Critics Weigh In: Tesla’s Australian ESS Apparently More Costly Than Diesel Generators

4 weeks ago by Mark Kane 69

Tesla Powerpack to Enable Large Scale Sustainable Energy to South Australia

After the wave of enthusiasm on the news of latest, and world largest energy storage system (100 MW/129 MWh), to be delivered by Tesla in Australia, some criticism has appeared.

Apparently, new technology costs more than old tech at the start…go figure.

Tesla Powerpacks

According to a Bloomberg article, the Tesla batteries will be over 60% more expensive than conventional generators.

Wood Mackenzie analyst Saul Kavonic said:

“Given current costs “the reality is South Australians are paying a big price to stabilise their energy supply, after a rapid build-up in solar and wind power generation,””

Federal Resources Minister Josh Frydenberg said in an interview with Sky News said:

“Tesla’s battery plan “is a lot of sizzle for very little sausage. Let’s focus not necessarily on celebrity. Let’s focus on what is needed to stabilize South Australia’s system which unfortunately today has not had a very good record.””

More generators still need to be installed to compensate for shortfall of the battery storage system, as the capacity of the Tesla system (as large as it is, at 100 MW) is still insufficient to cover all the projected demand needs.  In 2018 a 200 MW diesel generator will be added, then eventually a 250 MW gas generator.

Via Bloomberg:

“The consultancy estimates the fixed cost of batteries in 2017 at $81 a megawatt-hour compared with fixed costs of $9 a megawatt-hour for an open cycle gas plant. The charging cost for batteries is estimated at $57 a megawatt-hour compared with the cheapest gas seen at about $59 a megawatt-hour. By 2025 gas could be more expensive than batteries given the rising cost of the fuel.”

source: Bloomberg

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70 responses to "Critics Weigh In: Tesla’s Australian ESS Apparently More Costly Than Diesel Generators"

  1. John says:

    And this is why a carbon tax will be the only way to move the world forward. People are apparently incapable of looking at the total cost of things. Diesel exhaust floats away and seemingly disappears. Make them visible by associating a direct cost to them…

    1. georgeS says:

      John,
      Australia had a carbon tax but they repealed it:
      https://www.wsj.com/articles/australia-repeals-carbon-tax-1405560964

      1. Pete says:

        Don’t blame us for that, that was done by a guy who thinks coal is good for humanity, his words, not mine.

        1. mx says:

          Buggy Wipes for Sales!! Get Your Buggy Wipes Here!

    2. Martin Winlow says:

      The blinkered thinking behind these opinions is, frankly, unbelievable. So much so that one can only assume they all have an agenda that is anti-renewable energy.

      And, yes, the politics of Australia makes a tin-pot despotic dictatorship seem really quite civilised.

      1. mx says:

        You guys need to find your KOCH Prostitutes.
        This is a Global Effort by the Koch Bros. With 80 Billion in Assets these guys have disrupted progress primarily in the US, but also Canada, the EU and now your country.

        Two old guys who’ve invested NOTHING in Wind and Solar, are the source of a global effort to stop progress.
        That’s what 80 Billion Dollars and NO INNOVATION can do.

        1. arne-nl says:

          A global effort of Rupert Murdoch.

  2. Tech01x says:

    Not enough detail in the consultant’s report to know their assumptions. It doesn’t look right at first glance. One can look at the Lazard LCOE estimates and see that the consultant’s numbers don’t match up.

    A typical slip up is figuring out the charging cost… if they take the most expensive cost of providing electricity instead of the likely cost, then they can paint whatever number they want. And they can screw up the efficiency numbers as well as miscount the fixed versus ongoing costs. For example, the battery system is likely to last 12-15 years, but if they amortize the costs over 5 years or even sometimes 1 year, it looks very different.

    Without seeing the actual work, hard to spot where they went wrong.

    1. pjwood1 says:

      I agree. The $9/MWh to $57/MWh “fuel” cost spread is just wrong. I wish the Bloomberg New Energy guys had some editorial sway, before Wood Mackenzie pukes a sonnet for fossil fuels.

