Origin Energy to spend $400m on big battery at Mortlake Power Station

The company’s second major battery development will temper some shareholder pressure after the collapse of Brookfield’s $20bn takeover.

Origin Energy will spend $400m to construct a large-scale battery at the Mortlake Power Station, as it moves to accelerate its transition to renewable energy.

The 300MW battery, which is expected to be ready in late 2026, is a boost to Australia’s energy transition goals, which remain behind schedule, and will help ­relieve shareholder pressure on Origin after the failed near-$20bn takeover bid from Brookfield and EIG Partners that promised to accelerate the move away from fossil fuels.

Origin chief executive Frank Calabria said the Mortlake battery was another significant step in our ambition to lead the energy transition through cleaner energy and customer solutions.

“With the proliferation of wind and solar farms, particularly in Victoria’s South West Renewable Energy Zone, the Mortlake battery will help keep the grid stable and support more renewable energy coming into the system as the market continues to decarbonise,” Mr Calabria said.

Mortlake Power Station is the largest gas-fired power station in Victoria with a generation capacity of 566MW. The peaking power station is powered by gas from the Otway Basin.

By building a battery at its gas peaking station, Origin will capitalise on existing infrastructure, most notably transmission lines, avoiding the grid connection ­issues that often ­curtail new renewable energy projects.

The Mortlake will be Origin’s second battery development after committing $600m to build a large-scale project at the site of its soon-to-close Eraring coal power station.

The new battery investment will cool some shareholder concern about Origin’s renewable energy transition in the wake of shareholders rejecting the near $20bn offer from Brookfield and EIG. Brookfield had promised to spend between $20bn-$30bn on 14GW of renewable energy projects, far more than the between 4-5GW that Origin is targeting.

Origin CEO Frank Calabria. Picture: Jane Dempste

Batteries are a major component of the federal government’s plan to rapidly wean the country’s $2.5 trillion economy from coal dependency. Labor has set a target of having renewable energy generate more than 80 per cent of the country’s electricity by 2030, a target that Australia is on course to miss.

In a bid to accelerate development, Labor said taxpayers would underwrite 32GW of new renewable energy generation.

Under the scheme, should the wholesale electricity price fall below an agreed threshold, taxpayers will compensate the renewable energy project. Should the wholesale electricity price ­exceed a metric, developers pay the government – a design that removes revenue risk from developers and accelerates much-needed investment.

The increase in renewable energy has made batteries more financially viable. During the days, the wholesale electricity price is often at near zero or even in negative territory meaning developers can charge batteries for little to nothing. In the evening, when the wholesale price increases as solar generation dims, battery developers can dispatch to meet demand and earn lucrative returns.

Squadron Energy, Australia’s largest renewable energy developer — owned by billionaire Andrew Forrest — has promised to deliver more than a third of the solar and wind generation capacity the country must build by 2030 in a major boost to the country’s ailing energy transition.

Originally published as Origin Energy to spend $400m on big battery at Mortlake Power Station