The National Electricity Market needs upgrades to transmission and an injection of storage if it is to cope with wind and solar claiming a higher and higher stake of generation. That’s the verdict from the Australian Energy Market Operator’s 2020 Integrated System Plan, delivered late July.
The conclusion is no surprise to anybody on the right side of the energy debate. But the really good news is that AEMO’s logic is already well understood by investors.
Listed Australian company Genex Power is working on delivering an 820MW portfolio of generation and storage, comprised of solar, pumped hydro, wind and batteries, but it needs money to do so. News that it has raised $28 million towards its lithium-ion Como Battery storage project in Queensland will send a breeze of reassurance through the sector, especially at a time when developers of large-scale solar in particular are struggling.
“There is no doubt that battery projects assist the grid, they balance supply and demand of energy and they also provide auxiliary services to AEMO, which effectively strengthen the grid,” says Genex executive director Simon Kidston. “We’re going through the connection process at the moment and at this stage we’ve encountered no issues.”
Provided the project is financed by the second quarter of next year Kidston expects the Como Battery to be operating by the end of 2021. Will it mean raising more funds? “We’re not able to answer that … we’re still finalising the vendor selection, which will determine the capital cost.”
As the company settles on a revenue model for the battery it will turn to debt capital to round out the total cost, expected to be about $50 million fully installed.
“Genex is very well capitalised,” Kidston says. “If you include our existing cash, we’ve got in excess of $50 million on the balance sheet.”
For Como, the company has raised $21 million in a placement with institutional investors and $7 million from existing shareholders at a 17% discount to the last traded price.
As unpredictable renewables replace dispatchable coal and gas generation in the grid, storage on a vast scale will quickly be required so that electricity supply can be matched with demand. Enormous projects are in the works, such as Snowy 2.0 and Tasmania’s Battery of the Nation pumped hydro schemes, and plans for large lithium-ion battery installations are becoming more common. Genex is working in both these camps.
“Pumped hydro is the low-cost way to store energy,” Kidston says. “Our pumped hydro project can store 2GWh of energy on a single pumping cycle – 250MW for eight hours. Como will store 50MW for 1.5 hours. Batteries tend to be for shorter periods of time, whereas pumped hydro has a different application.”
Genex has been working towards building a portfolio of large assets for many years: so far it has 50MW of solar in operation and another 50MW under construction, with another 270MW of solar, 250MW of pumped hydro, 150MW of wind and the 75MWh Como Li-ion battery in various stages of planning. As technology costs wax and wane and the grid is slowly redesigned, it takes great confidence to lock in your ambitions.
“We see ourselves as an energy storage and renewable energy generation company, and we focus intensely when we are planning these projects to find the right location and partners, the right technology and the right partners,” Kidston tells EcoGeneration. “Those arrangements tend to span at least a decade; in the case of the hydro pumped storage, we’ve put in place offtake and funding arrangements that last 30 years.”
Genex has benefited from $8.9 million in ARENA funding for its 50MW Stage 1 solar project and $9 million towards its Stage 2 hydro and solar projects at its Kidston Renewable Energy Hub in far-north Queensland
In a world where the technology is evolving at a rapid pace and the assets count as long-term public infrastructure, the slow build-out of a network of clean generation will rely on investors keeping their nerve. In Australia, Genex Power is an example of an energy ringleader in action. It has a lot to deliver before the show’s over.