PUMPED HYDRO ENERGY STORAGE

Paul Heithersay

Chief Executive

30 August 2018Source: Cleantech Concepts

• Energy – World Leading

• Copper – World Class, High Grade

• Iron Ore High Quality and in Demand

• Oil and Gas – Large Scale

The South Australian Opportunity

Copper in SA

Copper in SA

South Australian Copper Production

South Australia’s Lithospheric Architecture

Copper to the WorldAccelerate exploration, discovery and information

AusLAMP Magnetotellurics (30 km depth slice) and tenements in South Australia

(image from Kate Robertson, GSSA)AusLAMP Magnetotellurics (30 km depth slice) and copper occurrences in South Australia (image from Kate Robertson, GSSA)

Structural Shift in iron ore pricing

PRODUCT Fe% SiO2% AL2O3% S% P%

South Australia 66.5 – 70.0 1.8 – 3.36 0.2 – 1.9 0.002 – <0.01 0.005 – 0.009

Rest of Australia 64.5 – 65.0 6.6 – 8.15 0.16 – 0.25 0.004 – 0.03 0.02 – 0.026

Global producer

(Sweden)

67.90 0.75 0.16 0.002 0.025

Global producer

(Brazil)

67.75 1.40 0.55 0.007 0.035

PRODUCT Fe% SiO2% AL2O3% S% P%

South Australia 66.5 – 70.0 1.8 – 3.36 0.2 – 1.9 0.002 – <0.01 0.005 – 0.009

Rest of Australia 64.5 – 65.0 6.6 – 8.15 0.16 – 0.25 0.004 – 0.03 0.02 – 0.026

Global producer

(Sweden)

67.90 0.75 0.16 0.002 0.025

Global producer

(Brazil)

67.75 1.40 0.55 0.007 0.035

Indicative Magnetite Product Quality from South Australia

• South Australia energy mix is transitioning to low carbon energy supply.

• High penetration of intermittent renewable energy:

• 48% of total generation in 2016-17 forecast to rise to approximately 70% by 2020-21 (AEMO)

• Presents challenges for maintaining an affordable reliable and secure South Australian electricity system.

South Australian Energy Landscape

Changing Operational Demand

Source: AEMO Integrated System Plan

Large ramp to

evening peak

Low demand in

middle of day

Effect of growing rooftop solar

Increasingly Volatile Wholesale Prices

Source: Australian Energy Regulator

Low System Strength

Source: AEMO Integrated System Plan

Reducing inertia

Source: Alan Finkel et al – Independent Review into the Future Security of

the National Electricity Market, Preliminary Report, December 2016

• South Australian Government supports the transition to clean energy.

• The transition must be orderly and challenges must be managed.

• Will be achieved through the South Australian Government’s comprehensive energy policy.

• Major focus on storage, interconnection and demand response

Managing the Transition

• Informed by Acil Allen

• Consistent with Finkel Review

Key Initiatives

• $200m Interconnection Fund

• $100m Home Storage Subsidy Scheme

• $50m Grid Scale Storage Fund

• $20m Demand response and Demand Aggregation Trials

South Australian Government Energy Policy

AFFORDABLE, SECURE AND RELIABLE ENERGY SUPPLY

Grid Scale Storage Fund

“Objective – To facilitate the development of new storage technologies capable of addressing the

intermittency of South Australia’s electricity system”

• Dispatch into the South Australian Grid during

peak periods of demand

• Demonstrate a new or substantially improved technological

application in South Australia

• Contribute to improving the economics of storage

technologies in South Australia

Grid Scale Storage Fund call to market to

occur before end-2018

Linking Pumped Hydro Energy Storage With SA Govt. Energy Policy

Downward Pressure on Prices

• Reduces market volatility, increases competition / contract liquidity

• potential for deferral of network upgrades

Supports emission free, renewable deployment

• Smooths intermittency of renewables, reduces need for spare capacity from gas/diesel

