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Posted: 2022-08-29 22:45:00

“If you want to trickle it out, then you can provide energy over a longer duration,” Cole says.

With plans to come online in the first half of next year, the Riverina Battery will utilise Tesla’s Megapack Storage System and was partially financed by the Commonwealth Bank - making it only the second battery to be financed by commercial banks in Australia.

Pioneering project

According to the Commonwealth Bank’s executive director of natural resources and energy, Neil Fraser, a key reason only two batteries have been financed by commercial banks so far is because there has been a lack of so-called offtake contracts to support the revenue. Edify signed long-term supply agreements, or offtakes, with Energy Australia and Shell Energy to cover 10 out of the 15 years of the project’s financed life.

The offtakes provide both parties with a hedge against market volatility, but for battery operators they also give much needed revenue security. This means the bank can be quite aggressive with the amount of debt they put against the project because they know the project will have stable cashflow to support loan repayments, Fraser said.

Commonwealth Bank’s executive director of natural resources and energy, Neil Fraser.

Commonwealth Bank’s executive director of natural resources and energy, Neil Fraser.Credit:CBA

“We view energy storage as being crucially important to the transition of the energy market over the next 10 to 15 years and we think there will be a lot of batteries coming into the market in the future, we’re very eager to support the introduction of this technology into the National Electricity Market,” Fraser says.

More pertinently, the Riverina battery is the first time a battery has been financed by commercial banks with a merchant tail – as during the final five years of the repayment profile the battery’s revenue will depend on market prices. As the battery market continues to develop and new grid-forming services are increasingly monetized, operators will see their revenue streams increase, Fraser says. The Riverina battery will likely operate across nine different energy markets by the time its loan period passes the 10-year mark, Fraser says.

He says CBA spent a lot of time talking to Edify about the merchant tail and this first instance will no doubt herald similar deals in the future.

“We have financed batteries offshore in North America and in Europe, so we’ve been able to take some of the learnings from over there and apply them here as well.

“And as the market develops and we see increased penetration of renewable generators, these batteries are going to be crucial in supporting the stability of the grid and firming the variable renewable energy,” Fraser says.

For Steven Panizza, head of renewable energy at investor Federation Asset Management, the key business attraction for deals like Riverina is that 100 per cent of the capacity of the project has been contracted to high quality counterparties for substantial periods.

Steven Panizza, head of renewable energy at Federation Asset Management.

Steven Panizza, head of renewable energy at Federation Asset Management.Credit:Federation Asset Management

“Having security of revenue from high quality counter-parties via offtakes, provides surety to us as investors on the long term potential of the deal. So for Federation, you have a good developer, good technology, confidence in the engineering, procurement and construction and then contracting for the offtake,” Panizza says.

He adds that grid-forming batteries – those that help stabilise and strengthen the NEM as the power generation mix continues to shift to renewables – are especially important for Australia’s future. This was another reason Federation was keen to support the project – to ensure grid-forming battery technology is rolled out in Australia.

“We anticipate that the advanced inverter technology is a better solution to challenges in the grid than current systems. Providing this solution to the system can bring economic benefits to our investors; thus we are keen to support its rollout for them and the grid more broadly”, says Panizza.

The Darlington Point battery facility, comprising three independent but co-existing batteries, is testament to Edify’s position as leader in this space. The project has attracted $6.6 million in funding from the Australian Renewable Agency (ARENA), as well as $6.5 million from the NSW Government.

Disclaimer: This information is published solely for informational purposes. As this information has been prepared without considering your objectives, financial situation or needs, you should, before acting on the information, consider its appropriateness to your circumstances. Commonwealth Bank of Australia ABN 48 123 123 124 and AFSL and Australian Credit Licence 234945.

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