Tesla wins giant battery contract in Australia, has 100-day deadline

By Colin Packham and James Regan

SYDNEY (Reuters) - Tesla Inc has won an Australian contract to install the world's biggest grid-scale battery, in what experts say will be a litmus test for the reliability of large-scale renewable energy.

Tesla's CEO Elon Musk, known for his bold approach to cars, clean energy and space exploration, trumped dozens of competing proposals to build the gigantic lithium-ion battery that will serve as emergency back-up power for South Australia - a state racked by outages.

But under the agreement, Tesla must deliver the 100-MW battery within 100 days of the contract being signed or it will be free - a commitment Musk made in a Tweet in March.

"There will be a lot of people that will look at this -'Did they get it done within 100 days? Did it work?'" Musk told reporters in South Australia's capital city of Adelaide.

"We are going to make sure it does."

The battery, designed to light up 30,000 homes if there is a blackout, will be built on a wind farm operated by France's Neoen - parts of which are still under construction.

Musk said failing to deliver the project in time would cost his company "$50 million or more", without elaborating.

It will be the largest lithium-ion battery storage project in the world, overtaking an 80 megawatt-hour facility in California, also built using Tesla batteries.

Over the last three years, South Australia has decided to shut down its coal-fired power stations and instead rely on wind, solar and gas. In particular it has raced ahead of the rest of the country in turning to wind power, which supplies 40 percent of its energy.

The move has been applauded by environmentalists but left the state prone to outages as there is no way to store enough energy when the wind doesn't blow. In September, South Australia's 1.7 million residents were left without power, some of them for up to two weeks, when the grid overloaded and collapsed.

The battery is aimed at getting around the problem of inadequate storage.

"Cost-effective storage of electrical energy is the only problem holding us back from getting all of our power from wind and solar," said Ian Lowe a professor of science at Australia's Griffith University.

"This project is a significant innovation to demonstrate the feasibility of large-scale storage."

LITHIUM AMBITIONS

Dozens of companies from 10 countries, including privately owned Lyon Group, working with U.S. power company AES Corp , expressed interest in the project. [nL4N1I51XB]

Now the sector is waiting to see if Musk can make good on his promise.

"Tesla has been telling the world that it can and will finish the project within three months, said a source at a Korean competitor to Tesla, declining to be identified due to the sensitivity of the matter.

"It seems that confidence helped Tesla win, but typically this kind of project takes six months so we have to wait and see whether or not Tesla can do it," the source said.

Lithium-ion batteries have been in widespread use since about 1991, but mostly on a small scale, such as in laptops and cell phones. A typical lithium-ion battery can store 150 watt-hours of electricity in 1 kilogram of battery, representing more than double the capacity of nickel batteries.

For their proponents who have long been pushing for grander use, the success of Musk's big South Australian experiment will be key to greater acceptance.

"For lithium technology to take off on a global scale, they clearly need the storage capacity to make sure renewables can deliver 24 hours a day, seven days a week," said Adrian Griffin, a geologist who specialises in lithium extraction.

(Additional reporting by Sonali Paul in MELBOURNE.)