Tesla is coming to South Australia. The global clean tech icon has been awarded the Weatherill Government tender to build a 100 megawatt battery. It has promised to do it in 100 days. The hype has been literally electrifying.
Now how about we calm down and take a good hard look at the Tesla deal and what it means for South Australian consumers, electricity prices and reliability.
Subsidising large scale electricity storage in South Australia is a useful idea, providing the price is right. South Australia now sources around 52 per cent of its local generation from intermittent sources, mainly wind (42.7 per cent) and solar (9 per cent).
The SA electricity grid now has the highest level of intermittent generation in the world which has both reduced emissions but posed new reliability challenges. Cost-effective storage is a natural complement to wind and solar, so it makes sense to accelerate its deployment in the SA grid.
It’s still unclear how much of taxpayers money will go into the project, and what share this is of the overall project. There are suggestions that Tesla has offered big discounts to get the tender, as they will benefit both from the lessons learnt and the cachet of building the world’s biggest battery.
But batteries are still at the developmental stage in grid scale applications. A 100MW battery is still small in the scale of the 3200MW South Australian market demand. It’s unlikely to bring down power bills or significantly improve system security. It’s a start, not the full solution.
The Tesla battery will be paired with Neoen’s Hornsdale Wind Farm in the mid-north, as this will help it avoid the necessary safety and performance approvals needed when large electricity infrastructure is connected to the grid. This is critical to Tesla honouring its “100 day” challenge.
To have 100MW of new instantaneous power (with a discharge of around an hour) will be useful to help keep the lights on in some potential blackout situations (assuming the battery is charged and ready at the time).
But it is still relatively small and would almost certainly be overwhelmed in more extreme situations, like the system black last September, or long and protracted heat waves.
This first foray into large scale storage is probably most valuable for what we learn from it. Specifically, how does the battery operate in real time to maximise its revenues that will come from both providing technical grid services and taking advantage of higher wholesale prices? A successful commercial trial may incentivise other storage technologies to enter the market sooner.
In this regard it may have been preferable for the South Australian Government to spread the trial across three or four different smaller storage projects. This would have allowed the market to compare different technologies and how they operate.
Depending on its configuration, the Tesla battery’s operation may not be visible to other market participants. There is a risk its commercial performance will also not be visible and most of the important learning will be done by Tesla, not the market.
There are also potentially valuable lessons about how different applications of storage work. How does a storage device attached to a wind farm operate differently to a solar linked battery, or a stand-alone battery? How do longer discharge technologies like pumped storage compare to chemical batteries? What is the optimal capacity and discharge duration? Is an hour enough? These are valuable comparative questions that we will not find many answers to with a single 100MW Tesla battery located alongside the Hornsdale wind farm.
South Australia finds itself unwittingly at the leading edge of renewables integration. It is both a challenge and an opportunity.
If South Australia wants to really position itself as a smart adapter of new technologies, it needs to be smart in the way it charts the unknown waters it finds itself in now.
The fourth quarter of 2020 saw the NEM reach lowest average demand since Q4 2001 – with SA and Victoria’s spot prices hitting record lows. Are customers benefiting from the price suppression effects of renewable energy generation? Or is the market telling us a different story?
The way 2021 has started, you could be forgiven for thinking it is the year of the big battery. Plans for the “world’s largest battery” were unveiled for the Hunter Valley, while Meridian Energy announced a battery energy storage system to be co-located with the Hume Hydro Power Station. These are just the latest in a series of big battery project announcements.
The continued fall in minimum demand levels to new record lows in South Australia is raising a new challenge for the market.
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