Tesla Energy and utility scale projects

[adiggs]

That's an interesting article because it suggests that Tesla isn't getting paid. But if Tesla is entitled to payments, that means the battery wasn't really fully bought and we are looking at a PPA or similar scheme (but then for frequency regulation) But on the other hand Tesla is claiming it will book revenue from the battery sale this quarter? Is the article wrong? Or did Tesla sell one part of the battery, while retaining ownership in the other and merely contracting out frequency regulation services through it?

I've been following the big battery pretty closely through articles at Renew Economy. Though I don't know the answers to your questions, my understanding is that for Tesla, the Hornsdale Power Reserve (aka Tesla Big Battery) was fully bought and paid for by Neoen and South Australia, so Tesla has been fully paid for providing the equipment.

My take from this article is that Tesla is making the observation that the services being provided by the battery can't be fully and fairly priced in the market, because the market works on bigger timeframes than the ones in which the HPR can respond. So Neoen / South Australia aren't being fully paid for the service they are providing.


A subtext here - South Australia might not be receiving the full market payment for the service they are providing, but they are also winning the war with HPR. FCAS services are falling dramatically in the prices they are commanding due to the existence and participation of HPR in that market, and that's really what South Australia was trying to accomplish. Mission accomplished. (There's an article about how prices for FCAS have been dropping in '18 linked over in the Tesla Utility thread).

However, if the energy market doesn't update to provide payments for these services, it may be more difficult for purely commercial providers to get into the market. HPR is valuable, but it doesn't do everything itself - more of it will be needed, and if some of what it does ends up being done for free using current market mechanisms, that might be enough to shift the investment thesis so that further investments don't happen (or reduce the rate at which the investments happen).

 

[mspohr]

That's an interesting article because it suggests that Tesla isn't getting paid. But if Tesla is entitled to payments, that means the battery wasn't really fully bought and we are looking at a PPA or similar scheme (but then for frequency regulation) But on the other hand Tesla is claiming it will book revenue from the battery sale this quarter? Is the article wrong? Or did Tesla sell one part of the battery, while retaining ownership in the other and merely contracting out frequency regulation services through it?

It's not clear whether or not Tesla has any interest in the revenue stream from the battery. I thought they just sold the battery and left the operation to SA.
I've never been able to find out how much Tesla was paid for the battery so it may be that there is some type of ongoing revenue from energy management services.

 

[adiggs]

This article suggests to me that Tesla doesn't have interest in the revenue stream from the batter:
Battery storage booming, but even Tesla struggling to cash in

It's not specifically about HPR, but its about the larger market that other big batteries are being funded and built for. It doesn't say it directly, but the hint I get reinforces my belief that Tesla's comments are sort of "friend of the industry" type comments, where "friend" is going to sell a lot of batteries to the industry if the market dynamics change so that the value the batteries provide can be paid for.

An interesting read on the wider market and its limitations, and how funding for these big batteries is working right now. My takeaway is that the economics are such that if we read about Tesla selling a future revenue stream and providing a big battery up front, in Australia, then as investors we're reading an article about a break even or money losing proposition for Tesla.

And I would say equally clearly, Tesla wants to see that dynamic change.

 

[jhm]

Tesla says its giant battery is not getting paid correctly because it sends power too quickly

Looks like the battery fixes problems too fast to get paid.

I'm sure all the old plants are sitting around just laughing at the new guy, who's a bit too eager.

 

[jhm]

Certainly Tesla has an interest in making sure that battery customers are technically able to maximize their revenue from the battery. It sounds like the battery is able to fix a situation before the billing system is even able to recognize that there was a problem that needed fixing. If so, there are two sorts of solutions.

1. Get the grid operator to improve the billing system.
2. Slow down the response of the battery so that the billing system is able to identify the billable event prior to battery response.

Clearly solution 1 is better service for the grid, but solution 2 may be needed to assure fair compensation for the battery owner. Tesla has a role to play here in posing technical solutions.

