Tesla's South Australian battery is about to go live. Will it end the blackouts?

The world’s biggest lithium iron battery farm takes shape near Jamestown, 200 kilometres north of Adelaide Neoen

Dusk was settling over the hills around Jamestown, three hours north of Adelaide, as a column of vehicles that included an unusual number of Tesla electric cars snaked towards a white marquee on the site of the Hornsdale Wind Farm. Nothing in the formal invitation had hinted that the event was to be anything more than a sod-turning to launch the construction of what would be the world's largest lithium battery. Coaches had driven from Adelaide for the occasion. But for the VIPs and press on board, a surprise was in store.

On disembarking it was clear that the first sod had been turned weeks, if not months, before. Laid out beneath the wind turbines was a half-completed bank of Tesla batteries, capable of pumping out about 50 megawatts of power – enough to power 15,000 typical homes and businesses. 

The date was September 29, a year and a day after a storm took down transmission lines and triggered an epic statewide blackout, and six months after Elon Musk's sensational bet that he could build a 100-megawatt battery to solve South Australia's power woes within 100 days of signing the contract – "or it's free". Invited attendees were to see the site where this electrifying gamble was to take place. Musk, who was also on his way to Jamestown, isn't one to leave anything to chance. He'd jumped the gun and started building early.

The South-African born, Los Angeles-based entrepreneur looked jaded after his trans-Pacific flight and three-hour drive from Adelaide. (Earlier that day he had been the showstopper at Adelaide's space show, where he outlined plans to take humankind to Mars by 2022 as well as fly people across the world in 30 minutes in reusable rockets.) As darkness enveloped Jamestown, Musk told the crowd that Tesla was doing everything possible to accelerate the shift to renewable energy, drawing loud whoops and shouts. "Goodonya, Elon!" called out one attendee.

December 1 target date

Kicking off construction early means Musk is virtually certain to have the battery open by December 1, the date that he insisted be specified in the contract with South Australia's government. The mad bolt to build the battery – three times larger than any lithium ion battery elsewhere in the world – has been a canny marketing campaign for Tesla batteries. But the more ambitious side of his bet – that his battery will help to fix South Australia's power woes and prevent power outages – won't be tested until the height of the summer, when the heatwaves roll in. And the stakes are especially high.

Neither state nor federal governments have taken the steps necessary to reinforce the power grid as it shifts from always-on coal-fired power stations to the variable output of the rapidly proliferating wind turbines and solar panels. After Victoria's Hazelwood brown coal power station closed in March, wholesale electricity prices soared along with fears of more blackouts and shortages this summer. The overseer of the national power grid, the Australian Energy Market Operator, has warned that supply could fall short of demand by 1000 megawatts in extreme weather this summer. South Australia, with its heavy reliance on renewables, and Victoria are the weak links in the chain that connects the entire eastern seaboard.

Tesla's battery, the $US50 million cost of which will be shared between South Australian taxpayers, Tesla and French firm Neoen, which owns the wind farm at Hornsdale, isn't the only big battery planned for the eastern states' grid. But it will be the first into the market. If it can help stabilise South Australia's system and lower power costs this summer it will silence a lot of critics and spur a greater take-up of the technology. If it fails to do its job, it will haunt Premier Jay Weatherill, and might even dim Elon Musk's star.

Twitter negotiations

South Australia's giant battery has its origins in a famous Twitter negotiation between Musk and software billionaire Mike Cannon-Brookes following a crucial event at the tail end of last summer. On Thursday, March 9, Tesla's then head of energy Lyndon Rive – who is Musk's cousin and has since left the company – launched Tesla's Powerwall 2 residential battery at an elegantly refurbished industrial building in the Melbourne suburb of Newport. Tesla had built a large grid-scale battery – 20 megawatts, 80 megawatt hours – near Los Angeles in 90 days in 2016. "Could Tesla do the same in South Australia?" The Australian Financial Review asked Rive at the Powerwall 2 launch.

It must be in the genes; Rive didn't hesitate. Tesla would commit to install a battery of at least 100 megawatt hours in 100 days, and would happily have the term added to the contract, Rive said.

