SYDNEY (Reuters) -Australia's New South Wales (NSW) state said on Tuesday it has awarded a A$3.2 billion ($2.5 billion) 10-year power supply contract to Royal Dutch Shell PLC, which includes supplying battery back-up power for wind and solar energy.
A 100 megawatt two-hour battery will be built and run by privately owned partner Edify Energy. The battery is slated to be switched on by early 2023, and will help fill a supply gap when AGL Energy Ltd's coal-fired Liddell power station closes in the same year.
"This battery will help to keep the lights on and keep costs down during peak energy periods, and support more renewable energy to come online," NSW state Energy Minister Matt Kean said in a statement on Tuesday.
The battery project is expected to cost about A$100 million, an Edify spokeswoman said.
Under a deal with Edify, Shell has contracted to take 60% of the battery's power.
"This long-term services agreement is a model for how large energy users can access dispatchable power like battery storage, which complements renewables," Shell Energy Chief Executive Greg Joiner said in a statement.
Kean said the battery would be built alongside the Darlington Point Solar Farm in the state, one of the largest solar projects connected to the national electricity market.
The decision comes just days after the federal government decided to build a taxpayer-funded A$600 million gas-fired power plant in NSW to offset a looming power shortfall once the Liddell power station shuts in 2023.
Officials said the new power contract would begin in July 2022, when its existing contract with Shell expires, and run for 10 years.
Shell won the deal to supply the state government, the second-largest power consumer in New South Wales, through its Shell Energy arm, the former ERM Power business, which the oil major bought in 2019.
($1 = 1.2897 Australian dollars)
(Reporting by Renju Jose in Sydney and Sonali Paul in Melbourne; Editing by Kim Coghill and Christopher Cushing)
