A Battery for system resilience and energy shifting
Tesla’s “big battery” will have power and energy capacities of 100MW and 129MWh respectively. At the time of writing, it will be the world’s biggest Lithium-ion battery when it launches (in December 2017).
Although the battery is being provided and built by Tesla, following their success in a competitive auction set up by the South Australian government, the battery will be owned and operated by Tesla’s big partner: French renewable energy developer Neoen. It will be located right next to the 309MW Hornsdale wind farm, also currently being completed by Neoen near Jamestown, South Australia. Through its adjacent wind farm, Neoen already had access to a connection point which needed no further upgrade. Thus the partnership between Tesla and Neoen was crucial in winning the contract for the battery project. (NB. The Hornsdale Wind Farm is available as a separate case study write-up here)
⇑ Here’s where it is!
Of the 100MW/129MWh battery capacity, around 70MW of capacity is contracted to the South Australian government to provide grid stability and system security. The most likely services are frequency and ancillary services (FCAS), which address unforeseen power system events such as major system faults, generator trips or transmission failures. The battery will also be able to provide quick reactive power, for voltage support, plus smoothing of the Hornsdale wind farm’s output. This part of the battery is designed to last 10 minutes, long enough to keep the grid stable while conventional generators such as gas power plants can respond.
The other 30MW of capacity will have three hours storage time. This portion will be used by Neoen to load-shift energy from their Hornsdale wind farm, where the battery is located. That in turn will allow them both to avoid potential curtailment enforcement and to take advantage of high peak prices in the electricity market.
Tesla refers to the battery as a “Tesla Powerpack”. The battery is no a single unit, but a collection of thousands of lithium ion batteries. Sixteen big, flat tray-shaped laptop batteries are connected in units about the size of a refrigerator. Then over 600 of these fridge-sized units are connected to create the final Powerpack: meaning the “big battery” actually includes close to 10,000 individual battery components.
The batteries are thought to carry guarantees for 15 years, contracts which allow for some level of degradation each year. With a footprint of about one hectare, the batteries are manufactured at the company’s new Gigafactory in Nevada and installed in waterproof cabinets.
The battery will have a separate meter from the adjacent wind farm. That means it can charge from the grid in the event that the wind is not blowing: a crucial point, given that it is contracted to deliver vital grid services.
Construction employs about 100 people. Many of these workers are shared across construction of the phase 3 of the Hornsdale wind farm, with the addition of Tesla engineers. Tesla has contracted Adelaide-based engineering firm Consolidated Power Projects (CPP) to build the project.
Cost & competition
Like almost every energy project, actual cost details remain confidential. Media estimates have varied widely: from A$50 million to A$200 million (at the time of writing, A$1 = 0.77US$). Analyst estimates tend to centre around the view that the battery should cost around $750-$950/kW, with a project cost up to ~$95 million.
Having claimed that if Tesla failed to complete the installation in 100 days, it would be provided for free, Elon Musk was reported to have said that such a failure would cost them about US$50 million. That claim was specific to the government contracted (70MW) part of the project.
The South Australian government has contributed to the project through its Renewable Energy Technologies Fund. The extent of this contribution isn’t known, though again media reports suggest it may be as high as A$15-$20 million. As the contract partner for grid services, there will be payments for those too. The Premier of South Australia suggested that the total cost to the government – both grant and grid payments – would amount to “around A$50 million” over 10 years.
The tender was a multi-stage procurement process which attracted around 90 responses to an expression of Interest, of which 14 proponents who were invited to supply and 5 shortlisted for detailed assessment.
According to local media reports, other firms who expressed interest are believed to include most of the leading battery storage names – LG Chem, AES, Kokam and others – along with developers such as Zen Energy, Carnegie Clean Energy and AGL Energy.
Although the assumption is that Tesla won the bid because it offered the cheapest price, the government’s official line was that the Tesla bid was “above all the other bids in terms of price, reliability and capability of delivering by 1 December.”
For the developer, Neoen, the project is regarded as a long-term, low-yield investment. This appears to fit with their strategy: compare their intention to own and operate the adjacent Hornsdale wind farm for fully 20 years.
Neoen are providing all the equity for the battery project, then plan to seek bank finance once it is up and running. Such is the speed of the rollout required by the South Australian government, to quote Neoen’s CEO, “there was no time to talk to the banks”.
Project Timeline: it’s short!
July 2017: Tesla announces that it has won a South Australia state government tender to supply the battery, partnering with Neoen to collocate the battery at their Hornsdale Wind Farm.
