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By Sonali Paul
MELBOURNE May 7 Battery makers worldwide are
watching to see whether Australia's most wind power-dependent
state can keep the lights on by installing grid-scale batteries
by December, which could help drive the growth of renewable
energy across Australia and Asia.
A decade-long political stalemate in Australia over energy
and climate policy has effectively led to power and gas
shortages and soaring energy prices threatening industry and
If batteries help solve Australia's problems by storing
surplus electricity generated by wind and solar power,
countries like Indonesia, the Philippines and Chile, could
"I call South Australia the 'perfect storm' opportunity for
energy storage," said Ismario Gonzalez, global sales director
for AES Energy Storage, an arm of U.S. firm AES Corp,
which has installed or is working on battery projects in seven
countries, including Australia.
The more dependent the grid is on intermittent sources like
wind and solar, the more flexible the back-up sources need to
be. That's the appeal of battery storage. It can be switched on
and off easily, responding faster than a gas peaking plant.
The state of South Australia, where wind and rooftop solar
make up 44 percent of power sources, urgently needs to install
big batteries after suffering blackouts over the past year.
It has little back-up as coal-fired power plants in the
state have shut due to the rapid expansion of renewable energy.
That has made it more dependent on power from neighbouring
Victoria, its only link to Australia's national electricity
The state government plans to spend A$150 million ($115
million) supporting the installation of 100 megawatt hours of
battery capacity this year, which would be the world's
second-largest battery system behind one installed by AES for
California's San Diego Gas & Electric Co in February.
South Australia has yet to name a shortlist of bidders,
after having received 90 expressions of interest from more than
10 countries. So by the time it signs contracts, the winner or
winners will have only six months to meet a December deadline.
At the same time, the state of Victoria is tendering to
support construction of 100 MWh of battery capacity to be
delivered in two stages by 2018.
AES says lessons learned in South Australia could be applied
in Victoria, which is facing the loss some coal-fired power, and
elsewhere, like Chile, where solar power is growing rapidly and
will need to be combined with energy storage to avoid outages.
COSTS DROPPING FAST
Stiff competition for the two state battery projects, with
all the big makers like South Korea's Samsung SDI
and LG Chem, Elon Musk's Tesla Inc and U.S.
firm Greensmith Energy in the running, will help drive down
prices for energy storage, another factor that should speed the
spread of batteries along with wind and utility-scale solar.
"Combined renewable energy generation and storage solutions
are becoming genuine competitors with fossil fuel base load
generation. This will be the real game changer," said Josh
Carmody, head of Australia for Equis Energy.
Equis Energy, a fund set up by former Macquarie bankers to
invest in renewable energy projects around Asia, is building a
large-scale solar farm in South Australia and is seeking state
funding for batteries at the project.
Carmody said safety and performance problems as well as cost
had limited the use of batteries in the energy supply system to
date, but those challenges were being overcome rapidly.
For battery providers, the money making opportunity will
come not only from energy storage but crucial extra services to
manage voltage and frequency on grids, several energy storage
"Projects such as those in South Australia and California
demonstrate that there is now significant growth to come in the
grid support sector," said Bruce Cole, East Penn's senior vice
president, industrial sales.
Costs have come down 90 percent over the past 10 years, AES
Energy Storage vice president Brian Perusse said. Industry
officials estimated 100 MWh of battery capacity could be
supplied for $700 to $1,000 per kilowatt hour.
That's much higher than an offer made by Elon Musk on social
media to supply batteries to South Australia for $250 per
kilowatt hour. However that figure probably didn't include costs
of equipment needed to hook the system up, like transformers,
said AES's Gonzalez.
"The analogy I like to use is: that's a Tesla car with no
wheels and no battery, no interconnection," Gonzalez said.
Asked for a response, a Tesla spokesman in Australia
referred to the cost estimate tweeted by Musk and had nothing to
($1 = 1.3323 Australian dollars)
(Additional reporting by Melanie Burton and Jane Chung in
Seoul; Editing by Simon Cameron-Moore)