1414 Degrees acquiring Aurora Project near Port Augusta

1414 Degrees acquiring Aurora Project near Port Augusta

  • – 14D acquiring SolarReserve Australia II Pty Ltd
  • – TESS-GRID to provide electricity firming services
  • – Refocus to 400MW solar farm with progressive storage capacity to several thousand MWh
  • – To be developed and financed in 14D subsidiary company

1414 Degrees (ASX:14D) is set to acquire SolarReserve Australia II Pty Ltd, which owns the Aurora Solar Energy Project near Port Augusta in South Australia and two solar sites in New South Wales.

The Aurora Solar Energy Project has SA Government development approval for a 70 MW solar PV farm and 150 MW of generation from a concentrated solar thermal plant (CST). South Australian company, 1414 Degrees proposes to use the site to pilot its world leading TESS-GRID technology. The electricity firming services will be developed to similar scale as the previous project.

“We will be using South Australian technology to create a large-scale, thermal energy storage plant near Port Augusta able to supply reliable power on demand to the national grid,” 1414 Degrees Executive Chairman Dr Kevin Moriarty said.

Government and stakeholder approvals will be sought to vary or submit a new development application to provide up to 400MW of solar PV together with the installation of the TESS-GRID technology. 1414 Degrees aims to progressively scale up the storage capacity to several thousand MWh. A TESS-GRID at this scale would be able to supply many hours of dispatchable electricity with spinning reserve from its turbines and a range of frequency control ancillary services (FCAS) to support grid stability.

1414 Degrees’ electrically charged TESS-GRID could also buy and store electricity generated by other renewable farms on the high voltage transmission network in the region, strengthening firming services and earnings from market arbitrage.


Image: 1414 Degrees concept for Aurora Solar Energy Project with TESS-GRID

Heat from the TESS-GRID can power Smartfarms, protected cropping greenhouses and industry, and 1414 Degrees is investigating production of hydrogen using the excess heat from its turbines. Progressing the development will create jobs during construction, then long term jobs for operators of the generation and storage plant and industries using the heat energy.

1414 Degrees Executive Chairman, Dr Kevin Moriarty said that the site had several clear advantages for the development of the TESS-GRID solution.

“The unregulated high-voltage transmission line to the OZ Minerals Carrapateena and Prominent Hill mines is being constructed along the boundary of the Aurora Solar Energy Project, and provision has been made for a substation at the existing Aurora site with direct connection to the Davenport substation in Port Augusta. Davenport is part of the major transmission networks to Eyre Peninsula, Adelaide and the new interconnector to New South Wales. This project is currently not impacted by marginal loss factors (MLF) that have constrained output from renewable farms in remoter parts of the national grid,” he said. “We will reopen negotiations with OzMinerals and ElectraNet as soon as the acquisition is complete” he added.

Dr Moriarty said that the Aurora Solar Energy Project will be developed and financed in the subsidiary company, and 1414 Degrees will control and manage the Project. “We’ve had a lot of interest from infrastructure and investment funds seeking to invest in the potential of our technology and this large solar farm will generate significant revenues while supporting the staged development of our large-scale energy storage technology. The advanced status of this project is expected to result in early revenues from energy sales. We will avoid high capital requirements by staging the development.” He said that the Company proposed to offer its more than 3,000 shareholders an entitlement to directly invest in units of the Aurora Solar Energy Project alongside the institutional funds.

The $2m acquisition will be funded by the Company’s cash reserves.

Third Quarter 2019 Update

Third Quarter 2019 Update

HIGHLIGHTS

  • – First operating results of GAS-TESS confirmed efficient biogas burning. Modifications underway to increase electrical output 
  • – Data for business case to replace Glenelg engines to be provided to SA Water by end 2019 
  • – Potential for early revenues from sale and trading of energy to facilitate TESS rollout  
  • – Scalable silicon storage technology under development with promising early results 
  • – Engineering reorganised to scale up silicon thermal storage technology and focus on efficiency  
  • – $7.7m cash at end quarter to be boosted by a substantial R&D rebate in November

 

1414 Degrees is pleased to provide its September 2019 quarterly update.  

 

Finance 

The Company’s cash balance remains strong because monthly outgoings have decreased following the commissioning of the GAS-TESS.  Over $1.5m has been advanced for a bespoke turbine, heat exchanger and storage components for the next TESS plant. Total assets are now more than $17m. The $7.7m cash balance at the end of the quarter is expected to be boosted with a substantial R&D rebate in November. 