• New load for surplus renewable generation

Improved reliability and security

• Provision of firm, dispatchable capacity

• Diversification from reliance on gas generation

• Inertia, spinning reserve, black start capabilities

PHES WELL

PLACED TO

MEET ENERGY

POLICY

OBJECTIVES

……..But faces competition from other

storage technologies each with their own

characteristics and usefulness

Gas Turbines Li-Ion Battery Flow Battery PHES

Average Size (MW) >100 1-20 1-20 >100

Typical Duration (hrs) N/A 2-4 4-6 >6

Round-Trip Efficiency N/A 85% 70% 70 – 85%

Emissions Emitting None None None

Lifecycles (cycles) >20,000 5,000 10,000 >20,000

CAPEX ($/kW) $1,000 $4,000 $5,000 >$2,500

CAPEX ($/kWh) N/A $400 $500 >$250

Operating Costs High (fuel costs) Medium (parasitic load) Low - Medium Low - Medium

Considerations • Emissions

• Natural gas infrastructure

required

• Challenging to permit

• Expensive at utility

scale and long

durations

• Limited cycles

• Expensive

• Unproven

• Limited cycles

• Capital intensive

• Siting limitations

• Challenging to permit

Source: AECOM, Bloomberg New Energy Finance

Pumped Hydro Energy Storage Historically Well Supported in SA

• $150 million Renewable Technology Fund announced during 2017.

• Objective - Accelerate deployment of projects that make renewable energy available on demand.

• $75m Grants / $75m loans

• Four Pumped Hydro Energy Storage projects awarded a total of $8.7m in grants for feasibility and pre-construction activities

Pumped Hydro Energy Storage Developments In South Australia

PUBLICLY

ANNOUNCED

PROPONENT CAPITAL

COST*

GENERATION /

STORAGE*

RTF SUPPORT

Goat Hill PHES Altura $420m 230MW / 1840MWh $4.7 million

Baroota PHES Rise

Renewables

$400m 270MW / 2160MWh $3 million

Middlebank Ranges

PHES

GFG

Alliance

$180m 110MW /660MWh $500,000

Cultana PHES EnergyAustralia $480m 225MW / 1770MWh $500,000

* Capital Cost/Generation/storage based on preliminary studies and liable to change

PUBLICLY

ANNOUNCED

PROPONENT CAPEX* GENERATION /

STORAGE*

Highbury PHES Tilt $380-$430m 300MW / 1350 MWh

Kanmantoo PHES Hillgrove $250m 220MW / 1300 MWh

RTF SUPPORTED – First commercial operations estimated 2H 2021 – 2H 2022

NON-RTF SUPPORTED - First commercial operations estimated 2H 2021

Proposed Pumped Hydro Energy Storage Locations

SUMMARY

1. South Australia has challenges transitioning to a low carbon energy supply.

2. SA Government has developed an energy policy to manage the transition that is consistent with Finkel Review approach.

3. The Finkel Review has highlighted the importance of Pumped Hydro Energy Storage (PHES) in the market.

4. The characteristics of PHES link well to Government energy policy objectives.

5. SA Government remains technology neutral and will assess each storage proposal on its merits.

6. PHES has previously been supported through the Renewable Technology Fund and future support may be available through Grid Scale Storage Fund.

Source: Rise Renewables Baroota PHES

Contact

Paul Heithersay, Chief Executive

Department for Energy and Mining

11 Waymouth StreetAdelaide, South Australia 5000

GPO Box 320

Adelaide, South Australia 5001

T: +61 8 8303 2299

E: paul.peithersay@sa.gov.au

DisclaimerThe information contained in this presentation has been compiled by the

Department for Energy and Mining (DEM) and originates from a variety of

sources. Although all reasonable care has been taken in the preparation and

compilation of the information, it has been provided in good faith for general

information only and does not purport to be professional advice. No warranty,

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