Here's an article about Batteries by a fellow Redflow investor..
A few mentions below.
https://seekingalpha.com/article/4309094-big-tesla-battery-making-moneyHow The Big Tesla Battery Is Making MoneyKeith Williams Nov. 25, 2019 7:16 PM ET
Neon/Tesla battery in South Australia has numerous sources of income.
Plans to increase the size of the Tesla battery (by 50%) will provide up to 3 GWseconds of inertia, covering 50% of South Australia’s inertia requirement.
Many big battery projects underway globally, with utility companies incorporating them as part of expanded renewable energy in grid power.
Adoption of big batteries is quick to implement and is taking off now.
Hornsdale Power Reserve (Tesla batteries 100MW/129MWh, to be expanded to 150MW/194 MWh)There has been a
lot of noise about how inadequate batteries are for contributing to the transformation of energy from fossil fuel-based power to adoption of renewables. Much of that discussion revolves around how batteries can’t provide enough power to keep the grid going when the sun goes down or the wind stops blowing. This completely misrepresents and underestimates the role of batteries in the new low carbon world. Here I use recent data from the Tesla (NASDAQ:
TSLA) grid scale batteries at the French company Neoen’s (PA:NEOEN) Hornsdale Power Reserve in South Australia to illustrate how they make money and what role they play. Rather than marginalise battery technology as a bit player, increasingly batteries are becoming mainstream and a key part of a modern grid. This has positive implications for battery companies, including Tesla, CATL (CN:300750), LG Chem (OYCPK:
OTCPK:LGCLF), Samsung SDI (OTCPK:
OTC:SSDIY), grid infrastructure companies (Neoen, NextEra Energy (NYSE:
NEE)) and negative implications for gas as a bridging fuel.
Big batteries: Tesla got into the
big battery market through working with French company Neoen to fast-track the world’s biggest grid scale battery in South Australia in 2017. This facility has been
financially successful, with Neoen reporting revenue of $A29 million in 2018 ($A24.25 million in commercial revenues and $A4.3 million for contingency reserves) and $A22.25 million in the first 9 months of 2019. Revenue in 2019 was once again largely as a result of frequency control and arbitrage (buy low, sell high). Bloomberg indicates the cost of $A87 million and revenue in less than 2 years of $A52 million is an attractive investment proposition.
In Australia, big battery systems earned total net revenue of $A12 million in the September quarter, the
best quarter yet for grid scale batteries. FCAS (Frequency Control Ancillary Services) was the biggest contributor to revenue in the quarter. Those with a sense of history might be aware that
South Korea pioneered the use of batteries for frequency regulation long before big batteries on today’s scale had been dreamed of.
The big Neoen/Tesla battery is being expandedYou know something is going well when a facility is being substantially expanded after just 2 years of grid connection.
This is
what is happening with the Hornsdale Power Reserve (Neon/Tesla facility), which is located at the 309 MW Hornsdale Wind farm owned by Neoen in South Australia, where ~$A71 million of Tesla power packs are being
added to the facility. The interesting thing about this is that it won’t be just more of the same. New roles are emerging for big batteries in maintaining the grid. The updated size of this battery facility will be 150 MW/194MWh (up from 100MW/129MWh). The core application of the existing facility has been frequency regulation (all over Australia), enhancing grid reliability, reducing energy costs and enhancing renewable integration into the grid. The added capacity will be used to provide up to 3GWseconds inertia (~50% of South Australia’s inertia needs) stabilising services which are critical for large scale integration of renewable power. This will help South Australia progress from 50% renewables towards the state becoming net 100% renewable.
And it is suggested that there are many as yet unexplored roles for big batteries in managing a grid largely powered from renewable energy. Part of the challenge is that batteries have characteristics not exhibited by traditional power systems, such as near instantaneous response. It will be some time before the full capacity of big batteries will be clear.
Innovation landscape for stationary batteriesThere remains a lot of innovation in the static battery space, but so far Lithium batteries are making the most progress. There is interesting progress being made with sodium-sulfur chemistry, but this technology is still
being perfected for room temperature applications in the laboratory. Sodium batteries are heavier than lithium, so the opportunity for sodium-sulfur batteries is in the stationary battery area.
