Crown Sponsorship extended to 280MWh battery storage on Aurora

Crown Sponsorship extended to 280MWh battery storage on Aurora

South Australian Government Crown Sponsorship for the Aurora Energy Project has been extended to support an increase of the battery storage component.  It has previously been extended to support construction of the battery and the Company’s thermal energy storage system (TESS-GRID).

Crown Sponsorship indicates that the project is sponsored by a State Government agency, in this case the Department of Energy and Mining as a development of essential infrastructure’ under section 131(2)(c) of the Planning, Development and Infrastructure Act 2016.

Crown Sponsorship was provided for the original project scope of 150MW concentrated solar power and 70MW solar and was extended in February 2021 to include 70MW of battery storage and 2MW thermal energy storage. Crown Sponsorship has now been approved to increase the battery storage component from 70MW/70MWh to 140MW/140MWh in the initial stage, increasing to 140MW/ 280MWh in later stages. 1414 Degrees acquired the project through its purchase of SolarReserve Australia II Pty Ltd now renamed SiliconAurora Pty Ltd.

First Quarter 2021

First Quarter 2021

  • – Aurora revenue upside potential grows 
  • – Global decarbonisation policies driving SiBox industrial heat opportunities 
  • – Cash of $4.6m 
  • – R&D rebate of $1.9m in process

 

1414 Degrees (ASX : 14D) overall company strategy was updated in the first quarter of 2021 to ensure the Company’s technological and commercial efforts are focussed on the quickest path to revenue.  The team is concentrating on using 14D’s competitive advantages to accelerate development of its core silicon-based thermal energy storage technology, including:  

  • – Working with client businesses seeking to decarbonise their high temperature industrial heat processes  
  • – Collaborative business development for clients with variable and waste flared gas streams 
  • – Applying for a series of recently announced government grant programs, both domestically and internationally, with direct relevance to 14D SiBox technology 
  • – Actively engaging Federal and State Government decision makers to access an increasing wave of grant funding specifically aimed at longer duration storage and decarbonisation of industrial heat processes   

14D’s unique technology opens an extensive source of funding to leverage its shareholder capital This is driven by the increasing recognition by government, energy companies, industrial and commercial enterprises and investors of the value of energy storage, in particular thermal storage, in converting variable renewable energy into baseload heat and electricity. The momentum in global energy markets should not be underestimated, and this view is supported by recent market events in Australia: 

  • – Energy industry leaders and analysts have been warning of a fallout on coal power plants from prolonged low wholesale power prices as a direct result of renewable penetration, fuelling expectations of extended temporary and permanent shutdowns.  This is precisely why the problem of variable renewables must be solved and can only happen through game changing storage solutions such as 14D’s silicon-based technology 
  • – Several large-scale thermal generators have flagged the potential mothballing of some of their coal units well before their advertised closure dates.  These announcements follow the publicly announced news of EnergyAustralia bringing forward the closure of Yallourn coal fired power station in Victoria to 2028 from 2032; the decision by Origin Energy to introduce greater flexibility into the operation of the Eraring coal fired power station in NSW; and Sunset Power flagging they remain open to shifting the closure date of the Vales Point coal fired power station, dependent on the prevailing wholesale price conditions in the National Electricity Market.  These announced changes are a direct result of the penetration pace of renewable generation impacting on lower spot and forward electricity prices   

These market dynamics are highly supportive of both 14Ds thermal energy storage technology development and the potential for higher forecast earnings from the Aurora Energy Project (AEP) 

Internationally, decarbonisation continues to impact domestic government, investor and corporation policies affecting carbon intensive industries.  According to the International Energy Agency (IEA), heat is the largest energy end-use, accounting for half of global final energy consumption, significantly more than electricity (20%) and transport (30%).  In this global context, where renewable energy met only 11% of global heat demand in 2019, fossil fuels continue to dominate heat supplies.  Awareness of these imbalances is front of mind in global government policy responses, as demonstrated by the following:  

  • – The European Union has warned that Australian steel and aluminium exporters won’t escape the EU’s planned carbon border levyFrom July 2021 the levy will ensure the bloc’s $65/tonne carbon tax is not undercut by imports from countries with lower emissions standards, like Australia.  This policy is a direct driver for 14D’s value proposition of turning variable renewables into high temperature baseload heat to decarbonise high emitting industries 
  • – Corporations continue to purchase record amounts of clean energy, approximately 23.7GW in 2020.  The rising numbers of companies making clean energy commitments is reflected in the number of companies executing clean energy Power Purchase Agreements (PPAs), demonstrating support of sustainability and clean energy, including storage.  Companies in all sectors, including hard-to-abate oil & gas production and mining, are responding to the pressure, not only by purchasing renewable energy, but also to use renewable heat to decarbonise their operationsThis is still a very immature market with vast potential for 1414 Degrees silicon-based thermal energy storage technology 
  • – A coalition of the world’s biggest investors is pushing companies to align capital spending with emissions reduction pledges 