 

GAS-TESS operations 

Following its successful commissioning, the GAS-TESS has been undergoing performance testing by our engineering team while delivering heat to the biological digestors and electricity to the site. The team reported first operational results in the quarter, showing near target combustion efficiency in burning biogas. This means the GAS-TESS is effective for disposing of the waste gas and has competitive advantages over reciprocating gas engines because it burns at a higher temperature, makes very little noise and should have reduced maintenance costs because the gas does not need pre-treatment. 

The engineering team are now modifying the prototype GAS-TESS to increase heat flow so the turbine operates at its maximum efficiency for longer duration. The aim is to provide operational data by the end of December so SA Water can model the business case for the GAS-TESS compared to its current engines, and our engineers can start on the design of an enhanced production model. 

In late October the device started operations under SA Water direction to test it in various scenarios, including integrating with the site solar PV and existing engines to contribute to SA Water’s target of zero net electricity cost.  

 

GAS-TESS taps a very large market 

There is an immense potential value stream from the market for our GAS-TESS, one that is fortunately independent of the vagaries of the electricity market or uncertainties in new technologies. Recently we hosted a delegation of Singaporean wastewater engineers who requested to inspect the GAS-TESS and they confirmed what we have been told by water utilities in Australia and overseas – the available reciprocating gas engines are costly for burning corrosive biogas. To consume all of the biogas generated by the Glenelg site per day would require TESS units of between 4 or 12 times the capacity of the current unit, depending on how the TESS is operated. Translating this to the global market indicates tens of thousands of GAS-TESS would be needed to replace all existing engines, before considering the many sewerage plants that do not tap their potential energy resource. 

 

Business development 

The feasibility study for TESS integration into the Stone and Wood brewery is expected to be completed by the end of the year. The current indications are that a system to fully replace LPG will need between 50 and 100 MWh of storage, potentially making it a suitable site for the TESSGRID test module as well as the first commercial pilot for an electrically charged TESS. 

Your Company’s analysts have been preparing the business case for wind and solar power purchase agreements (PPAs) to supply commercial and industrial customers with TESS based energy solutions.  

We also expect to soon report modelling of cash flows from firming renewable energy using PPAs with financial hedging that can be replaced by physical hedging from storage as our TESS units are integrated into the NEM. 

We continue to receive worldwide expressions of interest in purchasing our devices, or heat and electricity energy solution packages. We assess these for early revenue potential. 

 

Technology and engineering 

Our Chief Operating Officer Dr Jordan Parham has created three technical teams to improve delivery on your Company’s objectives to commercialise scalable TESS solutions.  

The R&D team are focussed on technology to fully exploit silicon’s lower unit cost of energy storage to deliver large scale energy storage. They have been testing a new silicon containment technology to provide a solution for all scales and devices. A materials scientist will soon join the team to accelerate development and oversee our collaborative work with several Australian and international research organisations and suppliers. 

Our new Thermal Systems Engineering team will focus on optimising the system design and components to maximise the performance of the TESS system. They are fine tuning a complete energy model of the TESS to enable prediction and optimisation of equipment and storage configurations to suit customer requirements. This will mean we can design and build the most efficient configurations as we scale to TESS-GRID capacity. Business Development will use the Thermal Systems team for concept design and performance modelling. 

The Project Engineering team will focus on delivering successful projects, such as the remarkably successful, first of its kind GAS-TESS. They will perform the detailed engineering, project management and oversee construction to successfully integrate heat store technology and system designs into products that deliver value for customers. 

Business development will draw upon these resources as required to conduct feasibility studies, such as that for Stone and Wood, providing costing, timing and scope for integration.   

To assist this reorganisation, Matthew Johnson has resigned his part time position as Chief Technology Officer effective 25 October 2019. He continues to contribute seminal ideas as consultant and a major shareholder. 

