UK billionaire Sanjeev Gupta has made good on his commitment to transform his newly acquired Australian steel business into a renewable energy powerhouses, announcing massive investments in solar and storage that will knock 40 per cent off his electricity costs.

Gupta said on Monday that he would build 1 gigawatt (1,000MW) of dispatchable renewables in and around Whyalla, where his major steel plant is located. This would comprise huge investments in solar, battery storage, pumped hydro and demand management.

He won’t stop there. Gupta is looking to repeat the dose – although with varying mixes and scale of renewables and storage – to power the company’s steel operations in Melbourne, Sydney and Newcastle. He said on Tuesday he wanted these bigger plants to be powered 100 per cent by renewable energy.

The initial development will see a proposed 80MW solar farm at Whyalla expanded to 200MW and completed by the first quarter of 2019.

This will be accompanied by:

– a 100MW/100MWh battery storage facility;

– 100MW of demand response at the Whyalla steel works and other sites.

Both of these will be built by 2019, and by 2020 there will also be a 120MW/600MWh pumped hydro storage facility at one disused iron ore mine pit in the Middleback Ranges that used to serve the steelworks.

The investment marks what will be the largest solar and storage investment in Australia – and we can be sure that this one will actually go ahead (unlike others) because Gupta has the money and his operations are the major client.

More importantly, it marks a new way of thinking about energy, and may cause the designers of Australia’s proposed National Energy Guarantee to reflect on their options.

If such savings can be gained from a severely overpriced grid through renewable energy and storage, then it may become clear to the regulators that their proposed reliability guarantee and emissions guarantee should be structured to ensure the shift to cheaper clean energy is accelerated, rather than held back.

Time will tell, and it appears Gupta is also keeping a close eye on developments, and has indicated that the second stage of his plans – which will consist of 480MW of additional solar – could be contingent upon the final design of the NEG.

“I have been asked whether today’s decision is contingent on how current uncertainty in national electricity policy is resolved,” Gupta said in a statement.

“Naturally we are watching developments in policy closely. In the meantime, we are proceeding with the first 520MW of capacity based on positive interactions with relevant stakeholders.”

The start of the first phase will not depend on outside or third party contracts, because most of the demand will come from the steelworks, although supply will be offered to other parties.

The work will be carried out through Zen Energy, the Australia renewable and battery storage company in which Gupta’s Liberty group bought a majority stake soon after the Whyalla purchase.

The combined impact of the proposal – if fully implemented – is likely to take South Australia well beyond 70 per cent share in wind and solar.

It is not the only major project underway: there is the 150MW Port Augusta solar thermal project, along with the Bungala solar project and the Lincoln Gap wind project, both under construction and also located near Port Augusta.

And there is the Tesla big battery nearly completed near the Hornsdale wind farm, another 30MW/8MWh battery to be built next to the Wattle Point wind farm, and possibly another pumped hydro facility at Cultana.

There are numerous other large projects, from the likes of DP Energy (wind and solar) and Lyon Group (solar and storage), and Adani (solar), but it is not clear that these will see the light of day.

(See this new Explainer for a summary of the big battery storage projects making South Australia a leader).

Professor Ross Garnaut, who remains a director of Zen after ceding the chair to Gupta on Monday, says the Whyalla project will also include co-generation – the use of waste heat – and will reduce energy costs at the steelworks by 40 per cent.

Garnaut said similar savings could likely be made at the electric arc furnaces the Liberty OneSteel group owns in Melbourne, Sydney and Newcastle, although the exact mix would depend on local conditions.

And Zen, as the renewable and storage developer, would be looking to service loads for other major energy users, particularly with the 480MW of additional solar that is planned for South Australia.

“Each of them will have a variety of opportunities,” Garnaut told RenewEconomy. “The key to our model is adjusting mix of generation and storage to local circumstances.”

Gupta said he was delighted that Zen had hit the ground running.

“These first steps in SA will improve reliability and greatly reduce costs of electricity in our own steelworks at Whyalla, and provide competitive sources of power for other industrial and commercial users,” he said in a statement.

“I believe there is a great future for energy-intensive industries in Australia. I look forward to helping build ZEN Energy to become a major player in the Australian energy transition.”

It’s ironic, because former prime minister Tony Abbott had said that the carbon price – co-designed by Garnaut – would make Whyalla a ghost town.

Abbott killed the carbon price, but electricity costs have more than doubled since. And the town’s future will be secured – rather than threatened by – renewables and storage.

Garnaut says the savings are a combination of soaring grid prices, falling solar and storage costs, and a new way of thinking about energy, including demand management and energy efficiency, particularly the use of waste heat.

Asked if the scale of the transaction and its significance had brought him satisfaction, given his near decade of work since his exhaustive review into climate policy, Garnaut said: “I would describe my emotion as one of relief.”

Why relief? “I think it’s pretty obvious.”