Could Elon Musk’s Battery farm supercharge South Australia’s electricity supply?

April 20, 2017
Editor(s): Michael Williams
Writer(s): Kevin Fan, Lang Qin, Vivienne Bear

It seems audacious, because it is. Tesla CEO Elon Musk has wagered to resolve South Australia’s potential electricity shortage in 100 days by building a supercharged battery farm. The announcement has generated a fair share of political and financial commentary, including a Tesla share price rise. However, Musk’s gamble comes at a crucial time in the national energy debate.

Why the need for such a proposal?

The proposal from Musk follows the ongoing controversy of the South Australian “energy crisis”. With 40% of the State’s electricity reliant on wind and solar, there are growing concerns for intermittent supply. It does not help that coal generators have steadily been squeezed out of South Australia (SA). Apart from environmental concerns, there is reason for SA to reduce its reliance on coal. When the weather is sunny or windy, renewable energy production has next to zero marginal production costs. As the market share of renewables increases, then it becomes inefficient to keep turning high price, big coal generators on and off. In this scenario it is better to just close coal generators down. Therefore, the years 2014-2015 saw the mothballing and shutting down of several power stations. In 2016, SA’s power was essentially sourced by wind, gas, and constrained interconnection to Victorian coal plants.

On July 7 2016, a combination of winter’s high demand for gas, a broken main interconnector, and unreliable wind caused SA’s wholesale prices to surge to $9,000/ megawatt hour (compared to national average of $90/ megawatt hour). This was followed by volatile energy pricing, state-wide blackouts and unpredictable supply. Consequently, there has been a scramble for solutions from governments. However, State and Federal decision makers cannot see eye-to-eye on the solution, as the SA government’s $500 million gas-power plant proposal has put it at loggerheads with the Federal Government’s $2 billion Snowy Mountains Hydro-electric emergency proposal.

How does all this energy stuff work?

While both the State and Federal governments’ proposals aim to address the problem through the improvement in the energy-generating process itself, the proposal by Musk aims to achieve the same result through the optimisation of the energy-storage process.

The main problem with renewable forms of energy production is inconsistency. Because the technology is highly dependent on weather conditions, the level of energy production varies greatly throughout the day. As a result, the primary focus for renewable energy suppliers is less about generating enough power at any given time, and more about efficiently storing excess energy generated when the weather is favourable to be used when it is not. For example, the Federal Government’s strategy aims to store excess energy by pumping (quite literally) water up a hill. Water is pumped into a reservoir converting the electricity into potential energy. When the electricity is needed again, the water stored in the reservoir is released and used to turn a turbine, and the electricity generated is then fed back into the grid. This method has a 70-80% round-trip energy.

In contrast, the Tesla Powerwall battery farm proposed by Musk has a round-trip energy efficiency of 92.5%. With Musk claiming that it will fix the South Australian energy problem within 100 days of signing the contract, the proposed system is capable of storing up to 100 megawatt hours of energy and is projected to cost $33.2 million. A system using the same technology was installed in South California earlier this year consisting of 396 batteries, and it is capable of storing enough energy to power 15,000 households for four hours. The proposed South Australian system is set to be five times that size.

A bright future in the energy debate?

Needless to say, Musk’s vision, in its scale and ambition, has the potential to affect monumental change. Not only do South Australians stand to gain from an energy system operating at the frontier of technological innovation, but they must also be heartened to see what looks to be a shining light at the end of what has been a frustratingly long tunnel of reductive political discussion and energy service woes.

Moreover, Twitter updates from both Prime Minister Malcolm Turnbull and Musk have provided hope that a nationally funded revamp of Australia’s entire energy grid may be on the cards. But perhaps the real genius behind a seemingly innocuous Twitter challenge lies not merely in the resolution of the “South Australian Energy Crisis” but rather in the sudden shift from a dithering, inconsistent and at times hostile political discourse to a more driven, intensified search for an environmentally friendly energy agenda. Elon Musk is talking. Both State and Federal governments, and perhaps most importantly, the Australian people, are tuning in to listen to the valuable insight a man of vaulting ambition, proven success and refreshing clarity has to give.

Not to say there are no reasons to doubt. Though initial fears of a potentially unrealistic commitment by Tesla to their challenging proposal were largely dispelled by a flurry of quick, optimistic contacts between the key stakeholders, questions still remain. A source of funding, whether government or private, to support the relatively economical, but still expensive $33.2 million required, will be a challenge. Musk’s 100-day timeline from contract signature to project completion is juxtaposed with the five to seven years needed to build a “clean-coal” powered station. And whilst Musk’s proposal does blow out of the water any anti-renewable politicians in support of such stations, the short timeline raises concerns that quantity and short-term efficiency are being prioritised over long-term quality. With tensions still unresolved between South Australian and national interests, and the willingness of both governments to engage in further conversations with alternative suppliers, the potential for the current situation to become all the more confusing, raises inevitable concerns.

What has come out of this scenario is that “crisis” is no longer a far-fetched description of the energy situation in SA, Australia and even the world. What is needed is greater clarity, sharper conversations and perhaps an audacious individual or two. Despite the challenges that will inevitably plague governments, energy innovators and private funders alike, there is reason for optimism.

The CAINZ Digest is published by CAINZ, a student society affiliated with the Faculty of Business at the University of Melbourne. Opinions published are not necessarily those of the publishers, printers or editors. CAINZ and the University of Melbourne do not accept any responsibility for the accuracy of information contained in the publication.