AGL, Hillgrove Resources scrap 250 MW pumped hydro plans

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In what has been termed a mutual agreement, AGL and Hillgrove Resources have decided to scrap a plan to develop a 250 MW pumped hydro facility at the Kanmantoo copper mine in South Australia’s Adelaide Hills region. According to Hillgrove, the two sides could not see eye to eye on a way forward that enabled the mine owner to commence underground mining and AGL to progress the development of the pumped hydro facility simultaneously.

The project was first announced last April when AGL secured the right to develop, own and operate the Kanmantoo pumped hydro energy storage project based on a $31 million binding agreement. AGL was supposed to buy the land required for the project from Hillgrove shortly after a final investment decision, which was expected to be made after the completion of processing at Kanmantoo. “The signing was the start of a multiple-stage process to progress the project and the agreements were subject to a number of conditions which needed to be satisfied within specified timeframes,” AGL’s Executive General Manager of Wholesale Markets, Richard Wrightson, said on Friday.

Since the agreement was signed, Hillgrove said it had conducted limited drilling work on an underground mining project below the giant pit that was going to be used for the pumped hydro project. In January, it won approval to begin underground mining. “However, Hillgrove and AGL could not reach agreement on a way forward that enabled Hillgrove to commence underground mining and AGL to progress development of the PHES simultaneously,” Hillgrove said in a statement.

In spite of the Kanmantoo debacle, AGL said it remained committed to continuing the development of energy storage projects such as pumped hydro and batteries to provide firming capacity to the market. The power producer has been actively growing its battery fleet. Early last year, AGL delivered the 30 MW Dalrymple ESCRI battery on the Yorke Peninsula in South Australia as part of a joint venture with ElectraNet. In October, it announced a deal with Maoneng Group to buy capacity from four 50 MW /100 MWh batteries in New South Wales. Last month, AGL inked a 15-year power purchase agreement for a giant 100 MW/150 MWh battery project that will be developed by Vena Energy near Wandoan in the Western Downs.

The power company is also investigating a pumped hydro plant at Bells Mountain in NSW, which if progressed will provide more than 250 MW of new storage capacity and a 50 MW battery at Broken Hill, which would be delivered under NSW Government’s Emerging Energy Program. It is also looking at a gas firming power station in Newcastle. “More broadly we have $1.9 billion of energy supply projects completed or in construction and another $2 billion in the pipeline, subject to feasibility and stable policy settings, which will all help to put downward pressure on prices for customers,” AGL CEO Brett Redman said earlier.

For Hillgrove, the battery opportunity looked attractive back in 2017 amid rising gas prices and increasing share of intermittent renewables on the grid leading to its decision to seek approval to develop the 250 MW cost-effective energy storage project at its mine. Welcoming the last year’s deal with AGL, Hillgrove CEO Steve McLare said the project would 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.” He said: “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.”

However, the copper miner is now content to continue its regular activities at the site. “As Hillgrove is no longer bound by the PHES restrictions it will now progress the approved additional drilling program, mine design, optimization and feasibility studies for an underground mining project beneath the Giant Pit, and continue advancing its regional exploration,” the company said in a statement to the ASX.