Tesla battery cost revealed in new report

Updated September 28, 2018 06:16:48

Two years since South Australia was plunged into darkness during a statewide blackout, new light has been shed on the cost of the Tesla battery — just one of the projects designed to prevent power failure in the state.

Key points:

  • The cost of the Tesla battery near Jamestown has been revealed
  • The figure is within expectations, but it is the first time the amount has been made public
  • It comes almost two years since the statewide blackout

A 505-page report released by Neoen this month ahead of an initial public offering suggested the battery cost around $90 million, at the current exchange rate.

The giant 100-megawatt lithium ion battery near Jamestown in the state’s mid-north commenced operation late last year.

However, the cost of the battery was not made public for reasons of “commercial-in-confidence” and was estimated to be in the tens of millions of dollars, some of that to be funded by South Australian taxpayers.

“In 2017, acquisitions relate mainly to the Hornsdale Power Reserve project (€56 million), which was built and commissioned in the period,” the document stated.

Industry analyst Giles Parkinson, who runs renewable advocacy website Renew Economy, said the figure was within expectations.

“The $90 million is what Neoen and Tesla paid for the installation of that project. That was the total capital cost,” he said.

“The forecast ranged from $50 million at the lower end up to about $100 million.

“It includes the connection fees and the extra expense of delivering the project within 100 days.”

Government labels the project ‘messy and overly expensive’

Last year, Elon Musk promised to construct the battery within 100 days during a now-famous Twitter exchange with entrepreneur Mike Cannon-Brookes.

But the cost of the project has raised the ire of the SA Government, which accused its predecessor of pursuing a “rushed, chaotic and expensive fix to South Australia’s power problems”.

“The information that was released by Neoen a couple of days ago… makes it very clear the previous government’s implementation and delivery of the battery was incredibly messy and overly expensive,” Energy Minister Dan van Holst Pellekaan told ABC Radio Adelaide.

“It actually costs taxpayers’ money. There’s a cost of $4-5 million a year to have the battery in place.

“There are more costs than that involved.

“The government of the day before the last election did not share all of the costs and all of the information.”

However, Giles Parkinson said the battery was on track to “make revenues of about $25-26 million in its first year”.

“We don’t know what the profit margin of that is but we can probably estimate it’s a fair profit margin,” he said.

Construction of the battery followed a series of blackouts in South Australia during spring and summer of 2016 and 2017.

On the afternoon of September 28, 2016, South Australia’s power supply shut down when tornados knocked out critical infrastructure, including giant transmission towers.

Mr van Holst Pellekaan said the current government remained strongly in favour of renewables when “paired with storage”, and had committed to pursuing investment in batteries.

The new document confirmed Neoen’s contract with the former South Australian Labor government would see taxpayers pay about $4 million to the French company each year for the next decade.

Under the agreement, the South Australian Government has the right to access 70 per cent of the output at any one time to provide an urgent hit of power to prevent load-shedding blackouts, or to provide system-security services to the energy grid.

Before the battery’s installation, those services had come at a hefty price.

The Australian Energy Regulator found they had cost the state more than $50 million since 2015.

Neoen remains in control of the remaining 30 per cent of the battery’s output as well the majority of the battery’s 129 megawatt-hour storage.

Neoen can use it to make money by charging the battery when power prices are low, then provide to the electricity market when wholesale prices are high.

Topics: electricity-energy-and-utilities, alternative-energy, solar-energy, wind-energy, states-and-territories, company-news, environment, jamestown-5491, adelaide-5000, sa

First posted September 27, 2018 14:53:00