 

Technology update 

SiBox 

Testing of our silicon-based thermal energy storage technology, SiBox, continues in multiple furnaces conducting daily cycling consistent with anticipated real-life operational conditionsA number of variants of the silicon-based storage medium are undergoing tests and modelling to compare robustness, cost, energy density, and energy conductivity. The result will lead to selection of the most robust and low cost products to scale up to approximately 1.5MWh in a demonstration module. The aim is to follow-up with an approximately 75MWh device delivering 2MW for 8 hours to the National Electricity Market (NEM) on our Aurora Projectresulting in a commercial SiBox product.  

 

GAS-TESS 

Our engineers are reviewing the results from the gas fired thermal energy storage system, GAS-TESS installation at SA Water’s Glenelg Wastewater Treatment plant, to identify the most appropriate path to commercialisation of this unique technology. The variability of biogas production in the plant suggested a combination of engines sized for the minimum gas production with a GAS-TESS to absorb the variable component.  They compared the business cases for engines alone versus a hybrid with an upgraded GAS-TESS. The results were close, with the hybrid case marginally less favourable, and the report noted that the comparison applies to this one site and is based on a number of key high-level assumptions, particularly around engine efficiencies. sensitivity/gap analysis indicated that improving revenue margins will increase the competitiveness of the GAS-TESS technology. This can be achieved by increasing the electrical energy conversion efficiency while decreasing costs as part of ongoing technical development of the GAS-TESS technology. 

The conclusion is that further investigation could promote the commercialisation prospects of the GAS-TESS. A key influence will be market research to identify and characterise broader potential applications for the GAS-TESS, and engagement with industry partners to further inform the GAS-TESS business case and collaborate on future opportunities. 

 

Technology Collaborations 

Our R&D collaboration project, funded through the Innovation Connect program, with the University of Adelaide on further improvements to 14D’s silicon-based thermal energy storage technology is well underway. We have also collaborated with Deakin University on optimising heat transfer design within the SiBox. The outcome of the HILT CRC bid, for which 1414 Degrees is an Affiliate Partner, is still outstanding. 

 

Aurora Project update 

Stage 1 of the Aurora Energy Project (AEP) will be a Battery Energy Storage System (BESS)Doubling of the previously announced 70MWh battery is under investigation, dependent on transmission and connection options. EPC and vendor finance proposals from four tier one providers are under consideration and we expect final decisions to be made in the near term. 

As previously announced, the Aurora Energy Project can provide a significant revenue stream to fund the development of the SiBox technology and achieve commercialisation.                           

The wholesale electricity market dynamics described above continue to support the Projects business case with greater revenue potential.  Key positive drivers for significant revenue upside include record national uptake in 2020 of approximately 3GW of distributed PVwith homes and businesses around Australia installing 317MW of systems in March – an all-time high for national monthly installs.  In South Australia it is now delivering a significant proportion of the state’s electricity needs, causing periods of negative market demand with resulting low to negative NEM prices. This is expected to become increasingly commonproviding upside to the projected arbitrage revenue for Aurora.  Additionally, the PV takeup rate will continue to exacerbate grid instability and driveup Frequency Control Ancillary services (FCAS) price volatility, providing revenue upside for Aurora. 

As mentioned previously, the announced early generator shutdowns and unit cycling should lead to increasing wholesale price spreadsbenefitting revenues from Aurora Energy Project storage.  

 

Finance 

At quarter end, the Company held $4.6m in cash and continues to manage cashflow to ensure the timely delivery of its projects. The Company’s R&D tax rebate has seen an uplift to approximately $1.9m receivable and was lodged with the ATO in April this year. Payroll was further supported by the second extension of the JobKeeper 2.0 program, which ended at the end of March this year.  

 

Corporate 

With a strengthening post-Covid economy, the Company decided to consolidate its team in a single location. The Southlink facility will be decommissioned in the coming monthsand all operations moved to Melrose Park. This will facilitate team collaboration and commercial advancement of our products, including the GAS-TESS and SiBox solutions 

 

 

Crown Sponsorship extended to 280MWh battery storage on Aurora

Aurora Project Update

  • – Internal modelling is identifying the lowest risk plant configurations with the highest returns
  • – BESS size could double to 140MWh in Stage 1
  • – Offers of vendor finance received
  • – Potential for Federal Government funding of $110m
  • – Final BESS business case will be reported in the near term

1414 Degrees Limited (ASX:14D) (Company) is pleased to provide an update of its Aurora Energy Project (Aurora) in the National Electricity Market (NEM).

