The windfall contract that will underpin the cost of building Australia’s biggest battery project

Details have emerged of the windfall capacity contract that will underpin Australia’s biggest battery storage project, the Collie battery being built by France’s Neoen near a soon-to-be-shuttered coal fired power plant in Western Australia.

Neoen has proven to be the most successful renewable and storage developer in Australia, largely because of its unmatched ability to win key tenders and contracts offered by state governments and the Australian Energy Market Operator over the last decade.

In April, Neoen revealed its latest success was in a W.A. tender designed to help absorb and store the state’s excess solar in the middle of the day and feed it back into the grid in the evening peaks when it is needed most.

AEMO has recently released the details of that tender result, which shows that Neoen will be paid $591,000 per megawatt per year for the 300 megawatts (MW) of battery capacity subject to the contract.

That translates into $177 million a year. The contract, issued under the NCESS program designed to flatten the state’s solar duck, will last for just two years, but the $354 million Neoen will pocket from the contract will be sufficient to meet a significant part of the capital costs.

The Collie battery will be built over two stages and will be sized at a total of 560 MW and 2,240 MWh, making it the biggest in the country, ahead of a nearby 500 MW, 2000 MWh battery being built by Synergy, and the 275 MW, 2200 MWh Richmond Valley to be built by Ark Energy in NSW.

The first 219 MW, 867 MWh stage of Neoen’s Collie battery was one of at least three battery projects contracted last year to help flatten the solar duck, and which caused a big boost to the company’s forecast revenues and profits for fiscal year 2025.

The second stage, to be sized at 341 MW and 1363 MWh – bigger than the contracted amount – will receive the NCESS capacity payments from October 1, 2025 to October, 2027, and have not yet been reflected in the company’s revenue and profit forecasts.

Neoen has contracted Tesla to supply its Megapack battery product for both the Collie battery stages, and will likely represent a contract worth at least $1.2 billion, based on recent advertised Tesla Megapack prices. Total construction costs will be higher than that.

Together, the two Collie batteries owned by Neoen and Synergy will be able to provide up to 40 per cent of the average demand in the SWIS, and will play a key role – along with other batteries at Kwinana and Wagerup – in soaking up excess solar in the middle of the day, and discharging into the evening peaks.

And Neoen’s Collie battery may get even bigger. It has development approval for a total of 1,000 MW and 4,000 MWh of battery storage, and Neoen will surely have its eyes set – as will others – on a new storage tender in W.A. launched under the guise of the federal government’s Capacity Investment Scheme.

That tender, initially sized at 500 MW and 2,000 MWh, could be expanded, depending on the market response and offer.

Neoen’s multiple wins in government and AEMO tenders include the three stages of the Hornsdale wind farms in South Australia through the ACT government, and with the Hornsdale battery, the Victoria Big Battery and the Capital battery (again through the ACT).

It is also building the Western Downs battery next to the newly completed 400 MW solar farm of the same name in Queensland, and is building the Blyth battery in South Australia, which will help provide a “baseload renewables” contract to BHP’s giant Olympic Dam mine.

Blyth will be delivering that contract with the Goyder South wind farm, which will be the biggest in South Australia and which was another winner of a long term power deal with the ACT government.

“It’s a market in which there is no guaranteed profitability,” Neoen CEO Xavier Barbaro said at a recent analyst briefing when asked about the company’s success. “You still have to be creative to reinvent yourself.”