Large-scale disruptor

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It’s a somewhat unlikely, but promising partnership. U.S. e-mobility, solar and storage innovator Tesla is teaming up with the French firm Neoen to build the world’s largest lithium battery plant in South Australia. The activity in international markets is nothing new for Neoen. The Paris-headquartered company is already present in Portugal, Zambia, Mexico and El Salvador.

In its home market, Neoen also has a trailblazing track record. In 2015 it completed the development and installation of the 300 MW Cestas solar power plant in France, near Bordeaux, the largest of its kind in Europe.

As its official website indicates, this French small-and-medium sized enterprise (SME) has 1,125 MW of wind and solar projects already in operation or under construction across several continents, and a further 800 MW in the pipeline. “Our goal is to reach 3,000 MW by 2020,” Xavier Barbaro, the company’s CEO tells pv magazine.

While not trumping some of the headline-capturing low solar prices seen of late in the MENA region, in El Salvador, Neoen has signed a solar PPA of $55/MWh, over a 20-year period. The company seeks to be as competitive as possible in order to free itself from the procrastination and, at times, obfuscation inherent in waiting for government policies or initiatives.

Neoen was founded by French engineer and businessman Jacques Veyrat in 2008. Veyrat was also the founder of the investment company Impala, at which he remains a director.

An emblematic project

Building on this track record, Neoen is now entering the battery big league. A statewide blackout in September 2016 led the South Australian state government to seek to shore up its grid. South Australia is connected to the country’s major east-coast network, yet recent fossil-fuel plant retirements and a heavy reliance on wind generation means that its grid remains vulnerable to blackouts in extreme weather or during peak demand.

This predicament led the South Australian government to tender for both additional gas-fired generation and large-scale battery storage in late 2016. The government received around 90 proposals for its battery tender – which called for 100 MWh of storage – and announced that it has chosen the solution proposed by the Tesla/Neoen team in July.

INSIDE NEOEN

Neoen CEO Xavier Barbaro sat down with pv magazine to provide an brief overview of the company.

pv magazine: Can you describe Neoen in a few words?

Xavier Barbaro: Neoen is an independent power producer, created in 2008 with the ambition to become a world leader in renewable energy. At Neoen, we are convinced that the energy transition is a real revolution: being clean and competitive power, and freeing us from dependence on fossil fuels. Neoen started in France, where it is now the leading producer of renewable energy.

What was the process of internationalization? Building on its experience in France, Neoen has been developing its first international projects since 2010. Our integrated model guarantees the quality of our projects and our assets: we develop our own power plants, we finance them and we exploit them. Neoen is now the leading independent producer of renewable energies in France. Its financial strength, long-term vision, experience and international reach make it an essential player in renewable energies and, more broadly, energy transition.

In December 2015, when the climate conference (COP21) was held in Paris, Neoen inaugurated the largest solar park in Europe in Cestas (Gironde). At the international level, it is now able to offer the most competitive renewable electricity in Australia, Central America, the Caribbean and sub-Saharan Africa.

The two partners will install a 100 MW/129MWh lithium-ion based battery storage array. Tesla will deliver the system, while financing, ownership and maintenance and operation will be provided by Neoen. The final investment figure was not disclosed at the time of the announcement.

“It will be the largest facility of its kind in the world,” says Barbaro. The battery array will consist of 788 Tesla Powerpack systems, which will be integrated by Tesla using software and inverters, and it will assist in buffering the 100 MW Neoen wind farm, located in Hornsdale.

With the southern hemisphere summer looming, the system must be delivered, installed, electrified and operation by December 1. It is a bold aim and all eyes will be on Tesla, Neoen and the South Australian government as to whether all three parties can deliver on their promises. If the lights go out when the mercury rises as expected in December, January and February, there is little doubt the chorus of disdain from doubters of renewables in the Australian conservative commentariat will be defeaning.

“You can essentially charge up the battery packs when you have excess power when the cost of production is very low … and then discharge it when the cost of power production is high, and this effectively lowers the average cost to the end customer,” said Tesla’s CEO Elon Musk, when announcing its success in picking up the project. “It’s a fundamental efficiency improvement for the grid.”