The Company has restructured its Aurora project team to ensure optimal delivery of the project. Additional energy market expertise has been brought into the team, particularly to refine the business case modelling of spot energy prices and Frequency Control Ancillary Service (FCAS) revenues. The revised modelling to identify the highest return-lowest risk outcome for 14D shareholders has been promising and the key outcomes to date are:

  • – Postponing solar PV generation from the first stage of Aurora development would substantially reduce the capex from the previously announced $199m and remove the requirement to sell Power Purchase Agreements (PPA’s) which are currently at historic lows
  • – BESS size could be increased to 140MWh (subject to transmission connections), for higher revenue streams from:
    • – Merchant generation: Current low wholesale energy prices support charging the BESS from the NEM
    • – FCAS: The BESS will be positioned for further revenue upside from merchant and FCAS as thermal power stations continue to exit the market due to renewable penetration and low wholesale electricity prices

Further Aurora project financing updates:

  • – Engineering, procurement, and construction (EPC) vendor financing has been offered, management is reviewing the economic and practical benefits of these offers
  • – The Federal Government budget reaffirmed $110m in contingent financing for a thermal storage project in Port Augusta
  • – A BESS with merchant earnings is attractive to potential project financiers in the current wholesale electricity market conditions

Several options are under evaluation for connection to 132kV or 275kV high voltage transmission lines to the Davenport substation in Port Augusta. While having these options adds some complexity to the business planning, they add flexibility to manage cost, constraints and connection efficiency.

The BESS business case with investment options is approaching completion and will be reported in the near term. Modelling and development of a hybrid power plant with Thermal Energy Storage System (TESS) is continuing.

In Stage 2 of the Aurora project 1414 Degrees intends to commission and test a TESS pilot of 75MWh/2MW capacity using its new SiBox™ technology.

Crown Sponsorship extended to 280MWh battery storage on Aurora

Crown Sponsorship

South Australian Government Crown Sponsorship for the Aurora Solar Energy Project has been extended to support construction of a battery and the Company’s thermal energy storage system (TESS-GRID).

Crown Sponsorship indicates that the project is sponsored by a State Government agency, in this case, the Department of Energy and Mining, as a development of public infrastructure under section 49(2)(c) of the Development Act 1993. This was previously provided for the original project scope of 150MW concentrated solar power and 70MW solar and has now been extended to include 70MW of battery storage and 2MW thermal energy storage. 1414 Degrees acquired the project through its purchase of SolarReserve Australia II Pty Ltd now renamed SiliconAurora Pty Ltd.

This government support is welcomed as it will assist in development approvals for the project.

First Quarter 2021

Fourth Quarter 2020 update

  • – Positive Aurora Project business case projects revenues up to $60m with 14D TESS
  • – Proprietary SiBox technology confirming robust and efficient energy storage solution
  • – Key CEO and director appointments boost board and management

 

The quarter delivered major commercial and technological advances for your Company and our ability to deliver for shareholders has been enhanced by key board appointments: Jamie Summons as Managing Director, and Peter Gan as a non-executive director. Their extensive management experience in finance, energy markets and renewable generation will be a major boost to your Company’s governance and capability.

The successful SPP capital raising allowed us to commission expert modelling of a combination of batteries, TESS and PV to model a 182MW hybrid silicon power plant on our Aurora Project, projecting net cash flows growing to $60m as it delivers multiple services to the National Electricity Market and off-market derivatives.

Our core SiBox thermal energy storage technology continues to confirm its potential for game changing energy storage. Our team has mapped out a pathway to a very competitive levelised cost for electricity storage using the SiBox technology at our Aurora Project. The SiBox technology can also uniquely provide heat solutions for very high temperature industrial processes.

We are progressing cooperative commercialisation agreements with several key industry partners to secure substantial investment in SiBox development and applications. The Company is an Affiliate Partner in the Heavy Industry Low-Carbon Co-operative Research Centre (HILT CRC) bid to engage with target companies and explore how SiBox technology can help decarbonise heat for industrial processes and high temperature hydrogen production.

 

Technology advances

The new SiBox thermal energy storage technology developed by your Company’s technical team contains many improvements that build on previous research and development and lessons learnt from the operation of TESS units, as illustrated on the following page. In-house testing and engineering of each of these sub-systems, supported by our partnerships with key specialist external companies, has continued to confirm their benefits for delivering a robust and competitive technology.

