Lyon Group in $660m solar-storage project in Victoria
Undeterred by the political argy-bargy over the Finkel Review, private equity-backed Lyon Group is launching a $660 million combined solar and storage project in north-west Victoria, the sort of investment it says will be at the heart of the future power grid.
To be built in the Sunraysia township of Nowingi the project is one of three ventures worth almost $2 billion that will be underpinned by what Lyon partner David Green describes as a "world-first" tender to utilities, retailers and energy users offering services from power-on-demand to frequency and network control.
"These things are happening despite governments, not because of them," Mr Green said. "The private demand for renewable energy can't be denied." He said the weight of private capital coming to renewable energy had shifted the momentum in the sector, despite the political uncertainty over energy and climate policy in Canberra.
Lyon will on Tuesday seek expressions of interest from electricity market participants - including generators, network owners and energy users - for contracts and other services to cover up to 640 megawatt-hours of storage capacity from the three projects across Victoria, South Australia and Queensland.
The tender "is a reflection of the new energy world the Finkel Report describes," Mr Green said.
"It is real and it is happening.
"Lyon will enter into commercial contracts for real services provided by physical assets. This is not a theoretical exercise."
Mr Green said projects such as the Nowingi venture allow for much higher levels of variable low-emissions power, while strengthening supply security on the grid, just as is needed for the energy transition.
Lyon, a Brisbane-based partnership whose backers include Mitsubishi of Japan, US hedge fund Magnetar Capital and others, will finalise the design of the storage systems depending on which contracts are signed in the tender.
The tender will also offer products from two other Lyon projects, the already-announced Cape York venture in Queensland, costing up to $200 million, and the $1 billion Riverland project in South Australia. Services on offer include energy price arbitrage, load shifting, "firming" back-up power, and other "ancillary" functions.
Mr Green said the tender "turns the market on its head" by offering a range of potential services from batteries to networks, generators and energy users, instead of responding to a specific need of a market player.
The projects will be initially 100 per cent equity funded to allow for swift development, but would likely be refinanced with some debt capital once up and running. Institutional capital and banks are becoming increasingly comfortable with providing funding for battery projects, Mr Green said, noting that one of the country's four major banks had approached Lyon voicing interest.
"We are seeing a really significant shift in sentiment in private sector capital," he said. "Private capital is really talking."
The Nowingi project's 2.3 million solar panels, with a capacity of 250 megawatts, will charge an 80 megawatt battery storage system able to run for about two hours, making it the world's second-biggest after the Riverland venture, announced in March. Construction will start in June, involving 250 jobs, with the project to be running in December.
Mr Green said the plant will improve the security and reliability of a stretched part of the power grid and "put downward pressure" on electricity prices.
The Finkel review recommends a new set of "energy security obligations" be placed on generators and network owners to maintain inertia in local regions and to provide fast-response supply, while new renewables projects may have to be supplemented by storage to deliver reliable power. Large-scale battery storage will be integral to meeting those obligations, Mr Green said.
He said while the Finkel review is a very important piece of work and stability in policy is clearly needed, "there is a degree of inevitability in where we are heading".
Lyon's Australian project pipeline currently comprises more than 1700 MW of large-scale solar and 1000 MW of large-scale battery storage.
Thursday, June 22, 2017
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