Cannon-Brookes, the co-founder of Atlassian, had just heard Prime Minister Malcolm Turnbull declare "a national energy crisis" at the Financial Review Business Summit in Sydney. He had already marked energy as one of two or three areas for Grok Ventures, his social venture capital company, to look at. Hours later Cannon-Brookes saw the Financial Review's story about Rive's offer posted on Twitter and tweeted to Musk: "Lyndon and @ElonMusk, how serious are you about this bet? If I can make the $ happen (and politics), can you guarantee the 100MW in 100 days?"

Musk memorably responded on Friday morning: "Tesla will get the system installed and working 100 days from contract signature or it is free. That serious enough for you?"

From left: Neoen COO Romain Desrousseaux, Elon Musk and Jay Weatherill front the media in July. AAP

Cannon-Brookes: "@elonmusk legend!  You're on mate. Give me 7 days to try sort out politics & funding. DM me a quote for approx 100MW cost – mates rates!"

'All hell broke loose'

Looking back on the momentous exchange on Twitter, the Atlassian co-founder says he didn't think about his initial tweet to Musk for more than 60 seconds before hitting send. "It sort of steamrolled from there," he says. "I was just asking if they were serious and he said they were and that they'd do it for free in 100 days and that's when all hell broke loose."

South Australian Premier Jay Weatherill was just days from launching his own energy security plan for the state when he learned of Musk and Cannon-Brookes' exchange on Twitter. "I was mildly horrified," he says. 

“In a few months we will have finished the whole system and be delivering a full 100MW to South Australia,” Elon Musk said when unveiling some of Tesla’s Powerpack batteries at the Hornsdale Wind Farm, above, in September. Mark Brake

A month earlier on February 9, the day after a blackout affecting 90,000 homes, Weatherill had called his cabinet together to tackle the state's energy crisis. Cabinet had been meeting three times a week to produce the plan and ideas had come from everywhere. They talked to two Australian battery "integrators" (firms that don't make batteries but pick the best for each job) about big-battery solutions. A government-backed generator based on a jet engine and reliability obligations were on the table. And all of a sudden a couple of billionaires from Sydney and Los Angeles were purporting to solve the problem for them on Twitter. 

"I thought he had blown all the most exciting parts of our plan by putting them out there," Weatherill says of Musk's bid to build a massive battery.

The Premier felt he had to respond positively to one of the world's most famous entrepreneurs offering to help his state – and the whole Twitterverse was willing him to embrace Musk's offer. But as Premier he couldn't be seen to be making policy on the run based on tweets. And the government had procurement processes to follow. Weatherill sent out what he calls "a cryptic tweet" in response to messages urging him to look seriously at Musk's offer. "[A]lready reached out looking forward to our discussion," he wrote. He spoke to Musk on the phone the next day and laid out his plan for energy security. Musk is no stranger to government processes; SpaceX's biggest customer is NASA. He promised to come to Australia to announce the result if Tesla won.

Like a lot of "super intelligent guys", Musk is "a pretty serious introvert forced to be an extrovert," Weatherill says. "He warms up. He is quite a reserved man so there are lots of pauses."

Illustration: Sam Bennett

Will it work?

Just how much Tesla's battery can do for South Australia's fragile grid is fiercely contested ground. At 100 megawatts, it's good for about one-30th of peak demand in the state – which is when it's likely to be required. And at 129 megawatt hours, it's good for about an hour and 17 minutes discharging at full throttle. On its own, it's not going to solve South Australia's power woes, nor prevent a statewide blackout if another storm takes down transmission towers and powerlines.

Critics dismiss it as capable of pumping out barely a few minutes of SA's peak needs. Federal Treasurer Scott Morrison likened it to the "Big Banana" at Coffs Harbour or the "Big Prawn" at Ballina on the NSW coast, and said South Australians had been taken for a ride by Musk and his "Hollywood solution". Snowy Hydro chief executive Paul Broad says that his $3 billion-plus Snowy 2.0 project will deliver 20 times the power for a week – not just an hour.

They're missing the point entirely, says Weatherill. The battery will help to stabilise South Australia's part of the national energy grid and could reduce the $52 million the state pays for services that keep the grid in balance to virtually nothing. (Such services are required when severe imbalances in supply and demand knock the grid off balance – or off the optimal frequency and voltage.)