      $9 would leave zero room for O&M, and assume a $3mmbtu price, for natural gas.
      An unsubsidized solar PPA, at maybe 5 cents/KWh = $50/MWh. So, yeah, it may not be $9, but even if $25/MWh for NGas, you’d need a $50/ton carbon price (Ngas=.5ton/MWh). Sad, but not that far from true.

      I could see watts from this peaker being a good $40 higher/MWh, but given the short run time, what they’re really getting is reliability. In the end, people will play with these up front, and input costs. Carbon dioxide shouldn’t be free.

      1. Mike I. says:

        What they’re really buying is time to spin up cold gas turbines. This is actually worthwhile since the alternative is spinning reserves which is wasting fuel just in the interest of fast response. Carbon free batteries providing that function is probably significantly cheaper. I would like to see that cost analysis – high power short runtime batteries vs. spinning reserves.

        1. Just_Chris says:

          +1

      2. Doggydogworld says:

        $9/MWh is fixed cost, not fuel cost.

        Solar and wind by themselves compete with NG. All are in the $50/MWh range. Storing solar and wind in a battery multiplies the cost 3-5x.

        Giant batteries are a very dumb way to deal with occasional supply/demand mismatch.

        1. sveno says:

          A battery system can offer almost all ancillary services with a delay measured in milliseconds – that is a huge thing!

          1. Doggydogworld says:

            Ancillary services are continuous, not “occasional”. That can make sense. Batteries are way to expensive to let them just sit there, waiting for a near-outage situation. If not used continually they don’t justify their cost.

        2. Martin Winlow says:

          Sorry, but I really don’t think you have the faintest idea what you are taking about!

          If 130MWh of battery storage saves the cost of building another entire power station then it’s cheap by comparison. Unfortunately, transient power surges happen all the time in any network and having a buffer that causes very little in the way of knock-on issues in terms of planning and local environmental impact (which a compact battery storage system provides – amongst many other advantages) is a Godsend.

          Besides, the cost, now, will reduce very significantly in only a few short years directly in line with projected reduction in battery costs. In 5 years the cost of building this sort of battery storage system will likely be half what it is today.

          1. pjwood1 says:

            Martin, I think you’re onto something, but $9MWh fixed costs and $59MWh costs are still confusing. What are we paying up front for the two peakers? They can’t assume “hour” rates, and not tell us the “hour” assumption. So, I’ll try:

            You can’t build new natural gas for much less than $1 million/MWh. For example, the standard baseload CCGT can competitively price <~1 billion per 1GW.

            We need to assume how many hours this peaker is going to run?!?. 2 hours every day is a generous assumption. So, 21.9GWh, over 30 years life, commands what price? (You simply don't run these choices enough to leave the up front comparison, as quickly as WM did) So, to unpack where Wood M. is coming from, at $9 + $59 = $68MWh all-in, the way I believe a utility analyst might assess fixed costs would be 30 years, at 2 hours a day (many days would be zero) would be cost/21.9Gwh. The open cycle plant, at $1mn/MW, would be $100 million for 100MW. 100mn/21.9GWh shows me fixed costs = $4,566/MWh. At battery costs of $250/KWh, for 129MWh = $32 million, for a fixed cost = $1,472/MWh.

            Open cycle ngas would be chepaer than CCGT, but not by two thirds.

            So, again, I think Bloomberg's NEF, or Insight, team could have done a quick sniff test on Wood Mackenzie's analysis, before publishing. I've met a few of those guys, and may give a shout. They don't like to see the narrative get away.

            Double Check: WM says batteries "60% more expensive". We could go to $400/KWh, installed by Tesla. That would still mean WM has just 51.6 million to go find 100MW of ng plant. I don't see smaller capacity price like this, but chances are smaller prices higher/watt, than bigger.

            Do we even need a carbon price assumption?

