How the giant Tesla battery will impact Australia's energy issues

Elon Musk might have the Midas touch but it’s unrealistic to expect his super-sized creation to be a magic bullet solution to South Australia’s energy woes, experts warn.

Power outages caused by adverse weather events wreaked havoc on South Australian businesses in 2016 and 2017. As has been widely reported, these crises have propelled the South Australian Government to think outside the square in coming with solutions. In March, the State Government launched a $550 million energy intervention package. It's most noteworthy feature was the creation of the world’s largest lithium-ion battery.

Premier Jay Weatherill called on one of Elon Musk’s companies, electric car giant Tesla, to construct a gigantic 100-megawatt battery. This battery will store energy from French renewable company Neoen’s Hornsdale’s wind farm near Jamestown, located 200km from Adelaide. As you’ve no doubt heard by now, Tesla proved the doubters wrong and got the battery built in record time.

The grid-scale battery is scheduled to go into operation on December 1. So, it’s now useful to consider how effectively the battery will live up to Tesla’s claim that it will “help” redress power shortages, shrink intermittencies and manage summertime peak load.

What the battery will and won’t achieve

Dr Ariel Liebman, deputy director of the Monash Energy Materials and Systems Institute (MEMSI) and senior lecturer at Monash University’s faculty of information technology, has done some modelling to answer that question.

His estimates show the fully charged battery can power more than 20,000 houses for a few hours in the event of grid failure. He says that, as impressive as it might otherwise be, a 100-megawatt battery can still only meet a fraction of South Australia’s 3,200-megawatt demand. He also points the new battery can’t be expected to significantly reduce consumer power costs nor improve system security at this stage.

Liebman says the battery is better viewed as a valuable learning exercise in a much longer energy security development process. “We need more of these [batteries] as the amount of renewables increases,” he says. “This particular one on its own is not anything amazing – except it's the largest of its size. But it's necessary to start with a relatively small installation, as this actually is, as we move beyond 20 percent renewables to 50 percent renewables.”

Karl Sullivan is general manager risk at the Insurance Council of Australia. He expects most businesses (particularly power-hungry businesses) that apply a robust risk management methodology will be well aware that the battery assists with grid stability rather than ensures it.

With the peak of the hot season approaching, he also suggests business have the right cover to protect them against power outages. “If they don't, they should be speaking to their broker now about arranging a risk assessment and placing some cover,” he says.

“Many of those who do take out cover may not be taking out business interruption extensions or utilities cover which are available” 

The chilling facts about underinsurance

Having no electricity to run the TV, fridge and air-conditioner at home is inconvenient but rarely serious. Not having any electricity to run lights, computers, refrigeration units and production lines can cost a small business thousands of dollars a day, or even an hour. A string of blackouts, especially during what is a peak period for many businesses, can be devastating.  

What information is available suggests that only a minority of business have covered themselves for losses resulting from ‘business interruption’.

Australians are notoriously underinsured and surveys suggest less than a quarter of Australian businesses have business interruption insurance.

Sullivan says the tendency of small businesses to be more price and cash flow-sensitive affects their decision not to take out cover. He also warns that many of those who do take it out don't always get it right.

“Many of those who do take out cover may not be taking out business interruption extensions or utilities cover which are available,” says Sullivan. “Those are businesses that will have limited or no insurance if they have a power outage lasting a number of days that severely impacts their operations.”

To find out more about insurance for your business and the differences between a restricted business pack versus wider industrial special risk covers, contact a Steadfast insurance broker.

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