Batteries 1 – Pumped Hydro 0

The two leading options to store electricity from intermittent renewables are batteries and pumped hydro. Judging from last week’s announcement by AGL, its strategy is steadily pivoting towards batteries and away from pumped hydro.

AGL stunned the market last week with its plans for 850 megawatts of new large scale batteries across the National Electricity Market by 2024. The biggest of these is plans for development of 500 MW of battery storage in NSW’s Hunter Valley, in and around the closing Liddell coal fired power station.

AGLs battery plans extend over three states: 180MW of new batteries in or going in to South Australia as its ageing Torrens Island A gas power station finally closes, a 100MW battery already committed in Queensland,  and contracting rights for 200MW of batteries being built in NSW. AGL has also been exploring the idea of a 50MW battery at Broken Hill to help out its 200MW Silverton wind farm partly stranded by grid constraints.

In April French renewable developer Neoen, the owner of the 100MW Hornsdale battery in South Australia, revealed it was kicking the tyres on a 600MW battery near Geelong in Victoria, presumably to try and get a financial leg up from the Andrews government as it did so successfully in SA.

Meanwhile in February AGL walked away from its proposed 250MW pumped hydro development at Kanmantoo in South Australia. It is still investigating a proposed 250MW pumped hydro site in the NSW Hunter Valley, although there have been no further dispatches since the feasibility study was announced in February last year.

Battery costs are high but have been falling steadily over the past decade and are projected to continue to fall further. The US National Renewable Energy Laboratory (NREL) estimates  costs could fall to around US$200/KWh. At those high costs batteries have to earn their keep dispatching into the most valuable peak times and selling services like frequency control (FCAS).

Battery revenues and costs: AEMO QED Q2 2020

In its most recent quarterly report The Australian Energy Market Operator (AEMO) identified how lucrative these services have become to battery owners. FCAS dominates revenues for batteries, making them far more lucrative earners than pumped hydro, which has to rely on arbitrage between its charge and re-charge costs to try and pay off all that concrete.

Pumped Hydro revenues and costs: AEMO QED Q2 2020

AGL is the biggest electricity company in Australia and is committing to large scale battery build as part of its strategy, without subsidy or government funding. If its strategic assessment is right, then its logical others will follow. The cost of batteries is likely to improve over time while the cost of pumped hydro – major capital works, drilling, concrete and steel – is likely to increase.

Batteries are more dynamic technology than pumped hydro but have lacked the volume to compete on large scale storage and dispatch. If AGL leads an investment charge then that will change too.

The question then is what future grid does the 2000MW giant pumped hydro colossus Snowy 2.0 find itself landing into at the end of the 2020s when it finally comes on line? Will it be redundant before it is switched on?