Tesla’s Battery In South Australia Breaks Stranglehold Of Natural Gas Industry

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The massive 129 MWh Tesla Powerpack installation in South Australia has already been having a strong impact on the region’s electricity markets, saving grid operator Neoen and customers an estimated $25 million, or just over of the purchase price, in its first year of operation.

As the regional grid continues to adjust to the impact of a new energy storage block of this size, we are already starting to see some of the side effects of the world’s largest lithium-ion grid-scale battery. Namely, the battery, called the Hornsdale Power Reserve, is putting the squeeze on natural gas peaker plants in the region.

Peaker plants are smaller natural gas–fired electricity generating units (EGUs) that are idled for the vast majority of their lives. For those rare periods when the grid needs a bit of extra juice to meet customer demand, the peakers are fired up. That’s all fine and good, but their intermittent nature makes peaker plants extremely inefficient to operate and extremely polluting, as the startup and shutdown segments of a natural gas turbine’s operation (when the engine gets warmed up or idles down) are by far the dirtiest.

After watching the operation of the battery closely for its first year in operation, the Australian Energy Market Operator (AEMO) informed operators in the regional energy market that it would be putting an end to “the three-year-old requirement for 35MW of local regulation frequency and ancillary services to be provided in South Australia when there was risk of the state’s grid separating from the rest of the national grid,” according to Renew Economy.

“The operation of SA has changed significantly over the past 12 months,” AEMO shared in a written statement. “Synchronous unit requirements (for SA system strength) and the installation of the Hornsdale battery have ensured regulation FCAS is more readily available post-islanding of SA. Hence this requirement is no longer considered necessary.”

The major shift enacted by the large battery is that it removed the ability for natural gas–fired generation to game the market and took over that role itself.

The result of a competing on-demand electricity supplier entering the market was the immediate dilution of the tactics of the natural gas industry, which previously had a de facto monopoly on the local backup market. These gas companies almost entirely leveraged their control to ensure that the price of electricity rose to the market cap price of a staggering $14,000 per megawatt-hour whenever a call for backup power was made.

With the natural gas monopoly washed out, AEMO is realizing a much more stable market, as Tesla’s new battery installation responds to needs of the grid whenever more production is needed. This isn’t some do-gooder installation, but simply a response to a market that had been gamed to the point of making a business case for the world’s largest battery installation.

The good news … or the bad news, depending on how you look at it, is that these situations exist all over the world, to varying degrees. That is the lucrative new market Tesla is racing to gobble up, with battery production and procurement capacity as its sole constraint. Nearly all of Tesla’s batteries from Gigafactory 1 in Nevada went to the production of the Tesla Model 3, forcing the world’s largest battery producer to purchase even more batteries from external suppliers LG and Samsung for its larger energy storage products.

“Hornsdale has had a significant impact on the South Australia system,” Christian Schaefer, AEMO’s head of system capability shared, “and we have got new batteries coming on line with Victoria and South Australia.” While Tesla was the provider at Hornsdale, this improvement is not a Tesla thing — it’s a grid-scale battery thing and Tesla just happens to be the leader in the space.

Its Tesla Grid Controller, which was piloted at Tesla’s installation on the island of Samoa, pushes its Powerpack battery tech to the next level by adding another layer of intelligence that allows it to act as the brain for an entire island grid. This is achieved by more effectively and efficiently balancing energy generation — from solar, hydro, and traditional sources — as well as energy storage in the form of batteries and hydro with electrical demand from customers.

The electrical grid is the most complex machine humans have ever built, and watching grid-scale batteries flip these markets upside down in a matter of a few months while driving emissions down at the same time is both exhilarating and a bit nerve wracking. Thankfully, they’re paying out and proving themselves in increasingly larger installations around the world.

Source: Renew Economy

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Kyle Field

I'm a tech geek passionately in search of actionable ways to reduce the negative impact my life has on the planet, save money and reduce stress. Live intentionally, make conscious decisions, love more, act responsibly, play. The more you know, the less you need. As an activist investor, Kyle owns long term holdings in Tesla, Lightning eMotors, Arcimoto, and SolarEdge.

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