In the quarter, activity was focussed on verifying the robust performance of the SiBox storage media. This included executing an agreement with a top-tier European supplier to contribute their expertise in manufacturing and supply of storage media for the SiBox. Pre-manufacturing samples from this supplier are currently being tested in our research facility and their laboratory.

The SiBox heat store will be the basis for all scaled up devices, so building a single heat store cell is a major objective in 2021. Its design, incorporating new heat transfer models, will be validated in performance tests over the coming year. Following this we plan to assemble 40 of these cells into a heat store module that will be integrated with an energy recovery system to form a TESS-GRID system for the Aurora site. Demonstration of the SiBox technology at Aurora will enable it to be scaled up for commercial applications requiring long duration heat or electricity supply from renewables. As illustrated in the figure below, this process of scale up with validation is expected to deliver a competitive levelised cost of storage (LCOS).

In parallel with the SiBox development program, further research and development will also drive down the cost and increase performance of the thermal energy storage technology. R&D will commence in early 2021 on the next generation of storage media in partnership with the University of Adelaide.

 

GAS-TESS

The GAS-TESS team and Glenelg WWTP operators having been working through final approvals of the solar PV, reciprocating gas engines and GAS-TESS as an integrated generation site. The main activity has been evaluating scenarios to determine the most favourable configuration for operating a variable biogas production facility with a combination of GAS-TESS and reciprocating gas engines. This hybrid power plant is projected to maximise the economic return on investment in generating technology by improving the utilisation of variable biogas production and minimising flaring.

 

Aurora Solar Energy Project

During the quarter the Office of the Technical Regulator (OTR) assessed the Aurora Solar Energy project plan and granted a certificate of compliance.

ElectraNet was contracted to develop the electrical specifications to enable the Project to connect to Electranet’s transmission network. ElectraNet will also carry out a due diligence assessment on the draft generator performance standards (GPS) and customer performance standards (CPS) for the Project to comply with the National Electricity Rules.

The siting of the battery (BESS) and thermal storage (TESS) systems was finalised for submission to the South Australian Government for a variation to the existing development approval. The siting provides for future expansion while conforming with the existing development approvals. As shown on the map, the siting avoids high-value vegetation following recommendations of a Flora and Fauna Survey prepared by ESB Ecology and corresponds with the Cultural Heritage Clearance Survey Report.

In the next quarter, a key focus is the grid connection studies to demonstrate GPS compliance to ElectraNet in an Application to Connect. Concurrently, Expressions of Interest are being sought for tenders for engineering and construction of the first stage of the project. This will provide firmer capital estimates for development of the project.

 

Aurora Project business case

Late in the quarter, the Company reported a positive business case for development of the first stages of its Aurora Solar Energy Project on the National Electricity Market (NEM). Independent consultants modelled spot energy prices and Frequency Control Ancillary Service (FCAS) revenues from the operation of a hybrid power plant comprising 70MW of solar PV with a 70MWh/70MW battery (BESS) on the high voltage transmission line to the Davenport substation in Port Augusta. The hybrid plant simulations were then extended to include a (nominal) 1414 Degrees 1GWh/42MW Thermal Energy Storage System (TESS-GRID) operating with the BESS and PV. Each device has separate inverters and operates through a Power Plant Controller to optimise dispatch of solar PV, BESS and TESS to the transmission line. The BESS and TESS charge and discharge with grid electricity or from the PV.

According to volatility in any particular year, net revenues from operating in the NEM spot market could range between A$25m and A$30m for the PV-BESS stage. The projected net earnings almost double with the TESS, ranging between A$45m and A$60m. Net earnings include provision for plant operating costs estimated up to A$3.5m for the project when all devices are operational. Electricity markets are volatile and may be greatly influenced by policy changes so these earnings estimates are indicative.

Capital cost of the first stage of development, including inverters, substation and connection to the high voltage transmission is estimated at A$199m. The second stage with TESS-GRID (and CSP) will utilise the same connection as the first stage PV-BESS. Further financial modelling will be undertaken to optimise the hybrid plant size, and this is likely to lead to adjustment of storage capacity and MW of output, potentially reducing capital outlay. Capital cost for supply of a TESS-GRID to the project will be estimated following completion of the pilot phase in 2024. The target is $210,000 per MWh for a storage and energy recovery system.