Keeping the grid at the right frequency and voltage is like riding a bicycle. If you lose speed and the bike starts to wobble, a short, sharp burst of pedal power gets you upright and moving again. When frequency and voltage levels in the grid fluctuate too much after some generators drop out or transmission lines go down, the system starts to wobble. Short, sharp bursts of power are needed to get the system running smoothly and safely – until more fast-starting back-up generation can be brought in. Most of the time Tesla and Neoen will be selling energy from the battery into the grid. But the government can also commandeer the battery to give the grid an almighty push whenever there's an emergency.

No silver bullet

Despite the initial talk of using the battery to solve SA's energy problems, and despite the silver gleam of Tesla's batteries, there is no silver bullet. In an electricity system that is shifting from a centralised, coal-power-based grid to a decentralised grid that includes solar panels, batteries, wind farms and hydro, no single component can be expected to do everything – a point that Weatherill needs to keep reminding anyone who'll listen.

The thing that AEMO hopes will stop blackouts is a concept known as "demand response"; utilities and specialist demand management companies offer customers financial incentives to send some of their "behind the meter" distributed energy (power from solar panels, batteries and "smart" energy-hungry appliances such as airconditioners, refrigerators, pool pumps and electric vehicle chargers) back into the grid at times of extreme demand. It's been done on a very limited scale in Australia, but as of this summer, it's rapidly ramped up.

AEMO has identified about 1000 megawatts of demand response and has prevailed on gas plant owners such as Engie and Mitsui (Pelican Point), Stanwell Corp (Swanbank E in Brisbane) and Hydro Tasmania (Tamar Valley) to recommission another 830 megawatts. The combined total more than makes up for the loss of Hazelwood's 1600-megawatt output.

AEMO chief executive Audrey Zibelman describes the decentralised grid as an orchestra: if every player does their job, beautiful music results. The Tesla battery isn't formally part of AEMO's strategy for keeping the lights on, but it's still in the arrangement. As is an additional 200 megawatts of diesel generation that the South Australian government has ready to deploy. If, however, one or more players strikes a bum note or freezes, the whole performance is affected, potentially leading to disaster.

Weatherill says it's impossible to guarantee the power stays on in extreme weather events that topple transmission towers, but barring that, everything that could reasonably be done in the short term has been done. "We have done everything we can to protect South Australia's interests, and AEMO can say all the steps they have taken will mitigate the risks," he says, choosing his words carefully. "I don't think we can put it any higher than AEMO have put it."

The big reveal

On September 29, at the marquee to unveil the battery, the SA Premier told the crowd that people who had made jokes about "our leadership in renewable energy" a year earlier "are laughing out of the other side of their faces because South Australia is leading the world in renewable energy and renewable energy technologies".

Musk has brought some star power to Weatherill's energy policy. When seen in action, the Tesla and SpaceX founder combines the demeanour of a socially awkward technology nerd with the determination of an alpha male bent on changing the world. At the event he cracked jokes ("it's a bit of a drive"; "one tweet leads to another"; "you can't remodel your kitchen in that amount of time") and issued a status report ("In a few months we will have finished the whole system and be delivering a full 100MW to South Australia"; "it will be the largest battery installation measured by power by a factor of three in the world").

The whoops seemed loudest when he flicked the switch to proselytising about climate change and the imperative of switching to clean energy, something the 46-year-old has believed in since he was a teenager struggling to make friends in South Africa.

He also brought props: a slide showing a map with a tiny red square showing the area covered by all the solar panels that would be needed to power Australia – a 10th of the size of Sydney – and another one showing the area needed for batteries (about seven square kilometres). Satellites have been orbiting the earth for 20 or 30 years with no maintenance, he pointed out, reminding the audience that the earth is a satellite of the sun.

"And so it's pretty obvious that if small satellites can be solar- and battery-powered then big satellites can, too," he said. "That is actually what the future will look like and the faster we get there the better."

Musk appears to have won his audacious bet that Tesla can install its batteries quickly. To prove his batteries at Jamestown are indeed what the future looks like, they'll need to perform as advertised, smoothing over the grid's highs and lows as power floods in and out. Indeed the bank of batteries is just part of a much bigger gamble that decentralised, clean energy and demand response can work on a scale never before tried in Australia. Any more blackouts would be a real setback for clean energy, for Weatherill and for Musk.

Landing humankind on Mars might just be an easier challenge to solve.

The December issue of AFR Magazine is out on Friday, November 24 inside The Australian Financial Review.

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