  3. Adam says:

    Josh Frydenburg is yet another member of the greedy COALation guvvament who works for his corporate paymasters. Who gives a toss what he says.

    Since when was the best solution the cheapest one?

  4. unlucky says:

    Well dang. It’s a big battery and it certainly won’t hurt the situation. But it’s very disappointing that a natural gas or Diesel generator will be required too.

  5. vdiv says:

    Sounds like Tesla needs to give the Aussies a buy-one-get-two-free deal on ’em powerpacks, throw in an extra 200 MW.

    We can wait for the Model 3 another couple of months 🙂

    1. Kdawg says:

      Maybe they need a referral system. Refer 10 people to a 100MWh battery pack and you get one free. 😀

  6. wavelet says:

    Noone knows the actual terms of the deal… In a rapidly evolving, still far-from-commodity field like battery storage, analyst estimates are worthless. It’s quite likely Tesla offered “at cost” pricing, both for PR value as well as to provide the gigafactory with a nice chunk of guaranteed business (recall, 130MWh is equivalent to >9200 Powerwall units).

    1. unlucky says:

      Don’t you read Musk’s tweets? Tesla doesn’t negotiate prices. They have list prices on their website.

      Okay, I jest. I mean it is true. This is what Musk says. But it’s also patently ridiculous.

      1. Nick says:

        > But it’s also patently ridiculous.

        Why is that ridiculous?

        Being straight with your customers is part of Tesla’s corporate identity. It’s one of the reasons they don’t want to sell through Auto dealers.

        1. unlucky says:

          It’s ridiculous because if you publish your price then you competitor only has to take that figure and cut 1% off and they get every contract and you get none. You’ll be out of business in no time. Heck, they can just cut 0.1% off and still freeze you out.

          And if there are only two bidders than the group offering the contract doesn’t even get the best deal they could because the company doesn’t bother to bid as low as they can possibly go because know they already are the lowest bidder.

          It’s why contracts are offered with blind bidding.

    2. Dee says:

      This is just about 1000 P100D (1000 cars) worth of batteries! So no sweat and 3X larger then the world has built do date.. Piece of cake!! Nothing really for the Gigafactory!!

  7. peetah says:

    how long does it take to build a gas plant?

    1. buu says:

      open cycle from 3 months if there is gas supply ready

      1. georgeS says:

        actually I bet this study is correct. The batts are more expensive if you value carbon at 0$/ton.

        I was in the gas turbine biz and gas combined cycle is the best bang for the buck on carbon. The Plants have 60% or so cycle efiiciency and are fairly cheap to install compared to renewables with battery backup.

      2. Ben says:

        I am currently working at open cycle plant that is being built. Construction started in November and first fire should happen shortly. If they meet their timeline it will be a world record for this size plant. (Won’t disclose more info as I have no idea what can be openly discussed)

  8. Toni says:

    I “love” it when some idiot starts stating “facts” extrapolated from wild assumptions…

  9. Pushmi-Pullyu says:

    “The charging cost for batteries is estimated at $57 a megawatt-hour compared with the cheapest gas seen at about $59 a megawatt-hour.”

    This is one of the most ridiculous comparisons I’ve ever seen. Talk about an apples-to-Rubik’s Cubes comparison!

    The biggest value for a small grid energy storage system is the ability to instantly respond to demand, rather than the minutes it takes to spin up a standby gas-fired power plant. That sort of demand stabilization has a value which can’t be determined by comparing the cost to generate 1 kWh of energy, or 1 kW of power.

    This comparison… it is, as they say, “not even wrong”.

    1. ModernMarvelFan says:

      “The biggest value for a small grid energy storage system is the ability to instantly respond to demand, rather than the minutes it takes to spin up a standby gas-fired power plant.”

      The demand doesn’t spike instantly either.

      Gas plants often have enough idling capacity to meet the load demand as they vary.

      The problem here is that the region has nearly 50% solar/wind and very little gas plant capacity left. The battery is a short stop gap to bring more gas plant online.

