How can we quantify the lithium battery bonus?


The Tesla Big Battery just got bigger.

This week, French developer Neoen has completed the expansion of the groundbreaking utility-scale battery system at the 315MW Hornsdale wind farm in South Australia.

This is arguably the world’s most famous battery storage project – against, it must be said, limited competition! It was built in 2017 after a very public bet between Tesla’s billionaire founder Elon Musk and fellow billionaire Mike Cannon-Brookes. This came after a blackout in South Australia in 2016 that was wrongly blamed on wind farms.

The Tesla Big Battery has just been extended from 100MW / 129MWh to 150MW / 194MWh, and so I guess we should call it the Tesla Bigger Battery. But even this is poised to be dwarfed by a 600MW battery project that Neoen and Mondo Power are looking to building Australian state Victoria. The firms haven’t revealed if they’ll use Tesla there.

But it’s not just the size of the Hornsdale battery that makes it interesting. It’s not the Musk connection either. No, it’s the fact it’s still rare to find a major renewable energy project with a big battery retrofitted onto it. We’ve written about why in recent weeks.

However, we are still expecting to see strong momentum on the energy transition in the 2020s – even with the upheaval caused by Covid-19 pandemic – and so this is a model that more owner-operators might look at.

The battery bonus

There is evidence that this strategy could pay off financially.

This month, renewables data management specialist Greenbyte has published an ebook that seeks to quantify the financial benefit of adding a utility-scale battery system to an operational 500MW renewable energy plant.

This ebook, called ‘The Battery Bonus: Using Storage to Boost Returns’, features real data from an operational wind farm and a hypothetical battery, and shows that owners and operators of renewable energy projects could generate large returns by installing storage ‘behind the meter’.

For example, it shows that an investment of around US$96m in a 100MWh battery at a 500MW renewables scheme would generate a levelised net return – with operating and capital costs removed – of around $30,000/ day or $11m/a year. This is primarily because the owner-operator can store and sell the electricity that would otherwise be lost during periods when grid access is curtailed because of high renewables production.

We won’t get too deep into the research here. You can read it yourself here.

But the study shows that this hypothetical battery could help the owner-operator to deliver an additional 68.33MWh of electricity a day. It adds that the ‘battery bonus’ would grow in proportion to the size of the battery until all charging power is used.

It also draws in data from Lazard that highlights the revenue streams that could be generated from ‘behind the meter’ batteries, which are mainly grid balancing and peak power provision. Greenbyte said a 20-year lifespan of a battery is likely to be split between four years of grid balancing at the start of operations and 16 years for peak power, although added that battery systems could potentially last 25-30 years.

It argues that the benefit of having a battery ‘behind the meter’ is that the energy it captures is both effectively free, and would otherwise be lost; and concludes that the early adopters of this technology could gain an advantage over their rivals because they would be able to sell power predictably, and support the stability of the grid.

At Hornsdale, the Australian Energy Market Operator has indicated that the Tesla Big Battery has helped South Australia to avoid three further blackouts, between August 2018 and January 2020.

This means there are potential benefits to the grid operator, the battery operator, and the customers that rely on the electricity.

Yet despite these successes, Hornsdale is still a retrofit rarity. In a world where investment will be squeezed, utility-scale batteries are yet to take off.

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