Tesla’s giant battery in Australia is already eating away at ‘gas cartel’s’ profits, report says

We already reported on how Tesla’s giant battery in Australia made around $1 million in just a few days by taking advantage of the country’s volatile energy market.

But now a new report shows how it is also eating away at the ‘gas cartel’s’ profits.

When an issue happens or maintenance is required on the power grid in Australia, the Energy Market Operator calls for FCAS (frequency control and ancillary services) which consists of large and costly gas generators kicking in to compensate for the loss of power.

These services are so costly that it can sometimes amount to up to $7 million per day – or 10 times the regular value of the energy delivered.

Electricity rates can be seen reaching $14,000 per MW during those FCAS periods.

Now Renewecomy reports that FCAS were required on January 14, but the prices didn’t skyrocket to $14,000 per MW and they instead were maintained at around $270/MW after a short spike.

The bidding of Tesla’s 100MW/ 129MWh Powerpack project in South Australia on the services is credited with escaping the price hike, which would have cost energy generator and consumers millions in costs.

The Powerpack system is able to switch from charging to discharging in a fraction of a second, which allows Neoen, the operator of the system, to quickly respond when frequency issues happen.

Ed McManus, the CEO of Meridian Australia and Powershop Australia, told Renewecomy about the situation on the Energy Insiders podcast:

“If you look at FCAS … the costs traditionally in South Australia have been high …. and our costs in the last couple of years have gone from low five-figures annually to low six-figures annually. It’s a hell of a jump,”

“That plays into the thinking of new players looking to come into South Australia to challenge the incumbents. FCAS charges are on their minds.

“It’s a little early to tell, but it looks like from preliminary data looks that the Tesla big battery is having an impact on FCAS costs, bringing them down … that is a very, very significant development for generation investment and generation competition in South Australia.

“The South Australian government deserves a big pat on the back …. they have received a fair bit of flack – people saying if the power goes out, the battery can only power state for 5 minutes – but that is kind of irrelevant.

“The battery is there to do other things … and it looks like it has been phenomenally successful in doing that.”

The government didn’t wait for a pat on the back and it instead quickly contracted Tesla for another giant energy storage project.

We reported this weekend that Tesla will be installing Powerwalls and solar power on 50,000 homes to create the biggest virtual power plant in the world.

The project would result in 250 MW and 650 MWh of capacity, which could also be used for similar services as Tesla’s giant Powerpack installation but distributed in residential communities.