AGL plans 250 MW pumped hydro project in South Australia

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AGL Energy will pay $31 million to acquire the rights to develop, own and operate a massive pumped hydro energy storage project at the Kanmantoo copper mine in South Australia based on a binding agreement inked with ASX-listed mining company Hillgrove Resources. The project is expected to have capacity of 250 MW and eight hours of storage, making it the largest storage capacity in South Australia.

The signing of binding agreements marks the start of a multiple stage process to progress the project, including the lodgement of a development application in 2020. AGL would buy the land required for the project from Hillgrove shortly after a final investment decision, which is expected to be made after the completion of processing at Kanmantoo.

“If all approvals are received, we expect the project to be complete and operating by 2024,” AGL’s Executive General Manager of Wholesale Markets, Richard Wrightson said.

The move is part of the utility’s strategy to align investments in its core energy markets business with customer needs and evolving technologies. In addition, the project will expand AGL’s technology mix in South Australia, where it has significant wind and thermal generation. “It would help us to meet the changing needs of the South Australian energy market, in which energy storage assets are likely to be needed to provide dispatchable capacity as renewables generation increases over coming years,” says Wrightson.

With more than 50% renewable energy achieved at this stage, South Australia is expected to continue adding solar and wind projects and single-handedly grow its capacity to over 70% in the next couple of years. Last year, the Australian Energy Market Operator projected South Australia would have 73% renewable power by 2020/21 and consultants Green Energy Markets found it could reach 74% by 2025 without any additional policies.

To match the state’s changing electricity mix, Hillgrove sought proposals to develop the 250 MW cost-effective energy storage project at its mine. It identified the opportunity in 2017 amid rising gas prices and increasing share of intermittent renewables.

One of the location’s advantages is an existing open mine pit, which will be used as the lower pond, while the upper pond will be built on nearby land owned by Hillgrove.

Hillgrove Managing director Steve McLare said the project will transform a former mining site into one of the lowest cost electricity storage projects in Australia, at a time when “synchronous generation and bulk storage is critically needed.” “Although the progression of the PHES will prevent long term mining of the portion of the underground exploration target directly beneath the existing pit, the Board determined the AGL PHES offer represented a lower risk and higher value proposition to shareholders,” he said.

The Kanmantoo copper mine project is one of a number of proposed pumped hydro projects in the state. There are three South Australian pumped hydro projects shortlisted for federal underwriting, proposed by Simec Zen, Rise Renewables and Delta Energy.