Australia projects drive trebling of energy storage revenues for Neoen

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Neoen saw its energy storage revenues triple in the first half of this year, driven by its Victorian Big Battery in Australia, where the company has established itself as a key market player.

The French renewable energy developer and independent power producer (IPP) published its latest financial results last week. It earned €99.5 million (US$101.38 million) revenue from its solar PV business division, €66.2 million from wind and €39.3 million from energy storage.

But while all three segments saw increases in revenues from the same period in the previous year, with solar PV up 17% and wind up 28%, in energy storage revenues for H1 2022 were 2.9 times higher than in H1 2021, when Neoen earned €13.4 million from the segment.

The increase in energy storage revenue was driven largely by Neoen’s Victorian Big Battery project, which came online at the beginning of this year and at 300MW/450MWh is Australia’s largest battery energy storage system (BESS) facility.

The Victorian Big Battery benefitted from three separate revenue streams for different applications: participation in the National Electricity Market’s frequency control ancillary services (FCAS) market, energy arbitrage and through a capacity reserve contract through the System Integrity Protection Scheme (SIPS) of the Australian Energy Market Operator (AEMO).

The latter is a long-term contract to provide 250MW that can enable the interconnected electricity system between the states of Victoria and New South Wales to handle more load at peak times.

Hornsdale Power Reserve also has a SIPS contract, with AEMO and transmission operator ElectraNet, together with the Victorian Big Battery marking two relatively rare examples of long-term contracted revenues for batteries in Australia, a market otherwise dominated by merchant revenue structures.

The company noted that two other battery assets in its portfolio, Hornsdale Power Reserve in South Australia and the 30MW Yllikkälä Power Reserve One in Finland contributed to an overall performance that meant energy storage’s contribution to Neoen’s half-year revenue total went from 8% in H1 2021 to 18% in H1 2022.

Storage adjusted EBITDA was €29.2 million for H1 2022, again a big jump from H1 2021’s €11.1 million. However, EBITDA margin was higher by percentage in the first half of last year, 83%, versus a still-very-healthy 72% in the first half of 2022.

It was a similar story to Q1 results this year, when energy storage revenues again outperformed the previous year’s equivalent period’s three times over.  

Having already put in two well-known large-scale projects in Hornsdale Power Reserve and the Victorian Big Battery, both of which use Tesla Megapack BESS units, Neoen has a few other Australia projects in development or construction.

The Capital Battery is a 100MW/200MWh BESS in the Australian Capital Territory (ACT), on which construction began in late 2021, shortly before construction began on the first phase of Goyder South, a hybrid wind-solar-storage project in January.

At the beginning of the year Neoen brought online the Bulgana Green Power Hub, also in Victoria, combining a 204MW wind power plant with a 20MW/34MWh BESS. It has also proposed, and hopes to get approval for, the Great Western Battery, a 500MW/1,000MWh BESS project in New South Wales.

Other highlights for the first half of the year for the company included 92.5MW and 80MW renewables auction wins for solar projects in France and Ireland respectively and wind farm contracts and projects in Sweden, Finland and France.

Meanwhile in energy storage Neoen signed a seven-year ‘virtual battery’ contract with utility AGL for the Capital Battery and Hornsdale Power Reserve’s retrofitted advanced inverters were cleared to begin providing inertia to the grid.

Neoen revised its EBITDA guidance for it financial year – which ends on 31 December – upwards from a previously offered €360 million to €375 million to a range of between €380 million to €400 million.

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