      Australia has a gas balancing issue. It exports ton of LNG to other markets under long term contracts.

      Many of the Natural Gas plants can easily switch from idling mode to generation mode. It isn’t like your stove with boiling water which often takes a long time to heat up.

      Those “idling” plants are often have boilers ready and just have the generators idling at a much lower capacity and ready to spin up/down based on load. The “load response” issues have been solved long before battery backup solution was ever ready.

      1. Pushmi-Pullyu says:

        “The demand doesn’t spike instantly either.”

        Spikes in demand certainly do happen instantly. Consider, for example, a large commercial building turning the central air conditioner on. Consider a large factory starting up the production line. Consider just one single ProTerra EV bus charger being turned on, instantly increasing demand by 500 kW. Even worse, consider a steel making plant turning its electrically-heated crucibles on. Of course that latter example is an outlier, but the grid has to be built to handle even outlier events. When it can’t, we have a blackout.

        Intermittent power sources such as wind farms make things far worse for those trying to keep the grid balanced, on a second-by-second and minute-by-minute basis, between supply and demand. With a steel mill, at least the mill can schedule things in advance, so if it coordinates its schedule with the power company, then the utility can make sure sufficient power is provided for the steel mill when it goes online.

        Contrariwise, with a wind farm, the wind can rise or fall in just a few seconds, in an entirely unpredictable manner, all day and all night long. A similar problem, altho I guess not as severe, happens with solar farms on partly cloudy days. Sudden rises and drops in intermittent generation are just as dangerous to grid stability as unexpected spikes in demand.

        1. Just_Chris says:

          The problem they are guarding against isn’t a sharp jump in demand but rather a large generator or part of the high voltage distribution network failing leaving a massive hole in supply. SA has 1.8 million people in it and a land area double California. If the main interconnector between SA and Vic trips, they lose any of the main hv network or if 2 major gas generators similtainously have a fault there is a big problem. Emergency load shedding is the cheaper option but hasn’t proven reliable or popular with the voting public.

          1. Pushmi-Pullyu says:

            @Just_Chris:

            Clearly you know this subject better than anybody else participating, so thanks.

            In your post below, you said:

            “This battery is for grid stability not for storing 3 days of electricity. Frequency regulation and fault current. It is also there to stop price spikes in wholesale electricity prices…. If the battery avoids 2 of those it’s paid for its self, there were more than 30 last year.”

            Are you saying that “price spikes in wholesale electricity prices” happen only when there is a catastrophic failure of grid infrastructure?

            I didn’t think that’s what you were saying, so I admit to being confused.

            If you wouldn’t mind, please define the terms “frequency regulation” and “fault current”. In context I think I know what those terms mean, but I’m unsure.

      2. arne-nl says:

        The spking is caused by big power stations unexpectedly going offline.

    2. ModernMarvelFan says:

      “rather than the minutes it takes to spin up a standby gas-fired power plant. ”

      I think you mean the other type of the NG plant where a natural gas pipe feed directly to a gas burning turbine that drives generator directly.

      Those can be made more responsive and idling too at lower rpm too. They are actually faster responding than the type that runs of the hot steams from the natural gas boiler type.

      1. Pushmi-Pullyu says:

        If it doesn’t have to heat up a boiler, that would explain how one can be brought online in just few minutes. I always wondered about that, so thanks for the explanation!

        1. ModernMarvelFan says:

          In those cases, the “standby” power are always keeping the boiler warm/hot, but not at max capacity. That is why there is standby cost and loss in efficiency sitting there waiting for power demand to spike.

          Often, they can also forecast or see demand coming with hot weather predication or load varying.

          The spiky demand is often from transmission line or generator failures or accident that can can the whole grid to go down if they can’t keep up or reroute sufficient power to meet demand quickly.

