“Battery storage is on the cusp of its first boom cycle,” says Maoneng co-founder and CEO Morris Zhou. “How long this boom will last is any man’s guess.” With the coal generation that provides 65% of the National Electricity Market due to retire in lumpy exits over the next 20-odd years, the chances are it will be a rather long and loud boom indeed.

Australia may not be an early adopter of new technology but it has a record for catching up very quickly. When it comes to building big renewables assets, Zhou wants it known that Maoneng isn’t a laggard. “We can make decisions and move very, very fast.”

Morris Zhou caught the utility-scale solar bug in 2011 while visiting the commissioning of a plant in China.

The company has already made a few quick turns during its short history, having started off in residential solar in 2009. It was during a trip to China in 2011 that Zhou saw the logic of large-scale applications when he witnessed the commissioning of a 20MW solar farm.

“When I got back from that trip the idea of developing a solar farm had infected my mind,” he says. “It wouldn’t go away. I thought, we’re installing six panels at a time, trying to make a difference, whereas other players around the world are installing hundreds and thousands of panels at a time. Maybe we should be doing this in Australia?”

That doesn’t mean large-scale beats small-scale every time. “In certain applications it makes more sense to have rooftop solar, especially if in the future every household has a battery; in other cases it makes more sense having utility-scale,” he says. “They are competing with one another but I don’t think they are mutually exclusive.”

It wasn’t long after that trip to China that the business reset its destiny, to become a large-scale solar developer. Its portfolio today includes the 13MW Mugga Lane solar farm in the ACT and the 255MW Sunraysia solar farm in NSW.

Ready to charge

The 240MW/480MWh Mornington battery will be needed as Victoria reaches for its 40% renewables target by 2025.

A relatively quick shift from residential solar to utility-scale shows management has an ambitious streak. The next shift is just as bold. “We’re trying to find the trend in the market; we have to develop products and solutions the market needs,” Zhou says. “If the market has hit a bottleneck in terms of solar penetration – even if the market would like more solar but can’t take more – it wouldn’t be prudent to keep developing solar.”

The great solar-saturation was evident to Maoneng as far back as 2019, when it decided to turn its attention to storage. “We do have a substantial pipeline of solar, it’s just not a focus we will have over the next 36 months.” The next solar and wind boom is coming, just as soon as network issues and government policies are favourably nutted out.

Maoneng (where “mao” means prosperous and “neng” means energy) has five standalone battery storage projects on the go, all two hours’ duration: the 240MW Mornington project in Victoria, with a DA “imminent” and grid-connection work underway; 225MW at Gould Creek in South Australia, about six months behind Mornington; and 400MW in NSW spread between Lismore, Tamworth and at the Sunraysia site, all further down in the queue.

The market never lies

Storage is the target, but how do you figure out if owning a battery is a good idea when Snowy 2.0 is coming over the horizon along with so many other gigawatts worth of competition? Zhou says it is the market that determines the economics of a project. “The market is always the leading factor when we decide what to develop and where to develop,” he says. Thankfully, the market is “much, much more transparent” than it was in 2016, and the data that comes out of AEMO and preferred forecasters Ernst & Young allows for much finer-tuned decision-making. “This has made our life much easier.”

Every six months Maoneng reruns its calculations, testing a range of outcomes beyond supplied forecasts to frighten its model into throwing up red flags. “It’s checking the temperature of the market,” Zhou tells EcoGeneration. “Are we still developing what the market wants? Are we still relevant? How has the market reacted? Then we adjust accordingly.” Estimates for capital expenditure, operational expenditure and cost of capital are also tweaked during this regular round of sensitivity analysis.

Chemistry lessons

The Gould Creek battery in South Australia, another storage project in the pipeline.

A strategic shift into storage brings a pile of new business decisions, one of them being which type of technology to back. Maoneng began researching the different battery chemistries in 2019, looking over lithium-ion phosphate (LFP), nickel cobalt manganese (NCM), flow batteries and others. Having decided the “sweetspot” for storage is around the two-hours mark, they zeroed in on lithium-ion phosphate. “It’s the most demonstrated, most mature and the safest.”

Zhou can’t comment on why Neoen’s Victorian Big Battery caught fire during testing in July but he does know the Tesla Powerpacks at the site use NCM technology, known for having much higher energy density than LFP. “Much higher energy density has its pros and its cons,” he says. “It has a much shorter thermal runaway.”

Cells that rely on LFP technology, he says, combust at a much higher temperature.

Maoneng has chosen LFP chemistry for its pipeline of storage projects.

Build to own

Mugga Lane in the ACT, Maoneng’s first utility-scale solar farm.

The objective at Maoneng is to own the projects it develops or share ownership with an investor. “We take a long-term view,” says Zhou, listing 35-year expected lifetimes for solar assets and 20 years for storage. It’s about aligning short-term goals with long-term objectives, and accumulating project history knowledge to comfort co-owners.

Imagine you’re an investor looking at the bulging pipeline of wind, solar and storage projects in Australia. Would you be attracted by a developer with a record for “getting a DA on a site and then flipping it to the next owner”?

“There is always going to be an inherent challenge on projects [like that],” he says. “The next owner, whether they be an investor or developer, may not be fully across all the issues [associated with that project].”

The investment community is madly trying to allocate capital to the clean energy sector, which is driving down expected returns on premium projects – if not all projects. “There is an abundance of capital chasing these opportunities,” Zhou says, “but there is probably only a small percentage of projects that will get off the ground – and that’s probably to do with the quality of projects.” The essential ingredients for investors to scope out, he says, are the quality of the site and the choice of contractor and off-taker (if any). Investors will also need to be aware of the unplanned-for cruelty of curtailment and marginal loss factors, not to mention FCAS costs.

The first wave

The 255MW Sunraysia Solar Farm has suffered network issues.

Investors who caught the “first wave” of clean energy projects since 2016 are fully aware of the market risks in Australia, including curtailment, Zhou says. “Investors now are much more well informed about how to assess these risks.” Maoneng’s Sunraysia Solar Farm has suffered network issues, he says, but things should look up when the $2.8 billion NSW-South Australia EnergyConnect interconnector is completed. “That will alleviate some of the network stress in that region.”

Large energy users eager to satisfy ESG requirements are signing power purchase agreements that underwrite new projects at the same time as hedging conventional supply agreements. The appetite for PPAs with generators may not be as strong over the next five years as it was from 2016 to 2021, he says, where demand was driven by retailers needing to hit the 2020 Renewable Energy Target.

“That market is going to grow steadily,” Zhou says, “although I don’t necessarily see it growing exponentially. I think a lot of the gentailers now are assessing their position [and asking themselves] are they willing to enter into a long-term hedge.” Inevitably, however, retirement of large coal assets will see gentailers form a queue once again to sign offtake agreements with quality clean energy projects. “Those retirements are coming sooner than expected.”