 

[adiggs]

Certainly Tesla has an interest in making sure that battery customers are technically able to maximize their revenue from the battery. It sounds like the battery is able to fix a situation before the billing system is even able to recognize that there was a problem that needed fixing. If so, there are two sorts of solutions.

1. Get the grid operator to improve the billing system.
2. Slow down the response of the battery so that the billing system is able to identify the billable event prior to battery response.

Clearly solution 1 is better service for the grid, but solution 2 may be needed to assure fair compensation for the battery owner. Tesla has a role to play here in posing technical solutions.

Agreed.

In the short term, I expect more of the current behavior - helping out the system even when not getting paid, as a significant investor in the HPR is the state of South Australia. They have political reasons for getting involved in the energy grid and knocking some of the more extreme price gouging out of it, and HPR is filling that role well. Even when it doesn't really get paid for it.

But that's a strictly small scale and short term / proof of concept type of situation. To really get scale (lots and lots of batteries installed all over the grid), the market needs to update so that price signals will bring more battery investment, and more batteries into the grid, to fill these instantaneous stabilization roles.

 

[mspohr]

Agreed.

In the short term, I expect more of the current behavior - helping out the system even when not getting paid, as a significant investor in the HPR is the state of South Australia. They have political reasons for getting involved in the energy grid and knocking some of the more extreme price gouging out of it, and HPR is filling that role well. Even when it doesn't really get paid for it.

But that's a strictly small scale and short term / proof of concept type of situation. To really get scale (lots and lots of batteries installed all over the grid), the market needs to update so that price signals will bring more battery investment, and more batteries into the grid, to fill these instantaneous stabilization roles.

Fluence, Tesla to Supply Major Battery Systems in Victoria, Australia

This will be the first storage system globally where a transmission network company owns the asset and a market participant dispatches it via a long-term contract, Kathpal said. This model could prove useful in other competitive electricity markets, like Texas, New York, New England, the U.K. and continental Europe.

 

[tftf]

@tftf
Just thought I'd quote your signature line for posterity since it is likely to change in the very near future.

Tesla's ramp from niche producer to 1M cars a year and a mass-market Model3 at $35k base is a financial suicide mission. The SCTY merger is the newest implosion catalyst. Your opinion may differ.
​

And yes, my opinion does differ:

Shorting TSLA is a financial suicide mission.​

9 months later I have no reason to change my signature.

In fact, I’m convinced that the TSLA stock story will unravel by around 2020.

The clock is ticking - and energy storage / storage batteries (as well as semis etc) proved just to be the latest distraction.

 

[EinSV]

9 months later I have no reason to change my signature.

In fact, I’m convinced that the TSLA stock story will unravel by around 2020.

The clock is ticking - and energy storage / storage batteries (as well as semis etc) proved just to be the latest distraction.

Your "solar city merger is an implosion catalyst" theory last year was a bust but let's see where we are in 2020.

 

[adiggs]

The Hornsdale Power Reserve (aka Tesla Big Battery) continues to impress:
The stunning numbers behind success of Tesla big battery

4 months in and HPR has >50% market share (by revenue) in a market that has also seen a 90% decline in price (of course, from 0% market share). One estimate is that HPR has already saved purchasers of electricity $35M in 4 months (on a ~$50M cost). BIG win for the South Australia government (oh - and consumers). The other states in Australia haven't experienced that same drop in their comparable markets.

Regulators talking about changes to add very fast response in the market and value it, changes in the bidding patterns of established participants in the market, and the ripples are still spreading.

 

[adiggs]

I missed this previously - Elon hinted that we might hear about a GWh scale grid battery installation in the next few months:
Musk says Tesla’s next big battery will be eight times bigger

And there are several smaller, but still each 10's of MWh scale installations, in other Australian states under way.


It occurs to me that a GWh scale installation represents a whole lot of packs to manufacture, and sops up a lot of excess production if there's been a mismatch between what the Gigafactory is able to produce, and what Fremont is able to consume in building cars.