On the other hand, some flow batteries do offer immediate prospects and they are beginning to be commercialised. Flow batteries hold charge for long periods and undergo complete discharge/charge cycles without loss of performance. Of particular note is the flow battery technology based on zinc-bromine that is making some progress in remote (and often hot) locations to power phone towers. After a near-death experience, ASX listed company Redflow (ASX:RFX) seems to be getting some
traction in South Africa and
New Zealand. Redflow acknowledges that it needs a stronger capital base and it is looking for a corner-stone investor to provide capital and access to markets.
A
recent summary of various flow battery companies was dismal reading, as they all seem to be struggling with the relentless progress of lithium batteries. A key statistic is that the volume-weighted price of a lithium ion battery pack fell 85% between 2010 and 2018.
I’ll consider stationary home batteries and batteries for electric cars, buses and trucks in another article.
A bigger view of big batteriesHere I’ve been primarily focused on the opportunity for Tesla’s grid scale lithium batteries and specifically how the world’s largest stationary battery in South Australia is providing some insights as to where this stationary battery market is going.
Of course, Tesla doesn’t have this market to itself, although as Tesla has done in the EV market, Tesla is showing what can be done. Other battery companies see opportunity here, notably Fluence which is
installingwhat might become the world’s biggest battery at the Alamitos Energy Center in California (400MWh) and also a big battery in Australia currently. Fluence was formed in 2018 by combining AES (
AES) Energy Storage with Siemens (
OTCPK:SIEGY) Energy Storage. This is a group worth watching.
Chinese battery company CATL has contributed a substantial grid scale battery facility (100 MWh) which has been integrated with 400 MW wind energy, 200 MW solar PV and 50 MW concentrated solar in a
large demonstration project in China.
An interesting development in Australia is that one of Australia’s major energy utilities, Origin Energy, is considering 5 different
big battery storage projects across the country as it rethinks whether pumped hydro is the best financial option for managing renewable energy supply. The idea is that it might co-locate big batteries with gas generators at four of its sites, which might be a sign that they think that batteries might compete with their gas solutions, noting that gas is a fossil fuel and there is acknowledged need to decarbonise. The battery projects are not small, two of them being 200MW.
Two other major Australian energy companies are also contemplating substantial big battery projects to help manage increased renewable energy. AGL Energy has signed a contract for 200MW/400MWh (4 facilities each with 50MW/100MWh capacity) with China/Australia renewable energy company
Maoneng. Maoneng is coy about who will supply the batteries, although Maoneng has apparently received “partnership offers from the best battery manufacturers around the world.” A third company, Energy Australia, is also exploring big batteries which may or may not be relevant to its recent decision
to delay a major pumped hydro off-take agreement in Northern Queensland.
I’ve focused on Australia as an early adopter of the grid scale battery technology, but there are a number of substantially
bigger battery projects now planned, including a 1 GWh battery as part of the Phoenix, Arizona Salt River Project. It seems that Fluence could have the inside running as it has previously supplied a 40 MWh battery for Salt River.
It is too soon to know which companies will dominate the big battery area, but Tesla’s early and successful role would suggest that it will be a significant player.
ConclusionTesla is a complex company, with a lot of levers being pulled at the same time. I’ve
previously written that Tesla is interesting as it keeps innovating, while also bringing products to market. Today the focus is probably more on the “Blade Runner”
cybertruck announcement, which is likely to be a very hot property in late 2021. Of more immediate interest is the fact that grid scale batteries represent another area where Tesla has stepped in to show that there is going to be a substantial big lithium battery market. Tesla is an innovator leading this push, which is very relevant to the emergence of low carbon energy. While Tesla won’t have this market to itself, the Hornsdale Power Reserve’s success and early expansion are foreshadowing massive investment in this area globally. This is another reason to take Tesla seriously.
I am not a financial advisor but I track the dramatic changes in the power sector as the world begins to decarbonize this sector. If my commentary provides technical insights into the energy transition which is helpful to you or your financial advisor in deciding about investment in this area, please consider following me.
Disclosure: I am/we are long ASX:RFX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
