The clean energy company Zen Energy has approved a $700m solar, battery and pumped hydro project at the South Australian town of Whyalla to power the OneSteel steelworks at Whyalla.

The project was announced on Monday after the British billionaire Sanjeev Gupta, who bought the Arrium steelworks from receivers on 31 August, chaired his first Zen Energy board meeting in Adelaide.

Gupta’s company, GFG Alliance, bought a 50.1% stake in Zen in September as part of its plan to power the steelworks.

The new energy project, which will be the largest solar and power storage investment in Australia, is intended to provide one gigawatt of additional dispatchable renewable energy assets to major industries on the Eyre peninsula, including Gupta’s OneSteel.

Frydenberg says government will further reduce emissions to meet Paris target Read more

It includes 200MW of photovoltaic solar panels, a 100MW/100MWh battery storage facility at Port Augusta, 120MW/600MWH pumped hydro storage facility in a disused mining pit in the Middleback Ranges and 100MW of demand response at the Arrium steelworks and other industrial sites.

In a statement, the company said the project would be expanded by an additional 480MW of solar capacity “in due course” to support industry expansion at Whyalla and in SA more generally.

“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,” Gupta said. “This will be followed by early steps to lower Liberty OneSteel’s electricity costs in New South Wales and Victoria, and to provide power at lower cost to other industrial enterprises in these states and Queensland.”

The Turnbull government is battling with the states, particularly South Australia and Victoria, over its new national guarantee.

The national energy guarantee would impose reliability and emissions reduction guarantees on energy retailers and large users from 2020, meaning retailers will have to provide a mix of dispatchable and low-emissions power generation options.

Gupta said he had been asked whether the Whyalla project was “contingent on how current uncertainty in national electricity policy is resolved” and added “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.

“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.”

What is the national energy guarantee and is it really a game changer? Read more

The price of getting electricity to the power-hungry Whyalla steelworks prompted the then opposition leader, Tony Abbott, to argue in 2011 that Whyalla would be “wiped off the map” if Australia introduced a carbon price and made emissions-intensive energy generation more expensive.

The SA energy minister, Tom Koutsantonis, has welcomed the announcement, which comes three months after the Tesla founder Elon Musk announced he would build a 100MW/129MWh lithium ion battery to store renewable energy at Jamestown in the state’s mid-north. Construction on that battery is well advanced.

“This is another example of the market saying to South Australians and Australians that the way forward is renewable energy with storage,” Koutsantonis said.

“What the monopoly owners of our privatised traditional generation assets have been doing is shutting down power stations and restricting supply to try and create scarcity so they can charge us more for the same electrons. What renewable energy is doing is pouring more power into the grid, increasing competition and putting downward pressure on power prices.”