Tesla’s Australian Battery Fix Comes at ‘Big Price,’ Analyst Says

Billionaire Elon Musk’s plan to install a giant battery to help fix a power crisis in South Australia will come at a “big price” with installation costing 60 percent more than alternative open cycle gas plants, according to Wood Mackenzie Ltd.

Musk’s Tesla Inc. won a tender Friday to build what the entrepreneur said is the world’s largest lithium-ion battery system capable of providing enough power for more than 30,000 homes. Little guidance or estimates were given on the cost of supplying the unit, sparking debate over the appropriate mix of power generation in the mainland state with the highest levels of clean energy.

Given current costs “the reality is South Australians are paying a big price to stabilise their energy supply, after a rapid build-up in solar and wind power generation,” Wood Mackenzie analyst Saul Kavonic said in an emailed note. Solar and wind account for about 40 percent of the state’s power generation.

A spokesman from Tesla’s Australian office declined to comment.

Batteries will be cost-competitive around 2025, according to Wood Mackenzie. The consultancy estimates the fixed cost of batteries in 2017 at $81 a megawatt-hour compared with fixed costs of $9 a megawatt-hour for an open cycle gas plant. The charging cost for batteries is estimated at $57 a megawatt-hour compared with the cheapest gas seen at about $59 a megawatt-hour. By 2025 gas could be more expensive than batteries given the rising cost of the fuel.

More Diesel Generation

Tesla’s battery plan will still leave the state’s blackout-plagued power grid vulnerable, Bloomberg New Energy Finance analysts led by Kobad Bhavnagri said in a July 10 report. While the 100 megawatt battery storage project would reduce its import dependency at peak energy use to 126 megawatts, the resulting shortfall will still need to be met by electricity interconnectors with neighboring Victoria, BNEF said.

A plan by the South Australian government to procure 200 megawatts of diesel generators for the 2018 summer and a 250-megawatt gas-fired generator will ultimately be needed to shore up supply, BNEF said.

Tesla’s battery plan “is a lot of sizzle for very little sausage,” Federal Resources Minister Josh Frydenberg said in an interview with Sky News on Tuesday. “Let’s focus not necessarily on celebrity. Let’s focus on what is needed to stabilize South Australia’s system which unfortunately today has not had a very good record.”

The state’s search for new forms of energy storage started after a severe thunderstorm triggered a state-wide blackout last September raising questions over the stability of its electricity supply. South Australia’s power market disconnected from Victoria with transmission towers and lines badly damaged, sparking calls for a second interconnector to be built with the state of New South Wales.

Musk has promised to build the battery and get it working within 100 days of a contract being signed or the California-based company would provide it for free.

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