September 2017: A connection agreement is sealed with the transmission operator Electranet, starting the clock on Tesla’s promise to “complete the battery within 100 days, or it’s free”. Tesla described construction as 50% completed, so the project was well on schedule.
December 1st, 2017: The government’s target finish date, which both Neoen and Tesla committed to meeting.
photo source: Tesla (this is a completed one in California, but hey, they all look pretty similar…)
Storage, South Australia’s systemic problems and its market prices
In September 2016, a 50-year storm damaged critical grid lines in South Australia, triggering a sequence of events that led to a state-wide blackout. It left 1.7 million residents without electricity. In addition to inconvenience, the blackouts had big economic impacts: for example, global mining company BHP was forced to shut its Olympic Dam copper mine for two weeks, losing $105 million and wiping out the mine’s annual profit. Further load-shedding (local blackout) and extreme peak wholesale pricing events occurred during extremely hot weather in early 2017.
As previously described, the battery will provide network support. If there are network failures, or if big gas generators trip (like they did in March 2017) then battery storage will help keep the grid stable and the lights on, particularly because of its fast response capabilities.
The battery can respond to faults in milliseconds, while big gas generators take up to six seconds before first responding, and up to 10 minutes to get up to full capacity.
On windy nights, there can be more energy supplied by wind farms that the local (South Australian) grid can cope with. So the battery will provide the opportunity to store rather than curtail this excess.
On its own, this single battery will not solve South Australia’s network flexibility challenge: over the longer term, South Australia and other grids will need both more battery storage and more storage that can operate over longer terms (hours and days) and at bigger capacities. The jury is still out on whether batteries will fulfil these requirements or whether pumped hydro, solar thermal, or power-to-fuel technologies (such as electrolysis of water to hydrogen) will play big roles.
Even if these other technologies do see significant growth, battery storage is likely to remain the solution that is quickest to respond, and the cheapest to deploy and operate over short periods. So it will continue to play a critical role.
For example, some studies have suggested that a battery of around 100MW capacity could have dealt with the initial sudden changes in frequency and voltage in the crucial seconds that kicked off South Australia’s blackout in late 2016: when several towers collapsed, and three major transmission lines failed. It is less likely that that the system would have been able to ride through the remaining issues beyond that initial frequency event, but at least such a battery could have “bought some time”, time in which it may have proven possible to implement alternative, longer-timescale solutions.
Aside from the technical aspects, the mere existence of a new frequency and ancillary services (FCAS) provider in the market, contracted to the government, is deemed certain to lower these FCAS prices. Existing players, mainly gas power plants, will no longer be able to control prices, which have jumped sharply in recent years. These costs ultimately land on consumer bills, to the tune of up to A$50 million per year, according to local politicians (and explaining why the government has been so keen to promote alternative sources of system flexibility and resilience)
Similarly, a new 30MW player in the wholesale (bulk energy) market is hoped to have a downward impact on peak electricity prices. The normal average peak demand in South Australia is around 1600MW, but this can close to double during heatwaves: leading to extreme prices.
Although it doesn’t sound like much new capacity, note that it doesn’t take much to change prices: they are set based on the marginal cost of the last bidder in a “merit order”. That means that single, high cost generators can set these prices. Even modest capacities of battery storage have the potential to remove the requirement to take the very highest marginal cost bidders as part of the “stack” of market bids. By combining with the Hornsdale wind farm, the battery project is seen as an important step along the road to providing “dispatchable” renewable power.
Storage isn’t the only flexibility investment!
It’s important to note that the agreement struck between Tesla and the South Australian government is just one part of a A$500 million plan aimed at preventing a repeat of the blackouts and load-shedding problems that South Australia encountered during the summer of 2016/2017.
The biggest element of this plan it the building a A$360 million state-owned 250MW gas-fired power plant. That plant help will provide emergency back-up power.
The government is also looking at temporarily operating nine new small-scale turbines, supplied by GE, with a total capacity of around 276MW. They will provide electricity only when there is a shortfall in demand. They are planned to run on diesel at first, on a temporary basis, before being hybridised with the operation of the gas power plant.
Finally, in August 2017, there was announced the intention to develop a A$650 million, 150MW solar CSP plant (the Aurora project). That capacity, at present, would make it the biggest of its kind in the world.
Last updated: October 2017
** You may also want to read about the Hornsdale Wind Farm, which is written up as a case study here. **