Tesla big battery lifts profits by one third in 2019, expansion on track

The Tesla big battery – officially known as the Hornsdale Power Reserve – in South Australia lifted its profits by around one third in 2019, and the expansion that will cement its status as the world’s biggest lithium-ion battery (at least for a time) remains on track.

According to the annual results published overnight by the Tesla big battery’s owner, the Paris-based renewable energy and storage developer Neoen, the operating income from storage activities in Australia rose by 36 per cent to €12.1 million in 2019.

This storage income came almost exclusively from the Tesla big battery at Hornsdale (a small amount will have come from a small battery in France), and largely reflected a big jump in revenue from the frequency and ancillary services market, where the South Australia battery has played an increasingly dominant and important role.

Earnings from storage reflected as (EBITDA earnings before interest, tax, depreciation and amortisation – were up 24 per cent to €17.4 million  Previously disclosed revenue from the storage segment rose 15 per cent to €20.5 million.

In terms of EBITDA, it means that Neoen has recouped around half of the estimated $A96 million cost of the Tesla big battery, which was completed in late 2017 after South Australia sought to boost system security following the system black in September, 2016.

According to the latest data from the Australian Energy Market Operator, the Hornsdale asset and the other big batteries operating in Australia’s main grid (Lake Boney, Dalrymple, Ballaat and Gannawarra) pulled in record revenues in the fourth quarter of 2019 as they played an increasingly crucial role in the country’s energy markets.

Hornsdale and the other batteries were also cited for their key role in keeping the lights on in South Australia when the main transmission link was torn down by a storm, and the state had to operate as an effective “island” for more than two weeks.

That key role is likely to have boosted revenues for those batteries significantly in the current quarter.

The 100MW/129MWh Hornsdale battery will add more strings to its bow when the 50MW/64MWh expansion is completed and commissioned within the next few months, offering new services such as “inertia” and “grid forming” inverter capacity which could play critical roles as more renewables enter the market.

Barbaro also pointed out that while Hornsdale is delivering strong earnings for Neoen, it is also delivering significant savings for consumers, with a recent report by Aurecon putting total savings at more than $150 million, just from the FCAS markets, over the last two years, and made several important interventions in the market.

Note: Energy Synapse has published independent analysis on the Hornsdale battery, which dives deep into how the battery has been operating, bidding, and earning revenue in energy arbitrage and FCAS. Order your copy here: https://energysynapse.com.au/product/utility-battery-storage-energy-arbitrage-fcas-nem/ (Disclosure: RE will earn a share of any revenue).