Hornsdale Power Reserve: calculating oneself rich

In Flanders, we have the expression “calculating yourself rich”. It means presenting one’s case in a too optimistic way that doesn’t accord with reality. This can for example be done by only counting the positives or by making overly optimistic assumptions. Both can result in an end result that is far too optimistic. Therefor “calculate” yourself rich instead of “being” rich. It is not real wealth, it is fully dependent on the tricks used in the calculation.

This expression popped up in my mind when I read an article about the blessings of grid sized battery storage (see previous post). To recap: two advocates for solar and wind claimed that batteries could replace natural gas power plants for peaking and gap-filling. Reading the linked article, it became clear that it had nothing to do with the claims made by the two advocates. The subject of the linked article described how the Hornsdale Power Reserve earned money by providing FCAS services to the South Australia grid.

This is how the article starts:

Tesla’s “big battery” utility-scale Powerpack system at the Hornsdale Power Reserve in South Australia has yielded more than doubled the savings to consumers in 2019 than the year prior as it dominates fossil fuel generators on quicker demand response for the grid.

Hornsdale Power Reserve saved consumers AUD116 million ($75.78 million) in 2019, a big jump from AUD40 million ($26.14 million) savings in 2018.

That seems impressive at first glance and I have no reason to doubt the numbers, but these are only part of the story. We should also look at the bigger picture and can not look at these batteries in isolation of the other elements in the grid.

There was something else that caught my attention. The tweet that pointed to this article, mentioned that the Hornsdale battery “saved consumers $76 million in 2019″:

Tweet Mark Jacobson 2020-02-28

Who in fact are those “consumers” who save all that money? The word “consumers” is used several times throughout the article, so we can figure out from the context who those “consumers” are exactly:

… Hornsdale Power Reserve in South Australia has yielded more than doubled [sic] the savings to consumers in 2019 …

Hornsdale Power Reserve saved consumers AUD116 million ($75.78 million) in 2019, …

It saves consumers a lot of money, and it’s something we should be rolling out right across the market.

… at the Hornsdale Wind Farm provides grid stability to consumers, …

… and gives consumers a win-win scenario.

Consumers benefit from the lower prices of HPR [Hornsdale Power Reserve] and blackouts that can disrupt businesses or daily household activities are avoided

… HPR was able to save consumers AUD14 million in five hours.

… and give consumers access to more affordable energy.

Every single time in plural form. The context it is used in somehow suggests that electricity becomes cheaper for the end consumers by the use of this battery. However, these savings were connected to FCAS (Frequency Control Ancillary Services). The battery offers these services to the grid and earn money this way. The beneficiary of these gains is the owner of the battery (Neoen). Shouldn’t it then say “consumer” (singular)? It is entirely possible that these savings are eventually (partially) passed on to the end consumers (plural), but that is by no means a given. As far as I know, Neoen is not a charitable institution.

That the savings were establish by FCAS and that the biggest saving came from a raised FCAS is interesting. Why is frequency control so much more important in a grid with a high share of intermittent sources?

FCAS are services that help to maintain the grid at 50 Hz. When there is more demand for electricity than there is supply, then frequency will fall and more electricity needs to be generated to compensate. When there is more supply than there is demand, then frequency will rise and less electricity needs to be generated. In a grid with conventional (dispatchable) power sources, this is rather straight forward. Production will just have to follow demand.

There is a different dynamics in a grid with intermittent power sources. Now not only demand is variable, also supply is. The grid now needs to correct more changes in order to balance the frequency. For example, when Germany added more and more intermittent energy sources to its grid as part of its “energiewende”, it saw the number of interventions to stabilize the grid shooting up from 2 in 2003 to 1,213 in 2012, with a steep spike in 2011 just after the start of the energiewende. Also in Germany, a balancing market was created in which electricity providers could earn money by providing services to stabilize the grid, similar to FCAS in Australia.

This is therefor not a “savings” in the usual sense of the word, it is in fact an additional cost to stabilize a grid that needs more interventions because more intermittent sources were added in the first place.

It is necessary to look at the bigger picture. That this battery “saves” money because of FCAS doesn’t necessarily mean that electricity is getting cheaper for the “consumers” (plural). This battery is only one small piece of the puzzle. When we want to calculate the total cost of electricity, then all costs need to be taken into account. For example: infrastructure costs, fuel costs, maintenance costs, decommissioning costs and so on.

Intermittent energy sources bring some extra costs like for example the need for huge installations spread over a large area (solar and wind are low density power sources), therefor a higher infrastructure costs (roads, cables,…) and higher maintenance costs, shorter lifespan of installations (20 – 25 years compared to 40 – 60 years for most conventional sources), the need for backup (conventional peaker plants, pumped hydro and/or batteries), the need for a stronger grid to handle the intermittency, subsidies for solar and wind are still needed in many places, conventional power plants that do the heavy lifting will be less economically viable (therefor a rising need to also subsidize them),…

Looking at those elements, I am not really convinced that a grid with a high(er) share of intermittent energy sources would be cheaper. That is also not what is seen in reality. In Europe, Denmark and Germany have the highest share of intermittent energy sources and they both have, by far, the highest energy bills for consumers.

Just looking at one element of the total cost doesn’t show whether electricity will be cheaper. That is why I think they are calculating themselves rich. In isolation of all other elements, this battery “saves” money, but when taking all other costs into account could well lead to a different, less rosy, picture.


6 thoughts on “Hornsdale Power Reserve: calculating oneself rich

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  2. Wannabe

    Excellent article. I’m glad I came across this, because for a while I thought that I was the only one who thought that those figures posted on the cost savings from the Hornsdale batteries, were grossly inaccurate.
    Your article correctly points out (It is necessary to look at the bigger picture. That this battery “saves” money because of FCAS doesn’t necessarily mean that electricity is getting cheaper for the “consumers” (plural). This battery is only one small piece of the puzzle.)
    These batteries are only a small piece of the puzzle, and I believe that non-technical people, or those who don’t understand how the batteries are incorporated into the system, are hoodwinked by those publishing the so called “savings”.
    These batteries are basically there to stabilize the system, allowing more efficient use of solar and wind – that can be so variable. The actual cost savings from the batteries themselves is probably quite complicated to work out.


    1. trustyetverify Post author

      Thanks for the comment. There will be other posts on this subject. Probably really soon. The article on the NSW batteries (see post of today) also contains some claims of batteries “at a lower cost to consumers” and looking deeper, it isn’t what it seems…

      Liked by 1 person

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