Two Years On, Elon Musk’s Big Battery Bet Is Paying Off in Australia

(Bloomberg) -- Two years after Tesla Inc. installed it, the world's biggest lithium-ion battery is helping to avert blackouts and lower costs as Australian grids struggle to handle surging renewable power generation.

The Neoen SA-owned Hornsdale Power Reserve has responded to three major system outages, helping to restore stability to the network and lower the costs of running the grid, engineering consultant Aurecon Group said Friday. The battery started in 2017 after Elon Musk famously won a bet that he could get a 100-megawatt system up and running in 100 days to help solve a power crisis in South Australia.

Hornsdale and other grid-scale batteries offer a way to tackle the variability of wind and solar power, and South Australia is seen as a global testbed in the transition away from fossil fuels, with the state getting more than half its power from renewable sources last year. Confidence in the global energy storage market faltered in 2019, mainly as a result of fires in South Korean installations, with global growth shrinking for the first time ever, BloombergNEF said Thursday in a report.

Hornsdale “demonstrates at scale the potential for battery storage to provide fast-acting supply and demand balancing,” Aurecon Managing Director Paul Gleeson said in a media release. That “is critical to maintaining consistent frequency for grid stability and improving integration of renewable energy.”

Batteries smooth out power flows which can threaten network stability when they become volatile. The Tesla battery can respond to these frequency events much more quickly than coal or gas-fired generators, which have traditionally performed the role in Australia, and at a much lower cost, said Garth Heron, Neoen's head of development in Australia.

“The grid has a heartbeat that needs to be regulated,” Heron said in an interview. “I think there will be a faster battery roll-out than most people expect. They really are able to solve a multitude of problems.”

Hornsdale reduced network costs by about A$116 million ($76 million) in 2019, according to Aurecon, savings Heron said would be passed on to businesses and households in the state. The battery's introduction also slashed the cost to regulate South Australia's grid by 91%, bringing it in line with other regions in the nation, according to Aurecon.

“Not only has the Hornsdale Power Reserve identified how batteries can physically help the grid, it has also showed how they can make money along the way,” BNEF analyst Ali Asghar said. “More importantly, it has boosted investor confidence in the storage market by showing developers how revenues from different power based services can be stacked to build a business case for storage in Australia.”

Paris-based Neoen will add a further 50 megawatts of capacity at Hornsdale this year and has ambitious plans for a giant renewables hub at Goyder South, also in South Australia, which would incorporate 900 megawatts of battery storage. Tesla has installed three big battery systems across Australia.

To contact the reporter on this story: James Thornhill in Sydney at jthornhill3@bloomberg.net

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Rob Verdonck, Jasmine Ng

©2020 Bloomberg L.P.