Largest battery

The South Australian government will spend $550 million on a new package designed to stabilise its electricity system, which includes a $360 million government-owned gas-fired power plant and Australia's largest battery storage facility to be constructed at a site still to be chosen. It will also pay landowners 10 per cent of the royalties for new production of gas which comes from their land.

Elon Musk's Tesla is among those firms vying to build the 100Mwh battery storage farm and local battery aspirants ZEN Energy, Lyon Solar and Carnegie Energy have also put their hands up.

Mr Weatherill said proposals would be carefully assessed, but he did refer to the "reputational impact" of having an international entrepreneur such as Mr Musk involved, and the message that would send to the international business community about the pioneering approach by the state on new technology.

"These are all things we are going to balance in the choices we make," Mr Weatherill said.

Farmers' cut

Mr Weatherill and Mr Koutsantonis on Tuesday also unveiled policies designed to source and use more South Australian gas for its own electricity needs, effectively putting the state before the national gas market and the $80 billion of LNG plants in Queensland, which are exporting vast amounts of gas from Australia.


The state government is also injecting a further $24 million into a PACE grant scheme to add to an existing $24 million already on the table to incentivise companies to extract more gas from the ground.

"If you want our money, the gas will be sold to South Australians first," Mr Koutsantonis said. He will also be given stronger legislative powers to override decisions by the national electricity market operator to benefit South Australia.

But critics pointed to statements made in State Parliament in late September, 2016 by Mr Koutsantonis the day after a state-wide power blackout that South Australia had been the "lead legislator for the National Electricity Market". Mr Koutsantonis said at the time "we have designed it, we have built it ... and it's worked and served us well".

JPMorgan energy analyst Mark Busuttil said the energy plan was "measured and practical solution to energy security in the state" but it may not have much of an impact on wholesale power prices because the new generation "will sit at the high end of the bid stack".

'Jet engines'

Mr Koutsantonis said the new "fast-start" gas-fired power plant would be a backup plant, and wouldn't compete on a day-to-day basis with companies such as AGL or Origin Energy. It would be an insurance policy for when power generation from existing sources was insufficient in the state, switched on only when demand exceeded supply.

"They are basically jet engines," Mr Koutsantonis said. The $150 million grid-scale battery will be funded by a $75 million grant and $75 million in low-interest loans from a Renewable Technology Grant Fund.


Mr Koutsantonis said the battery storage plant would be privately owned but the state government would "have a call on it" during those times when extra power was required. Strong interest was expected from private operators, many who have already put forward proposals.

The potential builders of the battery storage plant included Elon Musk's Tesla, which put forward its own proposal late last week after a Twitter conversation with software billionaire Mike Cannon-Brookes. Mr Koutsantonis said the battery storage plan had been worked on for weeks internally by the state government and wasn't a last-minute thought prompted by the Tesla offer but a "happy coincidence".

The government will also introduce an energy security target which will compel retailers to source up to 36 per cent of energy from local cleaner generators that source their energy from South Australian resources, and not coal from Victoria through the interconnector. The state government has used consultants Frontier Economics to model the energy security target, and as an independent expert on other aspects of the plan.

Energy company AGL described the plan as "a considered and comprehensive approach" to meeting the challenges in the market and said it was pleased the state government recognised "the vital need to secure more gas" to help in the energy transition.

Energy Users Association of Australia chief executive Andrew Richards said that state governments felt compelled to take such action "is an indication of the quantum of the crisis and that serious national reform is required". He also said the question needed to be asked where would the gas come from to run the new gas-fired power station.

Energy Minister Josh Frydenberg said the discounted electric vehicle leasing program will increase takeup and make cities healthier Alex Ellinghausen

"Dotted around the nation are various gas power stations sitting idle as gas prices sky rocket and supply is limited," Mr Richards said, adding that demand to fulfil LNG contracts "has sucked up domestic supply".


A 'backup' power generator

Mr Weatherill rejected suggestions the government-owned gas-fired power plant might become a millstone around taxpayers' necks if it wasn't required to be used at times when the existing market was operating properly, similar to an expensive desalination plant built in the state under the Rann Labor government when it was in the grip of a drought.

He said the plant would also serve as a stabiliser for the energy market by offering the "inertia" that is needed to stabilise local supplies.

"It provides stabilisation services," he said.

A specific site hadn't yet been chosen and the Premier admitted it was an ambitious target to try to have the gas-fired plant up and running before next summer.

"That's a stretch," he said.

He also said there were three bidders for the state government's long-term power contract for 75 per cent of the government and its agencies power needs, but no final decision had been made on the winner.

Mr Weatherill said the $360 million plant was the first major investment in electricity infrastructure in South Australia since the privatisation of ETSA in the late 1990s.


The SA government hopes new incentives will lead to increase gas production out of the Cooper basin gasfields dedicated for use in the state before any exports to NSW and Queensland are considered. Brendan Esposito

He said unless there was a price on carbon in Australia, there would continue to be an "investment strike" on power generation and that was why the state government had needed to step up.

"South Australia has stepped up into the breach in the absence of national leadership," he said.