Global spotlight on South Australia as it leads huge energy storage shake-up
Cameron Jewell | 14 March 2017
The world’s eyes have been on South Australia and its energy security issues after high profile tweets between the CEOs of Tesla and Atlassian went viral. Now SA premier Jay Weatherill has announced his state will invest $550 million in a bid to increase energy security.
The move will include a new $150 million renewable technology fund that will be used to build Australia’s largest battery storage system.
The announcement of a tender for a 100 megawatt grid-connected battery comes just days after Tesla’s Elon Musk said he would build a 100MW battery plant for SA in 100 days or provide it for free.
That challenge grabbed the attention of Atlassian co founder Michael Cannon-Brookes, and the subsequent engagement with Musk went viral and unleashed a storm of support for green energy, observers say.
Cannon-Brookes said he has had an embarrassment of offers to help fund a new battery storage plant from a range of sources – crowd funding programs, private investors, superannuation funds and infrastructure companies.
A number of local players have said they are likely to throw their hats into the ring to provide a potentially better price than Tesla.
“Major global battery suppliers have told me they could deliver a 100 megawatt on-grid battery in SA for less than the $330 million quoted by Mr Musk”, Energy Storage Council chief executive John Grimes said.
“There are over 50 brands active in Australia who could individually or in consortiums, deliver 100MW or more in 100 days of signing a contract.”
Zen, Carnegie and Lyon Group are some of the companies saying they have competitive offers.
Lyon Group partner David Green told Business PM he understood Tesla’s 100-day offer would occur from the signing of contract, however he said there was “about nine months of work” that needed to go into projects before that stage.
He said his company was “better placed” as it already had a project announced in the state and three more to be revealed over the next few weeks.
AGL has since further surprised the market by offering to make available a ‘hundred day ready’ site for the project, which it had already set aside for battery storage.
The Renewable Technology Fund will provide $75 million in grants and $75 million in loans to eligible projects, and aside from battery storage is expected to fund technologies like solar thermal, biomass, hydrogen energy and pumped hydro.
Putting gas in public hands
The largest commitment in South Australia’s plan, however, is $360 million to build, own and operate a 250-megawatt gas fired plant that will be able to help overcome issues with the National Electricity Market that saw the privately owned Pelican Point gas station stay idle while the state experienced a blackout.
“The first investment in a generation since the privatisation of [the Electricity Trust of South Australia] will give South Australians greater control over their energy security,” energy minister Tom Koutsantonis said.
Premier Jay Weatherwill said the decision to build a publicly owned gas station was due to the failure of the National Electricity Market.
“We have a National Electricity Market which is failing not only South Australia but is failing the nation,” he said.
He pointed to the South Australian blackout in February as a key decision to go down this route.
“On that occasion we had a private national electricity market that chose to blackout South Australians rather than turn on a power station. This is a totally unacceptable state of affairs.”
Legislation is also planned that would give Mr Koutsantonis more power in directing power stations to switch on in times of high demand, and directing the Australian Energy Market Operator to control flow on the interconnector.
“The minister’s power will be used as a last-resort measure if the national market does not act in South Australia’s best interests,” a government statement said.
There will also be an additional $24 million provided “to incentivise companies to extract even more gas” through the government’s “Plan for Accelerating Exploration” program, bringing total funding commitments to $48 million, with 10 per cent of royalties to go to landowners to further incentivise exploration.
“This will increase the supply of South Australian gas into the local energy market. South Australian energy generators, industry and households will have first offering,” the government said.
More green generation
Mr Weatherill said the government would also be tendering 75 per cent of its electricity supply needs over the next 10 years.
“It is anticipated this procurement will result in construction of a new privately owned generator in South Australia,” the government said.
The remaining 25 per cent of its electricity load will be tendered to support dispatchable renewable energy initiatives.
Energy security the key concern
There will also be an energy security target set, with retailers required to source more energy from South Australia producers rather than through the Victorian interconnector.
Mr Weatherill said the plan was about relying less on eastern states for energy security.
“At it’s heart: replacing Victorian coal with South Australian gas,” he said. “Making sure that South Australian power is reserved for South Australians.”
He said South Australia had gone from being ridiculed by the prime minister after the blackout to now being part of the international solution for a clean energy future.
A better approach needed
The Climate Institute said the moves by SA highlighted the need for a better national approach to energy security.
“Given the decades-long failure for national energy bodies to cope with the changes underway in the electricity market, it’s understandable that SA is stepping into the vacuum to solve its immediate problems, but it’s not the best way to run an energy system,” Olivia Kember, head of policy at The Climate Institute said.
“These triage responses to energy crises will keep occurring until we develop a nationally consistent, long-term strategy for our energy system that addresses energy security, affordability and the need to reach net zero emissions before 2050.”
South Australia’s actions forestall the recommendations of the independent Finkel Review into energy security currently under way, Ms Kember said.
Is gas the answer?
The Australian Conservation Foundation said the SA energy plan highlighted a “severe lack of leadership” from the Turnbull government on energy and climate change, which must be integrated to transition to a clean energy future.
“The South Australian plan is the result of a desperate situation where the Turnbull government has provided no leadership or direction. The prime minister is incapacitated by an ideological argument over renewable energy and fossil fuels,” ACF chief executive Kelly O’Shanassy said.
She said it was “disappointing to see the plan include 250MW of new government-owned gas fired capacity as gas is highly polluting”, and pointed the finger at the government for years spent “undermining renewable energy”.
“The Prime Minister has rushed to be seen to be doing something with his planned meeting with gas industry executives tomorrow highlighting just how far behind his government is on this current debate. A focus on gas supply and new gas infrastructure will leave Australia with useless stranded assets.”
Professor Ian Lowe, adjunct professor at Flinders University said it would have been preferable to provide support to the Port Augusta solar thermal plant rather than “prolonging the fossil fuel era by building another gas-fired power station”.
Professor Andrew Blakers from the Australian National University Centre for Sustainable Energy Systems said monetising demand management would have been preferable to adding more gas.
A recent report from ANU said wind and solar PV with pumped hydro storage would be cheaper than gas.