 

Energy markets and commercial opportunities 

It is encouraging that Australian regulators are proposing changes that could recompense providers of firming power supply and storage such as provided by our technology. Without such changes, grid storage security will continue to require subsidies and grants. With such changes, an open market for firming and storage will attract investment in the most cost effective technologies. 1414 Degrees grid scale TESS is targeted at being the most effective storage technology, tapping a much wider energy market base than, for example, batteries or pumped hydro. 

Although a number of regulatory bodies have asked for submissions on ways to provide secure, lower cost electricity, they are yet to look beyond electricity demand and consider the impact of electrifying the much larger heat market. Changing emphasis to consider renewable electricity as a replacement for fossil fuels like gas could reduce the emphasis on decommissioning reliable coal generation to achieve carbon reduction 

Electrifying some of the heat energy market will enable more investment on existing network infrastructure while reducing the proportion of network charges paid by current electricity consumers because it could greatly enlarge the pool of electricity users.  

Of course, energy demand in advanced economies is so large that many technologies can coexist in providing future solutions, but large scale energy storage could also reduce the urgency to develop new hybrid energy technologies, such as the proposal to use renewable electricity to produce hydrogen by electrolysis, that could in turn be mixed with gas or exported. Hydrogen has advantages as a transportable energy source, but might be best used to power commercial transport, which consumes substantially more energy than the current global electricity market. 

Interestingly, 1414 Degrees TESS could more efficiently provide both energy storage and lower cost hydrogen production. The high temperature heat output from the turbines could power hydrogen production systems more efficiently than electrolysis-based systems and increase the overall efficiency of a TESS. The effect of such a combined energy output could reduce or eliminate our need to co-locate with process industries so we intend to progress this exciting possibility for our technology. 

Our immediate focus is on achieving sales of our vanguard GAS-TESS devices in the next twelve months and on developing recurrent revenues from energy sales and trading. 

 

Dr Kevin Moriarty  

Executive Chairman

14D Board Changes

14D Board Changes

1414 Degrees is pleased to advise that Mr Ian Little and Ms Penelope Bettison have been appointed as Directors of the Company. These appointments strengthen the Board at an important time in the Company’s development. The new Directors bring significant experience and expertise to the Board.

 

Mr Little was until recently the Chief Executive Officer of the Petrosys Group, a global software company providing services to the oil and gas industry. He started work with Arthur Young & Co as a Chartered Accountant in New Zealand in the late 1970’s. He then moved to the oil industry, initially in Indonesia, and eventually with Shell, where he worked for over a decade in Australia, London and in the Pacific Region. He became involved with the natural gas sector when he was invited by Victoria’s Treasurer, Alan Stockdale in 1993 to initiate gas industry reform, including the privatisation of the State-owned Gas & Fuel Corporation. Ian was formerly the CFO for GPU GasNet in Victoria, before joining Envestra as Chief Financial Officer in 2000, and becoming Managing Director in 2003. Envestra Ltd grew to become an ASX200 company and was eventually sold in a contested takeover in 2014 for $2.5 billion.

 

Ms Bettison has 20 years’ experience in marketing and business management and is the Company’s Head of Corporate Services. She founded and was a Director and Brand Strategist at Pitstop Marketing, investing in an early seed round and consulting to 1414 Degrees to prepare it for its initial public offering. She sold her interest in Pitstop Marketing to accept an executive role with the Company in 2017, guiding the corporate development and people and culture. Her experience spans a wide range of industries including financial services, engineering, education, government, business events and tourism. Penelope has a Bachelor of Business, is a Graduate of the Australian Institute of Company Directors, a Fellow of the Australian Marketing Institute and is an accredited Certified Practising Marketer.

 

Non-Executive Director Mr Robert Shepherd has advised the Company that he will retire from the Board at the 2019 AGM, and not seek re-election. Mr Shepherd is a founding investor and Director. The Company wishes to express its sincere gratitude to Robert for his significant contribution to the Company.

