Neoen to expand world's largest lithium ion battery in Australia

FILE PHOTO: A worker walks along the fence for the compound housing the Hornsdale Power Reserve, featuring the world's largest lithium ion battery made by Tesla, during the official launch near the South Australian town of Jamestown, in Australia, December 1, 2017. REUTERS/David Gray/File Photo

(Reuters) - French power producer Neoen SA NEOEN.PA said on Tuesday it will expand its Hornsdale Power Reserve in South Australia, the world's largest lithium ion battery, by 50% to help improve stability of the state's power grid.

The A$71 million ($48 million) project will enlarge the 100 megawatt battery, which is owned and operated by Neoen, and was built two years ago in conjunction with Tesla Inc TSLA.O.

The move comes as energy storage becomes increasingly essential to managing power supply in Australia as coal-fired plants are shut down and alternatives are needed to back up intermittent solar and wind power.

The Hornsdale project stemmed from a promise by Tesla’s Elon Musk to help keep the lights on in South Australia following a string of blackouts by building a battery within 100 days or giving it to the state for free.

South Australian Energy and Mining Minister Dan van Holst Pellekaan said the expansion was designed to reduce spot price volatility and protect the grid from network disturbances.

The project will receive A$15 million from the South Australian government, up to A$50 million ($34 million) in cheap loans through the Clean Energy Finance Corporation (CEFC) and A$8 million from the Australian Renewable Energy Agency (ARENA).

“Large-scale batteries are playing an important role in providing short term, large-scale energy storage to help firm and balance the grid,” ARENA CEO Darren Miller said in a statement.

Reporting by Ambar Warrick in Bengaluru; editing by Richard Pullin