Pumped hydro more expensive than batteries: apples-to-apples

A lot of effort in the article in SolarQuotes (that is the subject of the series that starts here) went into avoiding a direct, apples-to-apples comparison between hydro and batteries. That made me wonder what the result of such a comparison would be.

Let’s just jump in. This is what we are working with:

  Snowy Hydro 2.0 Hornsdale battery Victorian Big Battery
Capacity (MW) 2,000 100 300
Storage (MWh) 40,000+ 129 450
Price (million AU$) 10,000 89 180

As seen in previous posts, some tricks were used to skew the comparison towards batteries. For example, the author of the article compared the expected average output of hydro with the maximum capacity of the batteries. That obfuscated the vastly lower storage capacity of the batteries, but it also left the batteries with an impossible tiny margin (according to his own Hornsdale Power Reserve scenario, the capacity of the batteries would not even be large enough to meet the average demand towards the end of their economical life).

Worse, he dimensioned the system using the expected average output. Dimensioning a storage system is however not done by using averages, but by the maximum storage needed to meet demand at all times. That maximum storage capacity might not be used often, but needs to be taken into account when dimensioning a functional storage system.

The Snowy Hydro 2.0 has a vastly larger storage capacity (40 GWh = 40,000 MWh) than the Hornsdale battery (129 MWh). It would take roughly 310 Hornsdale Power Reserve-sized batteries to get to a total storage capacity of 40 GWh. At 89 million a pop, the total price would be AU$27.6 billion, almost 3 times the (inflated) budget of Snowy Hydro 2.0 … for a one time purchase … lasting maximum 15 years.

More, the author of the article assumed that the storage capacity of Snowy Hydro 2.0 “under normal operation” is 40 GWh, but that, if necessary, Snowy Hydro 2.0 could provide more than this 40 GWh and that this is “a useful capability to have”. The report he linked to in his article stated that the recyclable storage capacity could vary between 40 and 200 GWh, depending on the operating regime of the upper reservoir. It could even be more than 200 GWh, but then the water would not be recyclable. Now imagine what would happen when I would redo that calculation for a maximum storage capacity of 200 GWh or more…

Arbitrage will bring in revenue, but I doubt that this will be as lucrative as what the Hornsdale Power Reserve is raking in now. The Hornsdale Power Reserve is currently king because it is the only one in its kind and can react much faster than other power generators, therefor eating their lunch. It also still fits snugly into the frequency control service market. Additional battery capacity will encounter stiff competition in a saturated frequency control market.
Replacing the Snowy Hydro 2.0 capacity means a vastly different role for these batteries, performing a task they are very weak at. Dimensioning for the maximum output will inevitably imply some over-capacity. This will increase the number of batteries that will stay idle at times when not all that capacity is needed, therefor reducing the ability to earn revenue for those batteries.

Over to the second scenario: the Victorian Big Battery is bigger and has a larger storage capacity than the Hornsdale Power Reserve. To end up in a scenario with a total storage capacity of 40 GWh, about 89 Victorian Big Battery-sized batteries are necessary. At AU$180 million a pop, this is a tad above AU$16 billion. That is much better than the Hornsdale Power Reserve scenario, but still 1.6 times the (inflated) cost of Snowy Hydro 2.0. Also here, this is for a one-time purchase and lasting maximum 15 years.

I think it is safe to conclude that if the 40+ GWh storage capacity really is necessary to meet demand at all times, then Snowy Hydro 2.0 would make much more sense than utility-scale batteries.

via Trust, yet verify

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October 22, 2021 at 03:57PM

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