 

Finance

At quarter end 1414 Degrees held $5.7m in cash following the Share Purchase Plan closing over target with $3.176m. An approximately $1.3m R&D tax rebate is pending. The payroll continued to be supported by JobKeeper receipts which will be continued until the end of March 2021 with the company’s enrolment in the second extension of the JobKeeper 2.0 program.

 

Corporate

Your company continued its corporate strengthening to meet key strategic goals of revenue generation and technology development. During the quarter, Jamie Summons was appointed Managing Director and Peter Gan as a non-executive director. Jamie brings a strong finance and energy market background to his new role. Peter brings extensive experience in listed companies and finance. Their term commenced in January 2021.

 

The new year will be very productive for shareholders as we move to tap the many revenue streams available to our Aurora Project. We also expect significant developments in SiBox applications through partnerships to support processes such as high temperature hydrogen production.

Crown Sponsorship extended to 280MWh battery storage on Aurora

Aurora business case projects up to $60m annual net revenues

1414 Degrees is pleased to report positive business case for development of the first stages of its Aurora Solar Energy Project on the National Electricity Market (NEM). 

The Company engaged independent consultants to model spot energy prices and Frequency Control Ancillary Service (FCAS) revenues from the operation of a hybrid power plant comprising 70MW of solar PV with a 70MWh/70MW battery (BESS) on the high voltage transmission line to the Davenport substation in Port AugustaThe hybrid plant simulations were then extended to include 1414 Degrees 1GWh/42MW Thermal Energy Storage System (TESS) operating with the BESS and PV. Each device has separate inverters and operates through a Power Plant Controller to optimise dispatch of solar PV, BESS and TESS to the transmission lineThe BESS and TESS charge and discharge with grid electricity or from the PV. Capital cost of the first stage of development, including inverters, substation and connection to the high voltage transmission is estimated at A$199m. 

According to volatility in any particular year, net revenues from operating in the NEM spot market could range between A$25m and A$30m for the PV-BESS stage. The projected net earnings almost double with the TESS, ranging between A$45m and A$60m. Net earnings include provision for plant operating costs estimated up to A$3.5m for the project when all devices are operational. Electricity markets are volatile and may be greatly influenced by policy changes so these earnings estimates are indicative.  

It is the Company’s view that policy and energy market trends are increasingly favourable for projects with energy storage, and the TESS business case assumes some revenue from the provision of long duration synchronous storage and generationIn contrast to a gas peaker plant, the TESS can also profit from both low and high price markets. However, the business case as modelled is not yet optimised for the TESS because the unique operational characteristics of the TESS with the BESS and PV require 1414 Degrees to create its own dispatch model to optimise the revenues from FCAS during charging and revenues from the provision of long duration storage and discharge with inertia. The new dispatch model to be built over the next 12 months will allow optimisation of TESS sizing, cost, and revenues to accommodate current and future market trends. It is anticipated that there will be substantially higher price volatility and new market mechanisms in place for supporting long duration storagefurther supplementing TESS revenue from arbitrageFCAS and derivatives (e.g. price caps). The ~1GWh TESS is scheduled to be commissioned in 2028 when the increasing requirement for long duration firmed generation is projected to result in favourable pricing signals. In addition to electricity storage, the TESS can supply substantial additional thermal energy that could be monetised but is not included in the current Aurora Project business case.  

1414 Degrees TESS includes its new scalable SiBox thermal energy storage technology coupled to a turbine-based energy recovery system (ERS). The TESS is capable of charging either from the grid or the on-site solar generation. This creates remarkable flexibility to service regulation and contingency FCAS markets and buy and sell energy on the NEM according to price signals. The bundled long duration storage and generation capacity would enable the fully developed project to sell more competitive power purchase agreements (PPAs), financial derivatives and grid support services under proposed regulatory market changes.  

An alternative operating regime bundles the selling flexible power purchase agreements is not considered in the current model because large-scale energy storage that can charge from, and regenerate to, the grid at high current will operate to advantage with price signals for energy and ancillary services. In addition to the modelled scenario the Aurora Project site has potential to install more solar PV and/or concentrated solar (CSP) generation, both of which could be firmed through the TESS-GRID to provide competitive PPAs. 

Approximately 12 months after commissioning the first stage PV and BESSthe Company intends to commission and test a TESS pilot of 75MWh/2MW capacity using its new SiBox storageFollowing verification of its operational performance in the pilot the 1414 Degrees TESS-GRID could be expanded up to several GWh providing 100-150MW of long duration electricity generation. The large energy storage capacity will contribute to supply security in the National Electricity Market to meet the challenges of increasing intermittent renewable generation. 

Indicative layout of Aurora Solar Energy Project Stage 1: