The Bouldercombe Battery Project (BBP) will be one of the first standalone large-scale Battery Energy Storage Systems (BESS) in Queensland and is the first fully commercial project financed battery in Australia. Australian company Genex has partnered with Tesla and Powerlink to operate the battery. We spoke to Genex Chief Executive Officer, Craig Francis, to hear more about the project’s funding, goals and milestones.
As Australia works towards net zero emissions and renewable energy targets, energy storage has become a hot topic. Generating renewable energy is only part of the green energy transition – energy storage plays a key role in maintaining grid availability and maximising the energy generated by renewable sources. Many renewable sources generate the most power when there is least demand, so to avoid losing out on valuable resources, energy storage is paramount.
Genex Power is an ASX-listed company focused on developing a portfolio of renewable energy generation and storage projects in Australia. Genex’s diverse portfolio currently includes large-scale batteries, pumped storage hydro and wind and solar production across Queensland and New South Wales.
The company’s flagship Kidston Clean Energy Hub, located in North Queensland, integrates large-scale solar generation with pumped storage hydro and wind energy. Genex’s first battery energy storage system – the Bouldercombe Battery Project (BBP) located in Central Queensland – is a 50MW/100MWh battery, set to be one of the first BESS set up in Queensland.
The BBP was developed after successfully achieving financial close followed by the commencement of construction of Genex’s Kidston Hydro project. While the Kidston project delivered outstanding results in hydro energy production, it highlighted the need for a standalone battery project to take on additional storage.
With the Kidston project located in North Queensland, the location for the BBP wasn’t hard to choose – the Bouldercombe site presented the perfect conditions for a large-scale battery installation. Genex partnered with Powerlink, who provided the land and grid connection.
Genex Chief Executive Officer, Craig Francis, said, “In terms of how we landed at Bouldercombe, we did a little site visit driving through Central Queensland looking at various substations. The concept was to find a good area of land in a good part of the network where there’s good interconnection and good system strength, but also where we could get a parcel of land that was as close as possible to the substation.” Consolidated Power Projects were employed as the plant contractor, providing the interface between Powerlink and the battery.
Mitigating risk
Genex wanted to keep the project entirely commercial, meaning that the project would not receive any government funding. Traditionally, commercial battery projects have been difficult to execute due to market risk. Market risk refers to the potential difference between the energy purchase price and the energy sale price. When the battery charges, it draws electricity from the grid, paying the spot price at that time.
When it discharges, giving energy back to the grid, it receives the spot price at that time. This exposes the operator to potential loss if the cost price is greater than the sale price. When battery projects are government-funded, the government offtake process absorbs the market risk.
While this can be helpful in mitigating potential losses for independent companies, it can also impact the ability to generate any profit from battery projects – profit that can then be reinvested into more renewable energy. The BBP is the first project financed in the National Electricity Market that is completely commercial. For Genex, keeping the project upside for its shareholders was crucial from an economic perspective.
“With our hydro project, the revenue structure that we were contemplating and that we ultimately agreed with EnergyAustralia basically gives them full control over the project and they pay us a fixed fee,” Mr Francis said.
“So really, all this work we’ve been doing on the dynamics of the energy storage market, and how it all works and the economics of it was a bit redundant in the end, because we don’t get to capture that upside. We receive a fixed rental fee, which is great for supporting project finance for a large complex project like the hydro, but really means we’ve got little upside.
“We looked at Bouldercombe specifically with the idea of broadening our storage strategy and capturing more of those economics, which we’ve got a great understanding of in Queensland. We’d been working on our flagship Kidston pumped storage hydro project since the company was founded in 2014.
“We learned a lot about energy storage in Queensland and the pricing dynamic, the economics that underpinned energy storage. We wanted to apply that knowledge more broadly than the hydro project to another standalone storage project and we knew the need for it was there.”
Prudent partnership
In order to deliver the project without government funding, Genex partnered with Tesla. The Bouldercombe battery is powered by the Tesla Megapack, which stores energy for the grid reliably and safely, eliminating the need for gas peaker plants and helping to avoid outages.
Along with the Megapack, Tesla delivered underwriting for the project, meaning that Genex is guaranteed a minimum revenue and share in higher profits. The underwrite not only reduces the market risk for Genex, but also ensures both partners benefit the more the battery is used and the more renewable energy is generated. It’s a great structure for both parties – and for the environment.
“It’s a deliberate risk that we are accepting. We think there is a lot of upside there. One way to mitigate against it would be to give that risk to somebody else, like EnergyAustralia or Origin. But we think in doing so, we’re leaving a lot on the table.
