Tesla’s Powerpack Battery in Australia Made up to $17 Million

[Brian W + 78]

This giant battery cost $66 million and it reportedly already made up to $17 million during the first 6 months of operation. It is so efficient that it reportedly should have made around $1 million in just a few days in January, but Tesla later complained that they are not being paid correctly because the system doesn’t account for how fast Tesla’s Powerpacks start discharging their power into the grid.

The system is basically a victim of its own efficiency, which the Australian Energy Market Operator confirmed is much more rapid, accurate and valuable than a conventional steam turbine in a report published earlier this year. Overall, it is estimated that Tesla’s giant battery in Australia reduced the grid service cost by 90%.

[Adam Varga + 123]

Out of curiosity, what's the expected life of the battery?  Is that $17M revenue or profit? If it's revenue, what are their operating expenses like? 
 

[CMOP + 227]

Wow this is huge. Absolutely incredible. $1 million in just a few days in January. ROI is looking quite nice. 

Looks like neonen is confident now that they are setting their eyes on an IPO. Will definitely be looking out for their IPO. 

 

[BlackTortoise + 103]

1 minute ago, Adam Varga said:

Out of curiosity, what's the expected life of the battery?  Is that $17M revenue or profit? If it's revenue, what are their operating expenses like? 
 

If it's just revenue and it is costing just as much to operate then that doesn't mean much.

[CMOP + 227]

@Adam Varga doesn't mention if it's profit or revenue. 

Quoting what they said, 

The giant battery cost ~$66 million and it reportedly already made up to $17 million during the first ~6 months of operation.

 

[Stormysaga + 62]

 The $66M is the revenue for the entire wind farm, not just the battery itself. The wind farm would still generate significant revenue without the battery system, but it's really hard to do a comparison to see the difference.

[Jan van Eck + 7,558]

14 hours ago, CMOP said:

Wow this is huge. Absolutely incredible. $1 million in just a few days in January. ROI is looking quite nice. 

Looks like neonen is confident now that they are setting their eyes on an IPO. Will definitely be looking out for their IPO. 

 

Well, don't go counting those imaginary pennies just yet.  The system is not quite what it seems. 

First, that gigantic (100 MW, 129 Mwh) Tesla battery is capable of running that South Australian  ["SA"] grid for only 12 minutes. Then it is dead.  IT is re-charged by wind power, which is a nice design feature, and what it does is chew away into the price-gouging that the gas-generator crowd was doing to the Grid Operator.  Here is their scheme:  a big chunk of the SA grid comes from wind (mostly) and solar (some).  When the wind goes down, the Operator has to call for gas power.  Those guys deliberately underbid the need.  Say the grid needs 30 MW.  The gas guys bid for 29 MW, and tell the operator they just don't have that last MW.  The lie, of course; they are holding that power back.  So the Grid Operator has to go find that last MW and that bids up the price to $14.00 per KWh,  Under Grid Purchasing rules, that $14 figure now applies to the entire 30 MW being bought - so the gas guys make an absolute fortune.  It is a game they play, and it is a rigged game.  

Along comes the Tesla battery and upsets that apple cart, so the game is over. That is what is going on.  The whole exercise is an artifice, and the Tesla battery was brought in specifically to counter the abuses of the gas generators, who were holding supply off the Grid in order to greatly inflate the price.  When the Grid system was developed, the designers, being rational men, had not anticipated that the gas generators would so cynically abuse the system.  In other words, the Grid designers had not anticipated that the gas guys were crooks. 

Twelve minutes of supply before exhaustion does not a great grid make.  But it gets the National Grid operator away from the market manipulators.  There is no room for multiple installations, not at this point.  So the sale of more such installations is dubious.  On that basis, I would not go tossing gobs of your capital at the Tesla Battery provider.  Cheers.

[Dan Warnick + 6,100]

17 hours ago, Brian W said:

This giant battery cost $66 million and it reportedly already made up to $17 million during the first 6 months of operation. It is so efficient that it reportedly should have made around $1 million in just a few days in January, but Tesla later complained that they are not being paid correctly because the system doesn’t account for how fast Tesla’s Powerpacks start discharging their power into the grid.

The system is basically a victim of its own efficiency, which the Australian Energy Market Operator confirmed is much more rapid, accurate and valuable than a conventional steam turbine in a report published earlier this year. Overall, it is estimated that Tesla’s giant battery in Australia reduced the grid service cost by 90%.

Great!  Link, photos, more?

[Rodent + 1,424]

1 hour ago, Dan Warnick said:

Great!  Link, photos, more?

https://electrek.co/2018/09/24/tesla-powerpack-battery-australia-cost-revenue/

[TomTom + 183]

10 hours ago, Jan van Eck said:

Well, don't go counting those imaginary pennies just yet.  The system is not quite what it seems. 

