Case studies Publication Date 2 November 2021 Published 2 Nov 2021
The Victorian Big Battery
The 300MV Victorian Big Battery is currently to be Australia’s largest lithium-ion battery which assists in providing critical grid support services, reducing wholesale power costs for consumers and assisting in the transition to renewable energy in Victoria, Australia.
It utilises the System Integrity Protection Scheme (SIPS) which increases import capacity to Victoria by up to 250 MW, reducing the likelihood of unserved energy (USE) from high impact, low probability (HILP) events during summer periods.
- Victorian Government (Initiated the SIPS procurement process)
- Australian Energy Market Operator (AEMO, Manages the National Electricity Market, the Wholesale Electricity Market and the Victorian gas transmission network)
- Clean Energy Finance Corporation (Project funder)
- Neon Australia (Grid service provider)
- Tesla (Battery service provider)
- High reliance on concentrated, increasingly unreliable thermal generation
- Increased reliance on variable renewable energy that may be delayed or underperforming
- Delay to commissioning of Victoria to New South Wales Interconnector West and continued interconnector outages
- Weather events and high temperatures
- The culmination of these issues mean HILP events are increasingly likely to occur, presenting a significant reliability risk for Victoria
- Australia's green bank, the Clean Energy Finance Corporation (CEFC), committed AUD160 million (USD125 million) in senior debt financing in the designing, construction and operation process.
- This investment has been delivered as CEFC’s strategic focus on energy storage as a priority technology under the new Technology Investment Roadmap.
- Amidst the growing attention for completed projects, the Victoria Big Battery was the only greenfield utility renewable project to reach financial close that was financed by the government body so far in 2021.
Results and impact
- Consumer benefits: The SIPS will provide significant benefits on high USE day (a HILP) event equivalent to AUD 220.4m over the 11 financial years, where AUD 201.9m is passed on the Victorian consumers through avoided USE and electricity price savings. It is assumed that the wholesale price benefits flow directly through to retail prices, with the full impact of these being received by consumers. This reflects a benefit to cost ratio of 2.4.
- Market benefits: The remaining AUD 18.5M of benefits go to generators and other participants within the Victorian electricity market through dispatch and demand side participation (DSP) benefits. DSP benefits refers to reductions in the volume of DSP called up to relieve supply/demand conditions during trading intervals in the NEM. This translates to savings in payments to DSP providers
- Unquantified benefits: These include the positive impact on Victoria’s sustainability and ESG credentials and wider impact and interaction with the National Electricity Market (NEM).
Key lessons learnt
- Government investment into private sector projects: Government is taking an increasing role in financing Australia’s renewable transition. Together with private sector project proponents, investors and financiers, and government agencies such as the Australian Renewable Energy Agency (ARENA) and CEFC have developed a strong investment pipeline across a broad range of technologies that are reducing Australia’s emissions.
- Debt and equity rather than simple grants: CEFE does not provide typical grants, but rather invests both equity and debt to deliver a positive return for taxpayers across the portfolio. As a specialist investor on behalf of all Australians, with the support of the Australian Government, this approach focuses on projects with positive risk based financial return that are commercial and reflect CEFC’s investment requirements.