 

[adiggs]

I think i like this business approach by Tesla:
Tesla unveils 18.2MW big battery in Belgium

Another big battery - in this case, not hinted at (that I know of) ahead of time. Just ~28MWh worth of grid scale battery added by Belgium, and announced not when the deal was signed, but after it was operational.

 

[adiggs]

A cleantechnica article about the HPR article on RenewEconomy, linked by @jhm :
Shorting Oil, Hedging Tesla

Talks about the ripples in the market that are still making their way to shore. Belgium will be seeing these ripples starting in their power market soon, with other Australian states also with projects under way to throw these stones into their ponds

 

[jhm]

It's wonderful to see all these battery installations sprouting up. HPR has captured about 55% of the FCAS market in South Australia and this has had a profound impact on prices in this market. One concern is that these ancillary markets are actually quite small. Batteries will quickly saturate them. I'm not too worried about this because we're just getting started. If the response time with one battery installation can be 100 times faster than any hydrocarbon plant, imagine how things change when you have multiple battery installations competing with each other to respond first. This might not move the needle on speed, but it will definitely improve reliability and the capacity to sustain response. So this will work to shut out all hydrocarbon plants from participating in this market and substantially improve grid reliability. There has been a great capacity market for plants to be on standby. I think this market will be radically altered by batteries. So we are just beginning to see how batteries will change the grid. I suspect that batteries will prove more disruptive (in a good way) than wind and solar have been. So I'm not worried about FCAS being a small niche market. I think in the long run such markets may not even need to exist. Batteries everywhere will simply manage frequency regulation as needed implicitly and so efficiently that there is not even a market to bid into.

 

[bonaire]

I missed this previously - Elon hinted that we might hear about a GWh scale grid battery installation in the next few months:
Musk says Tesla’s next big battery will be eight times bigger

And there are several smaller, but still each 10's of MWh scale installations, in other Australian states under way.


It occurs to me that a GWh scale installation represents a whole lot of packs to manufacture, and sops up a lot of excess production if there's been a mismatch between what the Gigafactory is able to produce, and what Fremont is able to consume in building cars.

If there was a purchase-agreement with Panasonic based on the prior years' claims of 500,000 cars/year by 2018 or 2019 - and the car counts are below that number - the need to fulfill those agreements may mean trying to sell large grid storage projects to absorb the cell count required purchases at a cost that works well for the buyers. We don't know the details of these large projects or the purchase agreements, so it's hard to deduce the real details behind these projects. There are a lot of government payments available to pay for grid storage projects (NY has a $2+ more per Watt program - huge, more than CA offers - and it then includes 30% Federal Tax Credits as well). Storage is being incentivized. Keep that in mind when building models for sales/profits/sustainability.

 

[renim]

there is a great storage market available, using Japan as a 'rule of thumb' approximation
Japan has about 26GW of pumped hydro (GWh unknown but must be longer duration than battery)
A Pumped Hydro Energy-Storage Renaissance

plus japan has a large amount of NaS batteries, so something on the order of 18% to 20% of Japanese supply is mirrored by storage.

I would however posit that well positioned hydro will always be cheaper than li ion battery.
perhaps i'll look up mining overburden ratio, but my suspicion is that the quantity of overburden removed for any given GWh is cheaper for hydro than for li ion raw materials, and that at heights available in Japan, for most GW ratings hydro is also cheaper.

 

[generalenthu]

there is a great storage market available, using Japan as a 'rule of thumb' approximation
Japan has about 26GW of pumped hydro (GWh unknown but must be longer duration than battery)
A Pumped Hydro Energy-Storage Renaissance
View attachment 301677
plus japan has a large amount of NaS batteries, so something on the order of 18% to 20% of Japanese supply is mirrored by storage.

I would however posit that well positioned hydro will always be cheaper than li ion battery.
perhaps i'll look up mining overburden ratio, but my suspicion is that the quantity of overburden removed for any given GWh is cheaper for hydro than for li ion raw materials, and that at heights available in Japan, for most GW ratings hydro is also cheaper.

Just one reservoir in Virginia has 3GW and 36GWh capacity. Yes environmental concerns will be huge, but probably not insurmountable.

Bath County Pumped Storage Station - Wikipedia

 

[adiggs]

there is a great storage market available, using Japan as a 'rule of thumb' approximation
Japan has about 26GW of pumped hydro (GWh unknown but must be longer duration than battery)
A Pumped Hydro Energy-Storage Renaissance
View attachment 301677
plus japan has a large amount of NaS batteries, so something on the order of 18% to 20% of Japanese supply is mirrored by storage.

I would however posit that well positioned hydro will always be cheaper than li ion battery.
perhaps i'll look up mining overburden ratio, but my suspicion is that the quantity of overburden removed for any given GWh is cheaper for hydro than for li ion raw materials, and that at heights available in Japan, for most GW ratings hydro is also cheaper.

There's a lot of talk and action in Australia along these lines. Several of the more promising sites for closed loop pumped hydro involve former mine sites (big open pits already dug), with enough of an elevation change between two nearby pits to run pipes between them, and pump water up and down, generating on the way down, consuming excess energy to pump water uphill.

I also tend to think of pumped hydro as a bigger time shifter than li-ion batteries, with the li-ion batteries providing grid stabilization (turns out there's a WHOLE LOT more to running a grid than manufacturing a KWh when somebody turns on a light switch )

 

[jhm]

Just one reservoir in Virginia has 3GW and 36GWh capacity. Yes environmental concerns will be huge, but probably not insurmountable.

Bath County Pumped Storage Station - Wikipedia

This is 12h of storage at max discharge rate. This is clearly more than is needed for daily cycling. Imaging charging for 12 hours and discharging for 12 hours within a 24 hour period. That is pretty packed with little opportunity for rate arbitrage. Batteries with 3 to 6 hours are probably much more suitable for daily load balancing.

But 12h of storage is just great for weekly load balancing. Consumption is actually much lower over the weekend than on week days. So net charge up about 6h Saturday and Sunday each, and net discharge about 2 to 3 hours each week day. Of course on each day there can be both discharging and charging (why I said "net"), but this is shallow cycling. Over the course of a week you could have one deep cycle and several shallow cycles.

The point that I am getting at is that batteries and pumped hydro can be complementary storage resources, operating over different timescales. Both are needed.

Additionally, natural gas storage mostly provides one deep per year for seasonal and even multiyear load balancing. I believe this is beyond the reach of pumped hydro. Imagine a 36GWh hydro facility that only discharges about 36GWh per year. That would be really expensive storage. Flow batteries my be more suitable for seasonal balancing. But really I think hydrogen electrolysis is the more realistic solution for seasonal balancing, though I don't think generating power from hydrogen make much sense. What makes sense is to oversupply market with renewables for most of the year and soak up the seasonal excess by generation hydrogen for export into non-electrical markets. This is actually a non-storage solution.

 

[mblakele]

natural gas storage mostly provides one deep per year for seasonal and even multiyear load balancing. I believe this is beyond the reach of pumped hydro. Imagine a 36GWh hydro facility that only discharges about 36GWh per year. That would be really expensive storage. Flow batteries my be more suitable for seasonal balancing. But really I think hydrogen electrolysis is the more realistic solution for seasonal balancing, though I don't think generating power from hydrogen make much sense. What makes sense is to oversupply market with renewables for most of the year and soak up the seasonal excess by generation hydrogen for export into non-electrical markets. This is actually a non-storage solution.

Why not use that excess renewable energy to generate methane, instead of hydrogen? Methane is roughly equivalent to natural gas. As you noted above, we know how to store that stuff. We can transport it too, and do both at large scale and over reasonably long periods of time.

Power-to-gas - Wikipedia