When deciding on battery storage as a part of the grid-stabilization solution, South Australia was looking for an alternative solution to diesel generators or fast-start gas power plants to secure its power grid. As such, it will be viewed as something of a litmus test as to whether battery storage, at scale, can live up to its considerable hype.

High profile

The deal came several months after a widely publicized Twitter exchange between Tesla CEO Elon Musk and Australian billionaire Mike Cannon-Brookes, who founded the software company Atlassian. Cannon-Brookes asked Musk if he could deliver 100 MWh in 100 days to South Australia and Musk responded in a tweet, “Tesla will get the system installed and working 100 days from contract signature or it is free. That serious enough for you?”

And Tesla therefore sought a development and engineering partner to respond to the tender. “Tesla has chosen us on the basis of our achievements in Australia, and the good image we enjoy,” explains Xavier Barbaro. The 100-day period starts from the signature of the network connection authorization.

“Battery storage is the future of our national energy market and the eyes of the world will be following our leadership in this space,” South Australian Premier Jay Weatherill said in a statement. He added that the contract would be followed by other investments by Neoen and Tesla in the state. “This historic agreement does more than bring a sustainable energy giant in Tesla to South Australia; it will also have some significant economic spin-offs.”

Crest of a new wave

There are wider implications to the South Australian project. “I specifically think that the consistently lowering cost of batteries, coupled with renewables, is going to fundamentally reshape the energy landscape much faster than anyone thinks it will,” highlighted Tesla’s vice-president Cal Lankton, speaking at the project’s unveiling.

The radical upheaval Lankton points to is currently impacting a range of incumbent energy providers, and particularly those in the gas sector. The defenders of the gas generators have recourse to argue that the manufacturers of batteries, such as Korea’s Samsung and the USA’s Tesla, judge at least strange. “Pushing for kinetic inertia over synthetic inertia in the context of the modern electricity market is akin to supporting paper records over digital file,” said Tesla’s Musk, as reported by Australian renewables website RenewEconomy. “In the context of South Australian grid frequency issues, synthetic inertia is in many ways superior to kinetic inertia. The notion of synthetic inertia generally appears to be misunderstood,” added Musk, never one to shy away from a controversial statement.

Thierry Lepercq, CEO of the French company Solaire Direct and Vice-President of the gas group Engie (ex-GDF-Suez), told pv magazine that the understanding of synthetic inertia is reaching a crucial threshold: “The time has come, as in South Australia, to develop a systemic approach and ensure that the inertial dimension, security and stability of the networks will be fully supported (in real time!) by virtual DSO operators, combining decentralized production, storage, flexibility and demand management. All via architectures of the Energy OS / IoT type with aeronautical control-command.”

Engie’s Lepercq continues that it indeed stands to reason that someone will have to ensure the safety of these networks when the large rotating masses, primarily coal-fired power plants, stop operating. The Australian situation has been linked to the recent closure of the 1,600 MW Hazelwood aged coal generator plant, owned by Engie. The company’s economic model is “now largely a compromise [between technologies] in a growing number of geographies,” he summarizes.

Breathing space

According to Xavier Barbaro, “gas is better than coal in terms of both CO2 emissions and air quality,” adding that he is not naive about the possibility of the emergence of pushback to the arriving wave of batteries. “There will be room for everyone, including gas,” concludes Barbaro, striking a conciliatory tone.

The laws of the market could do the housework themselves: energy storage projects may bring the cost per kWh of a lithium-ion battery down from $10,000/kWh in the early 1990’s to $100/kWh in 2019, according to a new study written by a research team from University of California and TU Munich in Germany, and published in Nature Energy. “We find and chart a viable path to dispatchable $1/W solar with $100/kWh battery storage that enables combinations of solar, wind, and storage to compete directly with fossil-based electricity options,” write the researchers.

What is currently happening in South Australia may set a trend in what happens elsewhere in the world in the near future in parallel with the decline in the cost of battery storage. The Australian battle is therefore of global strategic importance, led by a bold regional government; a fast-moving French developer, and high profile American innovator.

Author: Olivier Daniélo