So we’re taking that risk on this project, because it’s only a risk above the Tesla guaranteed revenue amount. We’re taking on this risk because we have a portfolio perspective, a largely fully contracted portfolio. Of our portfolio, 83 per cent of our revenues to 2055 are contracted, meaning 17 per cent are exposed to this market risk,” Mr Francis said.
The partnership also includes use of Tesla’s proprietary algorithm-based bidding system, Autobidder. Autobidder is a real-time trading and control platform that provides value-based asset management and portfolio optimisation, enabling owners and operators to configure operational strategies that maximise revenue according to business objectives and risk preferences.
Essentially, Autobidder determines the best times for the battery to intake and discharge energy from an economic perspective – benefitting both Genex and Tesla. “The revenue structure is basically, Tesla operates the battery to make as much money as possible, they’ve got the technology they use to do that. But what they also provide is a revenue underwrite, so there’s a minimum level of revenue they’ll guarantee.
In reward for that, they get a share in the outperformance above that underwrite. “It’s really an alignment of incentives. We both want to make as much money as possible. We both earn more the more we make, but we’re protected on the downside through the Tesla underwrite.
We think it’s quite an innovative structure, it’s enabled us to get some stability into the project. It gives us some downside protection, but also gives us that upside exposure, which is what we were looking for at the outset for the project,” Mr Francis said. “We think it’s pretty innovative being one of the first to attract project finance and get delivered purely on a commercial basis, without any support.
And hopefully, what that’s doing is paving the way for others to adopt similar structures. The banks that we spoke to have now seen one done, seen how it can be successful, and that feeds into their appetite for more projects with similar exposures. You build an industry by doing these things and that’s certainly what we’re doing.” Under the partnership agreement Tesla also agreed to warrant and operate the battery for 20 years, including physical maintenance at site.
Switching on
The BBP is an ambitious and innovative project. Despite many variables that either present risk or are so cutting-edge that there is no blueprint to follow, execution of the project has been smooth. So far, Genex has not experienced any major hurdles or delays – that’s even despite early parts of the project occurring during the COVID19 pandemic.
Although supply chain impacts affected the procurement of materials for the project, workarounds were found and the project stayed on track. The BBP is set to be delivered on time and on budget. Energisation has already been achieved on the project, an exciting milestone.
Energisation means the battery is connected to the network and is currently undergoing commissioning tests to achieve full functionality.
During this phase, the battery is still able to be used for simple charging and storage. “We’re just operating that simple profile of just, charging it in the middle of the day to absorb all the extra solar and discharging in the evening to meet the evening peak.
You have this battery sitting there, all this extra solar in the middle of the day and all this extra demand in the evening. So it’s great that we can use it just to earn a little bit of revenue, but also support renewables and the grid,” Mr Francis said.
“The project is built and it’s connected to the network. It’s now going through the commissioning phase, which is basically a series of tests with the Australian Energy Market Operator and Powerlink, the government-owned network.
There’s various tests that need to be performed and signed off on. Once they’re signed off, we’ll be announcing the project has reached practical completion, which is basically completion under the contract. That’s when the offtake agreement Tesla commences.”
Genex said the project is on track to meet its projected timeline of full operation in October 2023.
Big impacts
The ever-changing landscape of renewable energy has already encouraged Genex to think about Bouldercombe’s future. When the project was initially developed, 50MW was a large-scale battery. These days, not so much. Mr Francis said that the company is already considering expanding the BBP’s capacity to 100MW.
“50 megawatts is small these days, it wasn’t when we committed the project back in 2021. But what it does do is it provides the pathway for other projects, it shows that this can be done without government support, with conventional financing and hopefully it will enable more participants to come and deliver similar types of projects, because we’re going to need them.
And certainly for us, it will give some track record as well for us to go and do more projects, including potentially an expansion of Bouldercombe. We also have land and planning approval for an additional 50MW, 100MWh, which is something we’re continuing to explore.”
Bouldercombe isn’t going to single-handedly complete the transition, but it will contribute. Genex has already announced another project it acquired in August 2022, located at Bulli Creek in Southern Queensland. That site is currently powered with 2GW of solar, and Genex is currently looking at installing a 400MW battery at the site.
“We’ve announced a project at Bulli Creek, which is west of Toowoomba, right near the connection between Queensland and New South Wales. It’s called the Queensland–New South Wales Interconnector. That’s a big site with huge capacity, it’s got up to 2GW of solar and battery capacity. So we’ve announced that we’re looking at a 400MW battery there, that remains a priority site for us.
We’re turning our minds to what could be, to add something there, under a similar structure or something slightly different to Bouldercombe,” Mr Francis said. Executing a 100 per cent commercial battery project is no small feat – but the BBP is proof that with the right partnerships, it is definitely possible.
The interview with Craig Francis was conducted on 20 September, prior to a minor fire incident at the BBP site. The root cause of the incident is under investigation.
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