University of Queensland’s Tesla battery paying for itself

In December 2019, the University of Queensland (UQ) flipped the switch on one of the state’s largest behind-the-meter battery storage systems – a 1.1 MW/2.15 MWh Tesla Powerpack. 

This week, it released “The business case for behind-the-meter energy storage,” a report on the first-quarter performance of its Tesla battery. The university, which funded the Powerpack through the sale of renewable energy certificates created by its 6.3 MW behind-the-meter solar PV portfolio, hoped that the energy storage system would reduce the university’s monthly peak demand charges.

It is fair to say its hopes have now been realized. The Powerpack reduced the university’s peak demand charges, and in the first three months of this year, it actually delivered AU$74,000 (US$48,300) in revenue. 

Revenue driver

The university's Powerpack has delivered revenue across several main services. 

Grid frequency 

The university partnered its Powerpack with Enel X, whereby it is paid to keep its battery on standby, so it's ready to respond rapidly to sudden grid frequency issues. The National Electricity Market's (NEM) Frequency Control Ancillary Services (FCAS) then pays the university for its storage. 

The university has measured its Powerpack during commissioning tests to have a response time of 200 milliseconds between zero to full discharge, and 400 milliseconds from full charge to discharge. This capability makes it incredibly useful to the NEM when it is under immediate pressure. 

FCAS outperformed the university's forecast by a staggering 54% – an outcome that is being put down to unprecedented pressure on the NEM brought on by the past summer's bushfires, storm events, and other issues facing Australia's outdated grid. 

Virtual cap 

A virtual cap contract (VCC) is a kind of financial insurance on the wholesale electricity spot market. To manage risk in a volatile market cap, contracts are offered for a premium, and a payout is provided if the market’s prices exceed that cap. Typically, in the NEM, the threshold is AU$300/MWh. The university’s Powerpack is able to discharge energy when the price exceeds the threshold. 

Give that the first quarter was the first real outing for the Powerpack, it has performed extraordinarily well. However, the university believes that its performance can only improve. First, it wants to develop an effective control strategy to maximize arbitrage revenue. However, this depends on the Australian Energy Market Operator producing better pre-dispatch price forecasts. 

The university also believes it can improve on its FCAS and virtual cap revenue. Indeed, its financial modeling estimates that the battery could provide a financial return of AU$245,000 per year in a short period, and pay for itself within eight years. The expected lifetime of the battery is 15 years.