First, that gigantic (100 MW, 129 Mwh) Tesla battery is capable of running that South Australian  ["SA"] grid for only 12 minutes. Then it is dead.  IT is re-charged by wind power, which is a nice design feature, and what it does is chew away into the price-gouging that the gas-generator crowd was doing to the Grid Operator.  Here is their scheme:  a big chunk of the SA grid comes from wind (mostly) and solar (some).  When the wind goes down, the Operator has to call for gas power.  Those guys deliberately underbid the need.  Say the grid needs 30 MW.  The gas guys bid for 29 MW, and tell the operator they just don't have that last MW.  The lie, of course; they are holding that power back.  So the Grid Operator has to go find that last MW and that bids up the price to $14.00 per KWh,  Under Grid Purchasing rules, that $14 figure now applies to the entire 30 MW being bought - so the gas guys make an absolute fortune.  It is a game they play, and it is a rigged game.  

Along comes the Tesla battery and upsets that apple cart, so the game is over. That is what is going on.  The whole exercise is an artifice, and the Tesla battery was brought in specifically to counter the abuses of the gas generators, who were holding supply off the Grid in order to greatly inflate the price.  When the Grid system was developed, the designers, being rational men, had not anticipated that the gas generators would so cynically abuse the system.  In other words, the Grid designers had not anticipated that the gas guys were crooks. 

 Twelve minutes of supply before exhaustion does not a great grid make.  But it gets the National Grid operator away from the market manipulators.  There is no room for multiple installations, not at this point.  So the sale of more such installations is dubious.  On that basis, I would not go tossing gobs of your capital at the Tesla Battery provider.  Cheers.

Now that's a sound argument - I think that this system is particularly appealing for Australia where domestic gas prices are soaring because of the push to export the stuff to Japan/China etc. 

As Jan van Eck says, this could be good to break the monopolistic position of gas fired operators, but why did Australia abolish coal so easily as a back-up power generation option?! 

[markslawson + 1,042]

On ‎9‎/‎25‎/‎2018 at 7:09 AM, Brian W said:

This giant battery cost $66 million and it reportedly already made up to $17 million during the first 6 months of operation. It is so efficient that it reportedly should have made around $1 million in just a few days in January, but Tesla later complained that they are not being paid correctly because the system doesn’t account for how fast Tesla’s Powerpacks start discharging their power into the grid.

The system is basically a victim of its own efficiency, which the Australian Energy Market Operator confirmed is much more rapid, accurate and valuable than a conventional steam turbine in a report published earlier this year. Overall, it is estimated that Tesla’s giant battery in Australia reduced the grid service cost by 90%.

Brian W - the figures you cite don't show anything much but are certainly not a ringing endorsement of batteries. As other posters have pointed out, the revenue refers to the whole operation which includes a wind farm, and it is revenue, not profit. The wind farm cost nearly $A500 million to build https://invest.sa.gov.au/case-studies/neoen-hornsdale-wind-farm/

Costs are not given at all in the filing by Neoen (for an IPO), but annualised revenue of $34 million (double six months) on a project that cost say, $A550 million all up to build is far from impressive. About ten people are employed to maintain/operate the project so call it $A1 million annual expenses. Financing is always the major costs in these projects, and if the whole thing is financed at 4 per cent that's another $A22 million in costs. That all adds up to $11 million profit for the whole wind farm, if we allow nothing for depreciation (I only just remembered It). This is obviously a very rough and ready calculation but it doesn't add up to impressive numbers. An additional complication is that, as I understand it, Neoen is just managing the battery which is owned by the State Government. Just how that's shown on the books I don't know, but if the battery was profitable why was government money required to build it, and why aren't private groups rushing to build more? Answer - its marginal at best, particularly when expected battery life is taken into account 

[Mike Schnell + 2]

The only guys getting rich are the guys with cranes who service the windfarms. Germany who is a world leader is already turning away from wind and is building a coal fired power plant. Every time the wind stops Germany mooches power from surrounding countries and they aren't putting up with it any longer. There are 165 coal fired power plants being built the world over. The world is set to consume more coal than any time in history. Check out WUWT website for quality information without the hype. No BS.

[Refman + 207]

There are times in South Australia when power prices are close to zero or negative because of excess supply. The battery charges during these events and then sells power back into the grid when prices spike, which is usually due to a coal plant tripping offline. It's a great way to capture energy being sold below cost and then make a profit later.

 

Edited September 26, 2018 by Refman
spelling

[markslawson + 1,042]

4 hours ago, Refman said:

There are times in South Australia when power prices are close to zero or negative because of excess supply. The battery charges during these events and then sells power back into the grid when prices spike, which is usually due to a coal plant tripping offline. It's a great way to capture energy being sold below cost and then make a profit later.

 

I would agree with all of that, but the real problem is whether the battery can store low and sell high enough times to justify its capital cost, and return a profit commensurate with the risk, particularly if the batteries have to be replaced in about 15 years or so..  Not enough information has been released to make any real call..