Australia’s green energy transition is starting to look a little disjointed, to say the least. Transmission costs are surging and projects are running behind schedule, and not a single large scale wind project has reached financial close so far in 2025.
The household sector remains strong – the leap in electricity bills has ensured that rooftop solar is still popular, despite fears of “saturation”, and the federal home battery rebate is proving to be a phenomenal success.
And those two technologies – solar and battery storage – seem the best bet at utility scale as well, given the falling costs of their technologies (particularly battery storage), their relative ease of deployment and the realisation that, together, they provide a near perfect fit for the demands of large industrial consumers.
Few project developers would now dare to build a solar only project, given that the growth of rooftop solar ensures that prices will be negative for many of the daytime hours.
The biggest surprise is that there is still not a large scale solar battery hybrid in operation yet on the main grid, although the Cunderdin solar battery project in the separate Western Australian grid has already been making its mark, time shifting the solar output to the evening peaks, and even on occasions beyond midnight.
See: From breakfast to bedtime: How first big solar battery is cashing in on evening demand peaks
That is about to change. Several solar hybrid projects are now under construction – including at Fulham in Victoria and Quorn Park in NSW – but the biggest of them all will likely be built near Gladstone in Queensland, supplying firm power to the state’s biggest energy consumer, the Rio Tinto owned Gladstone aluminium smelter and refineries.
Lachlan Martin, from Edify Energy, says the 600 megawatt (MW), 2,400 megawatt hour (MWh) contract it signed with Rio Tinto for the development of its Smoky Creek and Guthrie Gap solar and battery project is the biggest of its type ever signed.
See: Rio Tinto signs massive solar and battery deal to help secure future of smelters and refineries
A revenue share agreement
“It’s not a PPA (power purchase agreement), it’s a revenue share agreement,” Martin said. “And so Rio will be receiving value from not just the megawatt hours generated, sold, displaced, but any other additional revenue” from FCAS or other grid services.
Rio Tinto has made it clear that – despite mixed signals from the new LNP state government – the future of its Gladstone assets rests on its ability to transition from coal to renewables. Rio Tinto had already signed two huge contracts with the proposed 1.4 GW Bungaban wind project and the 1.2 GW Upper Calliope solar project.
Martin says there are many reasons why a DC-coupled solar battery hybrid makes sense. One is that it enables the solar project to avoid system strength charges, because a battery with grid forming inverters can provide that essential grid service.
The obvious one though is the ability to store solar output, particularly when prices are negative, and send them into the grid – or to a customer via a contract – in the evening peak. It also removes the variability over charging costs – what if the wholesale prices weren’t negative, for instance.
Martin also noted the introduction of new peak futures contract on the Australian Stock Exchange. Instead of 24 hour contracts, these are focused on the evening peaks – five hours from 4pm to 9pm – and that makes a solar hybrid with a four hour battery perfectly positioned to meet that market.
“These are perfect for solar hybrids to defend,” Martin said during a presentation at the Clean Energy Council’s Queensland conference in Brisbane on Monday.
“They have overlapping solar profiles and battery discharge profiles … we see this as a very strong future of revenue source.”
Good for the CIS
He also says solar hybrids are well positioned to be competitive in the federal government’s Capacity Investment Scheme, which has been newly expanded to 40 gigawatts that needs to be allocated by 2027.
“If you consider your battery is able to wash its own face and recover its own revenue as a standalone separate project, what you’re left with is a effectively a standalone solar farm that doesn’t have any connection costs or any inverter costs to recover, and you can be competitive in these auctions,” Martin said.
He also noted, as the Edify contract with Rio Tinto highlights, that there’s been a notable shift away from simple take or pay PPAs in the market that solar used to deliver.
“Industrial users are becoming increasingly sophisticated, they’ve got more data at their disposal, and they want products that suit their specific needs.
“It’s important to note that actually it’s business and industry which are responsible for the overwhelming majority of electricity consumption in Australia.”
“Solar DC hybrids avoid a few costs that can extend out to a hard forecast. Standalone BESS (battery) projects face uncertainty over their charging costs, and standalone solar and wind projects have system strength charges.
“These don’t apply to solar DC hybrids, and if you’re facing (the potential of) high BSS charging costs, your solar is probably doing alright in a DC hybrid.
“Delivering low cost power isn’t just about building cheaper batteries or getting access to cheaper panels. It’s about designing a project from the ground up, being able to support the financing for it and maximizing the lowest cost of capital.”
Martin also noted that while the capital cost of solar and batteries are falling, that is not the case for wind energy capital costs, which is also facing issues in approvals and connections.
No new planning approvals for wind projects have been submitted in Queensland this year, which is probably not surprising given that two wind projects have had their previous approvals cancelled and two more wind and battery projects have been “called in” by the state planning minister.
Waiting for wind
“Wind development timelines and approvals are becoming increasingly challenging, and we can’t risk electricity consumers waiting for a pipeline of projects that might not eventuate,” Martin says.
“Forecast declines in wind capex through bigger turbines have not materialized, and when viewed against the cost decline seen in solar hybrids, it looks like the construction cost of a solar hybrid and a four hour battery providing firm power on a per megawatt basis, is now in line or less than wind.
“The next future trend is data centers, so they’re already 2.4% of the country’s load, and AEMO is expecting their use to increase by around 25% per annum. The horse has well and truly bolted on data service. They are getting built, and if we do not build generation to support them, they will crowd our other price sensitive energy consumers.
Stephen Sproull, from Hitachi, said Australia has been leading the world in the uptake of solar, and batteries, but curiously had not been so in the rollout of DC-coupled solar hybrids.
“Australia typically leads the world, but they’ve been a little bit behind on DC coupling,” he said at the same session. “But now the grid forming variant, is sort of leading, leading the world. So I think it’s an exciting next stage for the Australian market with this.”
Interestingly, Jack Han, from Tesla, also put the case for AC-coupling rather than DC Coupling, saying that some developers prefer the increased flexibility of AC-coupled solar and battery systems.
“I don’t think it’s a bad idea to have a mix of technologies in the system,” Han said. “We’re certainly seeing, as I said before, mostly AC around the world as it’s more flexible. In Australia there are certain incentives for DC, so I’d like to see how that plays out.”
