Tesla’s Giant Battery Saving Consumers Huge Dollars – Gas Turbines in Trouble

May 16, 2018

teslabatt_oz

General Electric, Siemens, and Mitsubishi, all scaling back production of gas turbines. This is one reason why. Future muddier for gas, bright for batteries.

I’ve asked the question before: Will Gas break wind? or Will Wind Pass Gas?

REnewEconomy- Australia:

The Tesla big battery in South Australia has already taken a 55 per cent share in the state’s frequency and ancillary services market, and lowered prices in that market by 90 per cent, new data has shown.

The stunning numbers on the economics of the country’s first utility-scale battery were presented at the Australian Energy Week conference in Melbourne on Thursday by McKinsey and Co partner Godart van Gendt.

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Speaking as part of a panel on the leading technologies and strategies that will help manage the transition to renewables in Australia, van Gendt said the data was more evidence that battery storage would “play a very big role.”

He said that a lot of discussion around the success of the big battery – the biggest of its kind in the world, and delivered at break-neck speed – had focused on the fact that “we did it,” and not on the economics.

“So, I thought I’d give you a few numbers from the market data,” van Gendt said.

“In the first four months of operations of the Hornsdale Power Reserve (the official name of the Tesla big battery, owned and operated by Neoen), the frequency ancillary services prices went down by 90 per cent, so that’s 9-0 per cent.

“And the 100MW battery has achieved over 55 per cent of the FCAS revenues in South Australia. So it’s 2 per cent of the capacity in South Australia achieving 55 per cent of the revenues in South Australia.

“So that’s great for the first battery in the market,” he added, “but if you’ve already had 55 per cent of the FCAS that are now gone, right… and a 90 per cent drop in price, then the business case for the second battery, of course, is a bit less attractive.

“So I wish the second battery in South Australia a lot of luck!”

Van Gendt’s calculations are just the latest in a series of assessments that show how the Tesla battery – despite being mocked by detractors for its small size compared to the overall grid – is having an impact on the market.

Various estimates have put the cost savings to consumers from the FCAS market alone at around $35 million, just in the first four months of its operation.

That’s a pretty good bang for the buck for the estimated $50 million investment by the South Australia government. South Australia is the only state that has experienced a decline in FCAS prices over the past few months.

The fact that the Tesla big battery has been able to puncture the FCAS pricing bubbles created by the gas cartel illustrates how even small additions to capacity – and new dispatchable technologies – can change the equations and market dynamics.

Tesla is doing more than that: It is also changing the way the market operators and participants are thinking about the grid, and underlying the case for new rules to be developed to ensure that their assets are properly recognised by the market.

Utility Dive:

Owned and operated by the French renewable energy company Neoen, Tesla’s HPR is having a huge impact on South Australia’s FCAS market, greatly reducing the price of grid service and increasing the electric grid’s reliability. The system proved its rapid response capabilities in December, following reports that it stepped in to provide power when units from a coal-burning plant tripped offline twice.

HPR represents only 2% of the power capacity in the state of South Australia and it has already cornered the FCAS market’s revenues, according to Van Gendt. Through his assessment, he aimed to illustrate the great impact that new dispatchable technologies can have on the energy market, as South Australia was the only state to see FCAS pricing fall over the past few months.

Other estimates credit HPR for saving consumers around $35 million in costs of ancillary services, to stabilize the grid, according to RenewEconomy.

balanced-load-and-generation

PJM Learning Center:

Ancillary services help balance the transmission system as it moves electricity from generating sources to retail consumers. Throughout the day, PJM operates markets to procure two important ancillary services: regulation and reserves.

Balancing the system means matching supply and demand while maintaining a system frequency of 60 Hertz. Several factors can impact supply/demand balance and the system frequency, similar to the careful balancing of a scale. Regulation and reserves work together to maintain this balance, but have different roles:

  • Regulation is used to control small mismatches between load (the electricity being consumed) and generation (the electricity being produced), adjusting for small tips to either side of the scale.
  • Reserves help to recover system balance by making up for generation deficiencies if there is loss of a large generator, resulting in a large tip in the scale.
  • In addition to Synchronized Reserve and Regulation services, Black Start Service supplies electricity for system restoration in the unlikely event that the entire grid would lose power.

mitsubishi

Cleantechnica:

At the other end of the spectrum are peaking plants, usually powered by natural gas, which are set up only to deliver power when the demand is exceeding the supply. These plants need to be maintained even when they are not needed, on a ready basis. Some operate as “spinning reserve,” running without actually putting power on the grid just so they can respond to demand changes as quickly as possible. Clearly, it is only fair that they charge high prices for power, possibly $250/MWh.

