In his recent Twitter exchange with Mike Cannon-Brookes and telephone conversations with SA Premier Jay Weatherill and Prime Minister Malcolm Turnbull, Elon Musk has very publicly thrown Tesla’s hat into the ring as a supplier of a grid scale battery farm to help SA through its energy security issues.  Tesla sell batteries to other people, generally for that person to store the power that they have generated through a renewable source (such as solar or wind).  Whether it’s stored through a Tesla battery solution or not, what’s likely to be involved to get a project like this off the ground?

In addition to the commercial requirements that the project will provide a return on the significant investment that will be required, there are a number of legal and procedural steps that will need to be met.  These fall into four main categories:

Land and Planning – the project promoter will need access to land to build their facility.  That access may come from either acquiring land outright or by taking a lease or licence over the land.  Most likely there’ll be planning approvals that will be required to build the facility.  The promoter will need to ensure the land can be used for the required purpose and obtain all of the necessary consents for construction of the facility.

Equipment and Services – the promoter often won’t have its own technology or skills to supply and install all of the bits of equipment that will go to making up the facility.  They’ll usually buy this in from others (such solar panel manufacturers, battery suppliers and technicians for installation).  They’ll need to negotiate the terms and conditions of each of the supply contracts and will focus, principally, on the risks of ensuring that the equipment is available at the correct times, properly installed and commissioned and capable of meeting the required specifications.

Funding – projects such as this are often funded by means of both equity and debt arrangements.  It’s common for those that are supplying key equipment to create a joint venture by which they all benefit from the ongoing returns that operation of the finished plant may provide.  These arrangements can be structured as incorporated or unincorporated joint ventures with funding by means of in-kind contributions, equity contributions or borrowings from the parties or third party providers.

Regulatory approvals – the generation and distribution of electricity requires a licence.  The structure of a project such as this can see different entities take different roles around asset ownership, electricity generation and connection to the grid for distribution of that electricity.  The promoter will need to obtain the necessary licences and enter into a grid connection agreement (which in the case of a grid scale generation and storage facility will be with the transmission operator in South Australia, Electranet).  In addition, as the proponent will be participating in the National Electricity Market they will need to register with the Australian Energy Market Operator.

Even if you’re not Tesla if you’re considering building infrastructure in South Australia please contact us if you’d like to better understand the opportunities we can create in bringing together the various elements to a successful project.