Over the past few weeks we have been looking at the findings of a study commissioned to investigate the feasibility of a neighbourhood battery to help address the power problems of Apollo Bay, Marengo and Skenes Creek.
We have learned that the study recommends a staged approach for the technical solution.
Experienced power industry consultant, Mondo, identified an advanced grid-connected microgrid with a central grid-forming 4.95MW/10MWh battery energy storage system as the best way to address the community’s top four power priorities for Apollo Bay. As far as Neighbourhood Batteries go, that’s a BIG battery (because it serves the whole town).
So, great in theory, is any of it financially viable?
Let’s take a look.
Straight up, the study found the battery would require government funding in the form of a grant to become financially viable. Mondo identified this grant could comprise up to 49% of the project and the remainder of the upfront capital cost would need to be covered by the community or a third-party owner depending on the ownership model considered.
The study recommends the battery be third-party owned so that the third-party is responsible for providing the remainder of the funding for the project, allowing the community to benefit without needing to fund the high upfront cost of the battery.
An analysis of the estimated costs and revenue produces a net present value in the
range of -$1.7m (unfavourable) to $400k (favourable). Mondo estimates the total capital expenditure to be $9.9M - $18M and the total revenue to be $7.4M-$13.7M. The financial viability presumes a government grant of 39% of the project cost and the figures don’t include the costs to make the battery fully islandable but do include components to make the battery island-ready for the future.
Based on the financial analysis there is a high likelihood that there would be a gap in the commercial case. This gap refers to the shortfall in revenue created by the project compared with the upfront and ongoing costs of the battery. The battery system, therefore, is not likely to be financially viable and would struggle to attract third party owners and investors without additional government funding. But that’s not uncommon. The Apollo Bay Neighbourhood Battery Feasibility Study project was one of 13 being investigated across Victoria and in each study, all of the neighbourhood batteries required government funding for financial viability.
So, is the project dead in the water?
Not necessarily, battery prices are projected to fall significantly and wholesale energy prices (and revenue) have nearly doubled since the report. But nevertheless, there is homework to be done before the project can progress any further or even consider applying for funding or trying to attract investors.
In order for the microgrid to be successful, the region needs to reduce its power consumption and larger electricity generation sources like a solar or wind farm need to be established.
Southern Otways Sustainable, the volunteer-run Apollo Bay community group coordinating the study, was very fortunate in late 2021 to secure additional grant funding for a desktop study to explore the viability of those larger electricity generation sources.
Stay tuned to learn more.
And follow us on Facebook