GAS-TESS Pilot Project Update

GAS-TESS Pilot Project Update

  • – GAS-TESS up and running after scheduled shutdown to assess O&M requirements
  • – O&M a key factor in business case for wastewater treatment utilities
  • – Improvements to be fast-tracked to provide SA Water with key data for evaluating business case
  • – Proposed review of revenue settlement due to delays in export approval to NEM 

Operational status

The GAS-TESS was recently shut-down to install additional instrumentation and inspect it internally. This demonstrated that the unit was in good condition. An estimate for operation and maintenance (O&M) costs can now be prepared, these being a key factor for utilities evaluating biogas burning equipment over their lifetime. The GAS-TESS is now back online supplying electricity and heat to the wastewater treatment plant (WWTP). Our engineers will continue test runs to refine operating characteristics and anticipate working with the Glenelg WWTP operators to evaluate the benefits of the TESS integrated with the plant systems from late September.

Commercial arrangements under the settlement agreement are underway but SA Water has advised there may be a long delay to obtain approval to export electricity to the grid. The addition of solar generation at the same time as the GAS-TESS and the current, interim network restrictions have imposed operational constraints on the site and hence GAS-TESS, so the company proposes to review the settlement agreement with SA Water.

Current performance status

A wide range of tests have been conducted to characterise the actual GAS-TESS performance compared to original design calculations and predictions. Analysis of the GAS-TESS performance is most readily obtained from simultaneous operations of the burners using biogas at the same time as energy is produced by the turbine, as this provides steady state conditions for simpler comparison with mass and energy balance calculations.

Under this regime, the combustion system burning the biogas is operating at 82.7% efficiency, almost at design specification, and some modifications to operational procedures are expected to improve performance. As expected, in this first testing phase of configuration the device is delivering only 39.8% CHP efficiency because the turbine is operating at half its potential efficiency. This is due to a number of factors but primarily caused by low heat transfer through the heat store to the energy recovery system (ERS). This results in a lower ERS gas outlet temperature and energy content, ultimately resulting in a turbine inlet temperature well below optimum.

Next Steps

As planned, the Company will upgrade the storage to increase heat transfer once the overall systems are validated. The project agreement provides for two years of operational tests, and we intend to upgrade the GAS-TESS performance in several stages.

However, the business case for the GAS-TESS is not driven just by return trip efficiency because the biogas is a by-product of a WWTP operation that must be burnt on a continuous basis whereas the heat and electricity loads of a plant and electricity export value are variable. This is one reason that SA Water proposed a GAS-TESS device – to time shift the energy supply to maximise the value of the biogas, something that the engines cannot provide. The second reason is to minimise O&M costs.

Following the positive internal inspection, some enhancements will now be fast-tracked, where possible, to provide SA Water with key performance and O&M data for evaluating the performance of the TESS compared to engines. Other performance enhancements will be rescheduled for inclusion in the design of the next version of the technology.

Chairman’s letter to shareholders

Chairman’s letter to shareholders

Dear fellow shareholders 

Over the last week, your Company has received some enquiries from shareholders about the performance of its share price and current market sentiment, so I would like to ensure you are fully informed.  

There have been no substantial changes to our share register, our pilot installation programmes, preparation for sales of the biogas TESS, and we continue to progress systems to earn early revenues from operations on the National Electricity Market (NEM) as reported in the second quarterly in late July. Your directors share your frustrations and it demonstrates that we are not immune to general market conditions and sentiment. 

Status of current pilot projects 

The Company is piloting its technology across three key product areas, the GAS-TESS, the TESS-IND and the TESS-GRID at three respective sites. To do this, we are partnering with stakeholders including SA Water, Enova Community Energy, Ampcontol and BE Power to provide energy solutions for customers. 

  • TESS-IND 
    • Enova Community Energy (Enova) 
    • 1414 Degrees is advancing commercial discussions with Enova toward a joint venture to sell energy – both heat and electricity, to Enova customers including the Stone and Wood brewery.  
    • Stone & Wood
    • The 1414 Degrees team are currently onsite undertaking detailed feasibility studies for installation of a TESS-IND pilot at Stone and Wood’s Murwillumbah brewery in northern New South Wales. The current use of expensive LPG for process heating provides a better economic case for replacement by a TESS charged from grid sourced renewables. 
    • Pepe’s Ducks
    • Pepe’s Ducks is open to progressing a TESS-IND pilot, however the fall in price of renewable energy certificates (RECs) and its location are not as favourable for 1414 Degrees as other sites. 
    • Austcor/Abbe Corrugated
    • Abbe Corrugated is open to progressing a TESS-IND pilot, however the fall in price of RECs and availability of network gas are not as favourable as other sites offered to 1414 Degrees. 
  • GAS-TESS
    • SA Water
    • A progress report on the GAS-TESS at the Glenelg Wastewater Treatment Plant is expected to be released later this week. The Company is continuing to augment the product for sale to water utilities as a commercial alternative to biogas engines. 
  • TESS-GRID
    • AmpControl, BE Power
    • The team are analysing data supplied by Nectar Farms to prepare funding submissions to grants bodies for the scale up of silicon based storage. 

