There's Less To Tesla's Big Australian Battery Deal Than Meets The Eye

It should surprise no one to learn that Elon Musk, a master of promotion, is capturing worldwide media attention Friday for Tesla's selection as the winning bidder for a project to install "the world's largest grid-scale battery"in South Australia.

It also shouldn't come as a surprise to anyone who pays attention to claims made by promoters that the details are not as exciting as the headlines and are substantially more difficult to discern.

Where Did The Story Begin?

Four months ago, during a crisis in which South Australia's wind-heavy power grid repeatedly failed to deliver, Lyndon Rive, the head of Tesla's energy products division, bragged that his company could provide a quick fix to the Australian state's power supply problems.

South Australian grid operators had indicated that their system woes could be alleviated by adding fast reacting electricity storage capable of providing 100 MW for somewhere between one and three hours. Supposedly, that amount of stored electricity would be sufficient to smooth out fluctuations produced by variations in wind speed.

Stating the obvious, there is a factor of 3 difference in size between a 100 MWhr battery and a 300 MWhr battery. However, Rive seemed to indicate during an interview with the Australian Financial Review that Tesla was interested in supplying the high end of the range.

"We don't have 300MWh sitting there ready to go but I'll make sure there are," Mr. Rive said.

Rive's confidence in his company's ability to deliver was supported by the recent opening of Tesla's famous battery production facility, the massive GigaFactory 1, near Sparks, Nevada. It was reinforced by the fact that Tesla had recently installed a 20 MW, 80 MWhr battery in Southern California.

That project was completed in less than three months. It was part of Southern California Edison's response to electricity reliability concerns associated with the loss of local natural gas storage as a result of large, difficult to stop leak at the Aliso Canyon storage facility.

Tesla Inc. Powerpacks and inverters stand at the Southern California Edison Co. Mira Loma energy storage system facility in Ontario, California, U.S., on Thursday, June 1, 2017. The Mira Loma substation houses nearly 400 Tesla Powerpack units, produces 20 MW of electrical power and stores 80 MW-hrs of energy. Photographer: Patrick T. Fallon/Bloomberg

Unsurprisingly, there was some skepticism among observers about Tesla's ability to deliver a system with five times the power rating and more than three times the storage capacity in the same period of time to a location approximately 8,000 miles farther from the company's Nevada production facility than Southern California.

Rive has an established history of making visionary claims, but his record of delivery on those promises isn't spotless. Before Tesla purchased the financially struggling SolarCity in August 2016, Lyndon Rive had been its CEO for 10 years. He and his brother co-founded the company with financial backing from their cousin, Elon Musk.

Musk stoked intense interest in Tesla's desire to help South Australia – while generating publicity for its new line of grid-connected batteries – by publicly standing behind his cousin's offer. The real attention-getter was the payoff if their company fails to meet the deadline – Musk promised that the system will be free if it is not operational within 100 days after the contract has been signed.

How Much Power Will A Fully Charged Battery Return To Grid? How Much Energy Will It Store?

As the initial flurry of excitement generated by Musk's offer began to dissipate, serious people attempted to determine exactly what Musk and Rive had promised to do and to estimate how much the project would cost.

On Twitter, Musk had made an attractive, but guardedly qualified price estimate of $250/kw-hr for installations larger than 100 MWhr. He quickly admitted that price does not include shipping, installation, taxes or tariffs. He failed to state that the price likely does not include site specific engineering, site appropriate cooling systems or site specific grid connection infrastructure.

Adequate cooling systems are important for high power, energy-dense battery installations. High discharge rates generate enough heat to damage the battery and its supporting electronics. Fires and explosions are more frequent occurrences than desired and are a high risk for improperly cooled or controlled systems.

With those additional installation investments, an estimate of $500-$600 per kilowatt-hour of storage is probably closer to reality. An installed 100 MW/300 MWhr lithium-ion power station would cost somewhere between $150 million -$180 million (200 million Australian dollars to A$240 million)

Within the context of addressing South Australia's electric power system stability needs, a 300 MW-hr installation appears to have been unaffordable. Premier Jay Weatherill has a total of A$550 million available, and Tesla's massive battery is only a part of the necessary capability.

As Gizmodo has reported, the system that Tesla will be installing will provide 129 MW-hr of energy storage capacity, less than half of what Rive originally hinted could be delivered. At a discharge rate of 100 MW, the battery will be totally depleted in less than 80 minutes. As all cell phone, tablet or laptop computer owners should know, it isn't advisable to fully discharge a Li-ion battery. It can dramatically reduce battery lifetime.

Are Tesla Type Batteries Renewable Energy Saviors?

The system will not solve South Australia's grid woes by itself.

The response plan also includes a new government funded, A$360 million, 250 MWe fast reacting gas turbine power plant, a bulk electricity purchase contract designed to encourage construction of a new privately owned power plant, a taxpayer financed exploration fund for additional natural gas supplies, special powers granted to the SA energy minister to order plants to operate, and a requirement for electricity retailers to purchase a fixed portion of their power from SA generators.

The South Australian government and Tesla have declined requests to provide details about the total project cost for the "world's largest grid-connected battery." Musk admitted that Tesla could lose in excess of $50 million if it is unable to meet its promised deadline.

Lyndon Rive, the executive whose promise evolved into this potentially game-changing project, was not part of the final negotiation and will not be involved in the project execution. He announced in May that he was leaving the company in June to spend more time with his family and to perhaps start a new business venture next year. That decision might have nothing to do with the South Australian project.