In emergency situations, the price of electric power can go to amazing heights. When a major baseload power plant goes off-line suddenly and without warning, power prices can go to over $10,000/MWh in minutes. Another of Giles Parkinson’s articles on RenewEconomy provides an example, in which Australian spot prices hit $14,000/MWh (Australian) when two large gas-burning power plants failed.

On the other hand, when the power supply exceeds the demand, spot prices can go into negative territory. Anyone who is set up to buy wholesale power can absorb the excess and be paid to take it. Batteries and pumped storage facilities do that.

Power generators often do not wish to lock themselves into contracts for production at a low, fixed rate. For example, when a contract between the state of Vermont and the Vermont Yankee nuclear plant had to be renewed in 2012, the owners of the nuclear plant offered to supply half of the amount of power Vermont had been buying from them at $65/MWh, with the remainder at spot prices. Vermont went with hydropower at $60/MWh for the entire amount instead. Vermont Yankee closed not long after that because it was no longer economical to keep it running.

Like Vermont Yankee, many power generators wish to maintain only some portion of their power under contracts at a low fixed price. With a contract for power at a low price, they can get a steady income, but they do not make a lot of money on it. They sell the rest of their power on the short-term or spot markets, because they believe they can get higher income there.

And this is where Elon Musk’s harpoon comes in. Tesla’s Hornsdale Power Reserve, by cutting the income available from spot power prices, has not merely cut into the incomes of peaking plants and other short-term suppliers. It has also eliminated some options available for baseload generators make profits.

When the high prices of spot power are pushed down, baseload power plants will no longer find the spot market profitable. In order to keep baseload plants profitable, the baseload power plants will have to sell their power under contracts at higher prices.

Meanwhile, with batteries like the Hornsdale Power Reserve, power from solar and wind power will be more valuable, because with battery backup their power can be used to supply an increasing share of baseload power. And that increase in value, which might not necessarily be reflected by an increase in price, makes their power all the more attractive.

One of the interesting things about this development is that it did not happen so suddenly because of market forces. It happened the way it did because Elon Musk felt frisky enough to place a $50 million bet that he could build his hundred-megawatt battery in a hundred days. He offered a bet too good for South Australia to miss out on, and the state committed $50 million in the big battery. As it happens, the state benefited from Musk’s win; it saved $35 million in the first four months of operations. And that is a pretty short return on the investment.

Fossil fuels have been harpooned.

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14 Responses to “Tesla’s Giant Battery Saving Consumers Huge Dollars – Gas Turbines in Trouble”


  1. If only the rest of the Australian states (and our federal government) could understand this. Instead we are getting government sponsored television ads saying “what we need is good reliable base load power” with the added comment “only coal can do this”.

    With these results from South Australia, even just looked at from a purely economic rather than environmental perspective, it is clear that the rest of the country are completely out of touch with our new reality!

    I wish our so called “leaders” would get their damn heads out of the ground!

    • dumboldguy Says:

      In the USA, our “leaders” have their heads up the butts of the Dark Money folks that own them, and that includes the fossil fuel Kochs. We are not building any huge batteries, but we ARE pushing pipelines everywhere to carry natural gas—-gas turbines are NOT in trouble here.

      Here in VA, the ladies who sat in a tree for a month on a pipeline right of way (on their own land) have come down under the threat of $1000+ a day fines. You can’t stand in the way of progress if there are big bucks involved for the greedy rich!

    • L RACINE Says:

      Leaders are elected by the population….

      Might I suggest that instead of pointing the fingers at the leaders you might want to look at the general education level of the population and the process of electing said leader…..

      Just saying…..


      • Actually, that’s not quite the case. Currently our federal leader sort of elected himself as the party he represents were tanking in the polls with the previous leader. Though admittedly, the old one was even worse on environmental issues. And they are not the only political party to have done this in recent times.

        I agree with your other points though…

  2. J4Zonian Says:

    Philip II reigned as the Spanish empire reached its greatest extent, but his financial and military bungling was in such contrast to his grandiose plans, and he failed so spectacularly Spain has been a second tier nation ever since, never a factor in global politics despite the vast cultural influence left over from its glory days in the late 1500s.

    The Spirit of Philip II lives on in the US.