Revenue from NEM trading 

NEM price volatility is expected to continue to increase into the future as your Company integrates its TESS with renewable electricity supplied over the grid and enters into power supply agreements with customers. Your Company is therefore preparing to participate in the NEM and trade energy for supply to its customers and TESS. 

Regulators are moving to support storage and firming generation 

Yesterday we reported economic opportunities for our technology in the context of negative electricity pricing events and proposed changes to reward firming generation that would benefit the TESS technology. I am pleased to see AEMO has requested rule changes that would see energy storage systems integrated into the NEM. If implemented, this would provide further support for our TESS business model. 

I encourage you to stay fully informed with all announcements on our website and, I look forward to keeping you informed with our ongoing communication. 

In closing, we continue to progress our commercial development and pilot demonstrations as outlined in the prospectus and your Company maintains a strong cash position. I thank you for your ongoing support and assure you that the Company continues its steadfast focus and commitment to delivering clean energy storage at scale. 

Yours sincerely, 

Dr Kevin Moriarty 

Executive Chairman 

Negative electricity prices and storage

Negative electricity prices and storage

    • – Intermittent negative electricity prices will not make energy storage economic

      – Energy Security Board looking at market redesign to favour firming generation as supplied by TESS

  •  
  • After periods of negative electricity pricing in recent days some shareholders have asked why 1414 Degrees’ thermal energy storage systems (TESSs) are not making money from these events like batteries are reputed to be doing. The Company will, in time, have that capability but, as explained below, proposed market changes would reduce these undesirable price swings by rewarding firming base load generation like that supplied by the TESS.

    While the 1414 Degrees TESSs will take advantage of periods of negative electricity pricing, these events alone are insufficient to form an economic basis for investment in energy storage, including batteries and pumped hydro. These events are intermittent and disruptive so the market operators are openly looking at market changes to promote reliable firming supply.

    The Energy Security Board called for submissions on market redesign on 2nd September. As mentioned in the Weekend Australian ‘Rejig power prices to reward reliability’ (7 Sept 2019), Australian Energy Market Operator (AEMO) CEO Audrey Zibelman commented, “What we’re looking to do is work with the Energy Security Board, which includes all the market bodies to say ‘let’s talk about how we get this done as efficiently as possible’.”

    This acknowledges that batteries and renewable generators do not deliver the firming power supply that is provided by the spinning generators of fossil fuel power stations. Profiting from these destabilising price swings would be opportunistic and should therefore form only a marginal part of any business model for storage in the National Electricity Market (NEM).

    A TESS provides the spinning inertia for electricity supply, just as the big power stations do, but with the added benefit of firming renewable sourced energy. While pumped hydro also provides firming electricity, the TESS can be built as small or large units distributed through all levels of the grid, delivering reliability irrespective of interconnector or transmission problems. Furthermore, the TESS can do this because it is designed to provide heat to industries as the base load for their stored energy, so the TESS has surplus electricity for the grid.

    In summary, TESS has a much broader revenue base and can provide long-term reliable baseload electricity supply in the manner of the retiring fossil fuel stations. 1414 Degrees is currently rolling out its pilot installations to prove this in operating commercial sites.

    The economic case for firming storage requires that the NEM be changed to reward the provision of firming baseload electricity supply. Instead of ensuring longer-term operation of fossil fuel power stations, the introduction of TESS would enable the transition to low or zero cost renewable supply and, remarkably, replace much of the fossil fuel used for heating, a market twice the size of electricity. Pumped hydro and batteries are useful for long term and short term supply, respectively, but are expensive and less versatile compared to TESS and cannot displace gas emissions used in the larger heat market.