesla big battery to the Big Banana, or the Big pineapple. Resources Minister Matt Canavan likened it to the Kim Kardashians of the energy market.

But it also stumped the experts. First, the Tesla big battery – at 100MW/129MWh was bigger than most people thought possible.


The Australian Energy Market Operator, for instance, in the same month as the billionaire tweets, published a report which included this graph above – suggesting that the maximum size of a utility-scale lithium ion battery would be 1MW.

The then AEMO chairman Tony Marxsen (and it should be noted that this was before the arrival of CEO Audrey Zibelman) had said just months earlier that utility-scale batteries were about “10 to 20 years away” from providing meaningful contributions to the grid.

That comment, made to the COAG energy council, earned a disbelieving rebuke from then ACT environment minister Simon Corbell. “It was a remarkably conservative and pessimistic view of a technology …. and it highlights some of the challenges we face in the design of our energy markets when that sort of presentation is being made to decision makers at COAG level.”

The battery was also built more quickly than anyone thought possible.

The Minerals Council of Australia, the primary coal lobby in the country whose staff infest many nooks and crannies in the government infrastructure, also had a bleak take on batteries, quoting this graph in a document, citing energy experts, that suggested any utility scale battery – and they couldn’t imagine one bigger than 20MWh – would take at least one year to design and two years to build.

Musk, of course, had different ideas.

He promised that it would be built within 100 days, or it would be free. The 100MW/129MWh facility came in ahead of schedule, and was online and operating by December 1 – that is six months after the billionaire tweets, and just 62 days after Tesla signed the connection agreement with the network owner and market operator.

So what has the South Australia government got for the $A4 million it has committed for the first 12 months of operation, and every year for the next 9. Certainly, the then Labor government got a huge amount of publicity, although not enough to save it from an election defeat.

But there is no doubt it has played a more significant role in grid security that anyone thought it could – from keeping the lights on, intervening in several major “contingency events”, and lowering costs by a significant amount.

The Tesla big battery didn’t have wait long before showing off its wares. It was called into action by AEMO even before its official launch, injecting 70MW of “stored wind energy” into the market on November 30, just as prices soared amid the heat, low wind generation in South Australia and a missing coal unit at Loy Yang A.

And it didn’t take long to show off its wares once officially opened. Two weeks after its official opening it stepped in when a unit at Loy Yang coal generator in Victoria suddenly tripped, just to illustrate how quickly and accurately it could respond.

It did this on numerous occasions, causing AEMO to admire its “speed, accuracy and flexibility” and causing it to mull the idea of changing the market rules to accommodate technology that was so quick.

Numerous other interventions have taken place, and AEMO was so impressed by that reliability, speed, accuracy and versatility – far greater than any coal, gas or diesel plant – that it enlisted the Tesla big battery into its front-line defences – known as its System Integrity Protection Scheme (SIPS) – should a major event threaten system security.

That paid off last month – the day after the mocking Morrison was made prime minister, when two lines connecting Queensland and NSW tripped simultaneously after twin lightning strikes, causing widespread outages in three states, and the grids in Queensland and South Australia to be islanded.

Queensland, as it turned out, suffered a few issues with hydro plants and coal generators that struggled to respond, and either tripped or were pulled out of service.

In South Australia, AEMO acknowledged that the Tesla big battery played a key role in keeping the lights on and ensuring no generators were tripped and no load lost by sudden swings in frequency. South Australia was the only state to emerge from this “emergency event” unscathed.

There is also no doubt that the presence of the Tesla big battery has slashed prices, particularly in the FCAS market where the local gas operators had a cosy little cartel running.

Various private estimates have suggested that the big battery has slashed prices in key markets, and AEMO has acknowledged this and provided estimates of the battery’s own earnings.

That was confirmed by the details of Neoen’s share offer documents, which  provision of frequency control and ancillary services (FCAS) and in time shifting the output of wind power and arbitraging the surge in wholesale prices. It made more than $14 million in the first six months of 2018, putting it in line for a healthy return for the year.

So what has the South Australia government got for the $4 million it will spend in the first 12 months of the Tesla big battery? For a start, a $90 million investment in a new facility, a significant reduction in prices (possibly a ten-fold reduction over the cost), and a significant boost to grid security.

Not that Liberals want to get too carried away. “The former Labor government’s failed energy policies results in a rushed, chaotic and expensive fix to South Australia’s power problems, state energy minister Dan van Holst Pellekaan told The Advertiser, when asked about the battery pricing details.

Van Holst Pellekaan may have been right about the money spent on the diesel generators, which have yet to be switched on (apart from maintenance), and maybe could have been leased rather than purchased outright.

But there can be no doubt that the Tesla big battery – and the other batteries that are following – will give the government confidence as the state’s share of wind and solar leaps from 50 per cent now to more than 73 per cent by 2021 and 100 per cent by 2025. (Those are AEMO forecasts).

That is a key point. Tesla has been a path finder for the battery storage industry, proving that it can deliver energy security, can lower costs, can find revenues, and identify what it needs to be changed so that the full value of battery storage can be realised.

The market for battery storage is not yet developed, as Tesla has outlined and AEMO has recognised, and crucial changes to the settlement period that might favour battery storage (to 5 minute price intervals instead of 30 minute) have been delayed until 2021 under intense pressure from the coal and gas lobby.

But, thanks to the Tesla big battery at Hornsdale, and the investment from Neoen, more battery storage is on the way:

The Dalrymple North battery in South Australia, next to the Wattle Point wind farm, will come on line soon and has already displayed an ability to “island” the Yorke Peninsula and guarantee power to locals even if there are outages elsewhere.

The Ganawarra battery – another Tesla installation – is due to start commissioning in the next week and will be the biggest battery to be paired directly with a large scale solar farm.

Another battery at Ballarat will be the largest to be installed next to a critical network point in Victoria, while yet another Tesla/Neoen partnership is to be be built at the Bulgana Energy Hub near Stawell, to store energy in a 20MW/34MW battery from a 190MW wind farm, to deliver 100 per cent renewables to Nectar farms and the country’s biggest vegetable glass-house.

And there’s more. in South Australia, Sanjeev Gupta is planning an even bigger battery at Whyalla, a 10MW battery is being added to the new Lincoln Gap wind farm, a 50MWh battery at the Lake Bonney wind park and another battery at the Snowtown wind farm which will also see a solar farm added.

In Queensland, Windlab is installing a battery for its unique wind-solar-battery hybrid at Kennedy, and almost everywhere you turn, another battery is being proposed with yet another new wind and solar farm, including at the new South Mortlake wind farm.

Utility-scale battery storage come a long way, bigger, faster and more efficient than anyone would have thought.

 

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