    Cleantechnica says ”harpoon”. I’d say one more nail in the coffin of 3 of the 4 CONG energies. When, in 3 or 5 years EVs put the last nail in Oil’s, the fossil fuel age will be over. The nuclear reactor age is on life support in Korea and China and dying in nursing homes almost everywhere else. Clean safe renewable energy now makes up what seems like 70-95% of the new energy built in the US every year, and a similar amount in the world.
    https://electrek.co/2018/01/12/94-percent-new-electricity-capacity-usa-from-renewables/

    https://www.greentechmedia.com/articles/read/natural-gas-and-coal-generation-fell-in-2017-while-renewable-energy-grew#gs.rUeXhtE

    Now that the last nail is in except for oil, which is almost all transport, no doubt those percentages will be taking a jump up about as high as the speed of building renewables will allow. The faster they can built the faster they will be, now that there are virtually no economic and no effective political or social barriers. IL Drumpfe is trying but the only thing he can do is make US companies fall behind and fail while Chinese, Norwegian, Danish, and other foreign companies forge ahead both there and here. Make America Spain Again?

    • L RACINE Says:

      Your sources in the links are taking on Decembers Data to justify the statement that 94% of new generation capacity is coming from renewables.

      See the EIA link below.

      What do we think of people who take one data point out of a data set and use that “outlier” to make misleading statements??????

      And what does it say when you get people like yourself who believe that to be factual…. Hmmm seem to me that we have a bit of FAKE NEWS going on with this site. This is shameful shit!

      https://www.eia.gov/todayinenergy/detail.php?id=35412

  3. L RACINE Says:

    Every time I read one of these BS articles I have to go back and look at the real numbers and the FACTS….

    Lets start with the EIA data for new generation in the USA brought on line for 2017.

    First the good news…. No new coal fired generation brought on line for 2017.

    9.3 GW of new natural gas-fired generating capacity came online during 2017.

    6.3 GW of wind turbines

    4.7 GW of utility-scale solar photovoltaic systems were added in 2017

    3.5 GW of small-scale solar

    Wind made up 6.3% of total net generation, and utility-scale solar made up 1.3%—record shares for both fuels.

    https://www.eia.gov/todayinenergy/detail.php?id=35412

    So, currently renewables account for roughly 7.6% of generation capacity… hmmm understand the word “CAPACITY”???? not the same a actual generation…

    We have a very long way to go to make a real dent in this problem… these numbers are pathetic.

    Good news on Tesla Battery, but is it one project with very little run time. It is NOT proven or completely debugged. Does anyone remember other ways to store electrical energy that were promising on paper but became very difficult to successfully implement and keep operating in the field…. I DO (but that post would take to long lol)!!!

    Last point for you all to consider…

    ” Regardless of how the pie is getting divvied up, the utilities have a problem: They’re operating in an industry with long-term declining demand. And these are the good times. In the second and third quarter, the economy grew by 3.0% and 3.3% annualized. Yet power generation fell in both quarters. And the utilities know what happens to demand for electricity when the business cycle turns.

    This explains why utilities are so gung-ho about electric vehicles. They represent potential new demand for electricity that could pull power generators out of their quagmire. If utilities see that demand might be increasing enough to justify adding significant generating capacity to their systems, it could even spur new orders for GE Power and other equipment manufacturers. But getting to that level of critical mass in EVs is years down the road. For now, the quagmire of declining electricity demand remains. ”

    http://www.businessinsider.com/electricity-demand-dropping-power-industry-negative-impact-2017-12

    Now stop and think about that… net carbon emission only decrease if the generation is predominantly renewable…. otherwise you are just swapping out one source for an other….. Getting a stable grid that is predominantly renewable is do able… but it is going to take time (to scale up from 7.6 % of current renewable generation capacity to well in excess of 80% renewable generation capacity and to de bug grid and invest in the grid so the it is stable, big caution in this because that has not been proven nor implemented yet, hence tesla’s batteries), heavy regulation of the industry to force them down this road and lst but not least it is going to take a shit load of money…. (and oh by the way who is going to pay for the “stranded fossil fuel generation”????)

    Do we have any of those?

    Hence calling bullshit on this article (although the tech details of how the grid works and pricing was really good).

    As Joe Friday use to say “Just the facts, ma’am”

    • Gingerbaker Says:

      No capitalist in his right mind would want to get involved in that profit-squeezing picture – which is why I keep on harping about public ownership.

      You talk about ” a shit load of money”. Well…. duh. But, we the people are already paying ” a shit load of money” for fossil fuels. We will be paying a whole lot less money – in the medium and long run – for just the energy from RE. Saving the planet and quadrillions of bucks on adaptation costs is gravy.

      Btw…. what is this concept about “stranded assets”? Did not these assets already enjoy full depreciation?


  4. Reblogged this on The Most Revolutionary Act and commented:
    General Electric, Siemens, and Mitsubishi are all scaling back production of gas turbines – due to the greater economic viability of storage batteries for renewable energy.


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