  10. georgeS says:

    ““The consultancy estimates the fixed cost of batteries in 2017 at $81 a megawatt-hour ”

    Huh

    more like 400$/kwh
    https://electrek.co/2016/11/14/tesla-powerpack-2-price/

    1. pjwood1 says:

      George, Those are amortized fixed costs over time, and MWh’s coming out of the batteries.

      1. georgeS says:

        ahh. OK thx pj

    2. Mr. M says:

      400$/kWh battery and ~80$/MWh dispensed means 5000 full cycles are assumed before the battery is dead.

  11. Just_Chris says:

    This battery is for grid stability not for storing 3 days of electricity. Frequency regulation and fault current. It is also there to stop price spikes in wholesale electricity prices. A price spike in the wholesale electricity market in SA costs $14 million AUD. That is an event that lasts for 30 min. If the battery avoids 2 of those it’s paid for its self, there were more than 30 last year. The Diesel generators are there because in really hot weather, normally around 3 or 4 days a year SA is short of generation capacity.

    1. Pushmi-Pullyu says:

      Thank you!

      Very nice to see the point I was trying to make, made much better by someone who knows a lot more about the subject than I do, and can cite figures to back it up.

  12. Apkungen says:

    This article doesn’t say anything about the cost… if this is initial cost, what it costs to keep the systems running, payback time between the two and so on…

  13. FISHEV says:

    I think they are missing the point that the Diesel generator(s) are the reason they need the additional power to run HVAC units to cool buildings due to the Diesel’s emissions heating up the environment.

    The point of the sustainable, zero emissions battery system utilize the wind and solar to break the carbon emissions cycle that is causing the need for more power. The Great Barrier Reef is dying because of the use of fossil fuels. Burning more fossil fuels is the problem, not the solution.

    1. Mister G says:

      We have surpassed 410 ppm of CO2 not good folks…we are in a pot of boiling water LOL

      1. Vexar says:

        Whoa, that was fast! Wasn’t it 400 ppm of CO2 last year? I remember a presentation from Elon Musk about it.

        1. ffbj says:

          The Oceans are mostly saturated so we should see a big spike in the next decade.

        2. Mister G says:

          Yes check it out http://www.co2.earth

  14. ModernMarvelFan says:

    Well, duh…

    Powerwall is far more expensive than a backup portable generator or a build in gas generator for your house. That is the current cost of battery system.

    But it is emission free. That is the benefit of it.

    If it is purely for backup, battery will probably never be cheap. But the battery itself has more usefulness which combines with load adjusting/balancing.

    The entire problem with Australia’s grid system is that they signed so much long term contracts to export LNG that there are very little available LNG designated for domestic grid usage.

    In addition, the part of the region that uses Tesla battery has a lot of solar/wind generation which are highly variable that requires quick response that is naturally great for battery.

    Diesel generator will be cheaper for sure. But that is dirty and have higher cost in service.

    1. pjwood1 says:

      In U.S. nobody uses diesel regularly (accept islands) due to high “service” cost. Average U.S. KWh is ~$.12. Puerto Rico and Hawaii pay ~$.25. Before oil’s price dropped, ~$.35.

      But, again, this analysis gets settled in the fixed costs. It’s not even avoided emissions that really matter, because you’re developing capacity to run extremely short duration, like maybe as little as ~100 hours per year if avoiding blackouts is the prime target. Kauai did different, by regularly shifting solar generation ~4 hrs into the evening. Australia isn’t there, yet, to price “the job” differently.

  15. Nix says:

    “By 2025 gas could be more expensive than batteries given the rising cost of the fuel”

    Power infrastructure is typically priced on 30-40 year projections. If 2025 is really the break-over point, then they are talking about 2018-2024 (7 years) of batteries being more expensive, followed by 23-33 years of gas being more expensive.

    Are they really that short-sighted?

    1. ModernMarvelFan says:

      The problem is really that they sold too much LNG to long term contracts overseas and very little “spare” NG capacity is left for domestic generation.

      When load spikes, there is very little capacity of NG left domestically to feed those power plants for additional capacity. So they have to buy at much higher premium price for those short duration gas demand that cost them a fortune.

      Many of those short term demand can be “taken out” with battery which can easily offset the “high premium” they pay for those short term gas usage demand.

      1. Nix says:

        Interesting! Thanks for the link below. Very good read. That certainly means that more NG production capacity wouldn’t have helped, since they couldn’t use the full capacity they had.

        It sounds like they need to diversify no matter what the new backup source they needed to build. The batteries are probably worth the extra cost just for the value of diversification to reduce a single point of failure — like running out of NG.

      2. unlucky says:

        “problem”

        This sounds like the same bull Enron pulled on California in 2001. They manipulated prices and claimed it wasn’t their fault, that to much energy was committed out of state. It was all an excuse just to jack up prices for their product. All it took was a few unnecessary and engineered blackouts.

        I hope the Australian government climbs up the behinds of the natural gas producers in the country and makes sure they aren’t just doing this on purpose to make more money.

        1. Just_Chris says:

          WRT to your hopes for the Australian government taking a hardline with any large corporation, unfortunately this is unlikely. Currently the cheapest place to buy Australian natural gas is Tokyo, Japan. No sadly I am not joking despite all the additional costs of liquefing natural gas spot prices in Australia are $12 /GJ and less than $10 /GJ in Japan.

          What is interesting is that greed is once again surprisingly effective at perversion in the extreme. Now that the monopolies have pushed the price of electricity in South Australia is so ridiculously high a whole heap of things are becoming cost effective – honestly I have no idea what’s going to happen next but with prices well north of 40c/kWh when you add in the daily connection charge in some parts of Australia all I can say is that it has hit the fan.

          1. Mark.ca says:

            I would think this is a prime spot for residential solar to thrive. Are the people adopting it?

            1. Robert Middleswarth says:

              Solar is Huge in Austral. Part of the reason they need the power packs because there is a ton of solar on the grid.

  16. Four Electrics says:

    Of course they’re expensive. These batteries cost thousands of dollars to store one dollar worth of electricity. That’s not the point. They’re emission free. The stone age did not end for lack of cheap stones.

    1. Mister G says:

      We have surpassed 410 ppm of CO2 not good folks THAT IS THE POINT

    2. Just_Chris says:

      Batteries aren’t expensive when they are used applications that don’t need a lot of energy storage. $30-40 million AUD for the whole project would work out as less than $300-400 /kW (note the missing h). That is a whole heap lower than the cost of a diesel generator or gas turbine. If the battery means you can achieve greater grid stability you can then use wind generate a far higher % of the power which is where you save big. South Australia has literally 100’s of times more wind and solar resources than it would need to provide its power but the grid is unstable. The Australian market operator did a study in 2013 and found, without going crazy, the eastern part of Australia had about 500 times more recoverable renewable energy resources than it would need to meet demand.

  17. Null says:

    Totally different capabilities!

    Near instant response, freq. regulation, etc.

    Gas or diesel would have to be running constantly as spinning reserve and much greater nameplate capacity as these services require the inertia of the turbine (acting as flywheel) to provide response.

    Takes minutes to spin up to capacity, by then black out!

    That’s why spot prices can get quite insane at times.

    Obtw, some wind farms can do same thing to limited extent using blades inertia as buffer.

  18. What are the costs for each over 10 years? What are the true total costs, in terms of pollution and climate change?

  19. Ron M says:

    Diesel Generators aren’t able to provide the instantaneous power where batteries can also diesel generators produce and there by waste electricity produced. Batteries allow the amount of electricity needed to be used wasting nothing. This helps level out peak loads which will eventually be passed on to the consumer.
    I predict Universities will be replacing there diesel generators with batteries in the years ahead. A perfect solution for emergency power.

  20. FPD says:

    Obviously, the Wood Mackenzie analysis completely and totally concedes that Tesla Energy can deliver the complete system is 100 days….when time is of the essence (otherwise the battery cost numbers have to be updated.)

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