Contact confirms investment in grid-scale battery

Contact Energy Limited Level 2 Harbour City Tower, 29 Brandon Street, Wellington 6011 | PO Box 10742, Wellington 6143
P: +64 4 499 4001 | W: contactenergy.co.nz


1
st
July 2024

Grid-scale battery investment to enhance
Contact’s renewable energy flexibility

Contact has confirmed it will build a 100MW (200MWh duration) grid-scale battery at Glenbrook. This
is an exciting step forward for Contact as it delivers on its commitments under the Contact26 strategy.
The battery will be located at Glenbrook, adjacent to NZ steel and Transpower’s grid connection point
and located closer to Auckland load than any other grid-scale battery project
1
.

After a competitive tender process, Tesla has been selected to supply its Megapack 2 XL battery
energy storage system and to provide commissioning and long-term maintenance services. The
agreement with Tesla includes an option to expand the capacity for the battery to 130MW (260MWh)
at this site. Contact will manage the project overall and will start construction at the Glenbrook site
immediately.

Contact continues to advance further battery investment options and has been granted consent to
build another 100MW grid-scale battery in Stratford, Taranaki.

The Glenbrook battery is expected to cost up to $163m
2
and be online in Q1 2026. Once operational,
it will provide Contact and the market with an important source of renewable electricity flexibility,
operating across physical, reserve and frequency-keeping markets. With the New Zealand Aluminium
Smelter now confirmed to stay for the long-term, providing improved market certainty, Contact is
advancing its plans for investment in new intermittent renewable generation across New Zealand. The
battery will support new wind and solar on an intra-day and intra-week basis and ultimately reduce
reliance on gas peakers as Contact transitions to a low-carbon future


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Investor enquiries
Shelley Hollingsworth
Investor Relations and Strategy Manager
+64 27 227 2429
shelley.hollingsworth@contactenergy.co.nz

Media enquiries
Louise Wright
Head of Communications and Reputation
+64 21 840 313
louise.wright@contactenergy.co.nz


1
Located on land secured under a 30-year lease agreement with NZ Steel.
2
Includes sunk costs of $5.4m.

---

1
Grid-scale battery
investment at Glenbrook
Contact Energy | July 2024

2
Grid-scale battery investment to enhance
Contact’s renewable energy flexibility
Contact has confirmed it will build its first
100MW grid-scale battery at Glenbrook
▪The battery will provide Contact, and the New Zealand electricity market, with an
important addition to renewable energy flexibility.
▪The site, three hectares leased from NZSteel, is adjacent to Transpower’s GXP
at Glenbrook.
▪It will be located closer to Auckland load than any other grid-scale battery project.
▪Following a competitive tender process, Tesla’s Megapack technology has been
selected – a first for New Zealand at grid-scale.
▪Consent has been granted by Auckland Council to operate for 35 years.
Auckland
Glenbrook
Stratford
Second consented site
at Stratford provides
future battery
investment option
Image depicts battery megapacks, transformers, switchrooms, auxiliary facilities and access road at Glenbrook the site.

3
Increase in intermittent generation and market
volatility sees a value shift to flexibility
The New Zealand electricity market will
increasingly be dominated by weather-dependent
generation that is variable on a short-term, daily
basis i.e. solar and wind generation.
Electricity supply
composition is
changing
Future price volatility to be
driven by increased reliance
on intermittent generation
Value shift to
flexibility
“ Flexibility in supply and demand becomes the ‘secret
sauce’ ........as the system shifts towards renewable
supply.”
EA’s Market Development Advisory Group
While recent price volatility has been the result of
gas market constraints, future volatility will also be
driven by increased reliance on solar and wind
generation. This trend is emerging now.
Value will shift from intermittent renewable
generation to the owners of flexible,
renewable storage.
Grid
scale
batteries
Demand
response
Biomass
Hydro
consenting
Pumped
hydro
Sources
of new
renewable
flexibility
Forecast generation mix (TWh)
Climate Change Commission
1
¹ Climate Change Commission Demonstration Path (April 2023). Aligns with New Zealand’s emissions targets.
0
80
60
40
20
Wind
Solar
Coal
Gas
Other
Geothermal
Hydro
199020232050
Weather
dependent
(daily)
Weather
dependent
(annually)
Recent examples of price volatility; the
figures on the right-hand side demonstrate
this in June 2023 and May 2024.
4,934
4,071
3,593
3,212
0
2,000
4,000
6,000
1,000
2,048
3,620
4,412
0
2,000
4,000
6,000
0
50
100
150
200
250
300
350
400
450
500
2010
2023
Spread at Otahuhu ($/MWh)
Trends in the volatility of wholesale prices
Daily Max. Spread: 12-Month Moving Average
May 2024
June 2023
Price at Otahuhu ($/MWh)
Wholesale prices per trading period

4
Battery investment metrics are compelling,
supported by a range of strategic benefits
Battery investment key metrics
Battery capacity
100MW
Modular format
56
megapacks
Total project cost
Up to
$163m
1
Target schedule
Online by
Q1 CY2026
¹ Includes sunk cost of $5.4m.
Initial EBITDAF
~$15-20m p.a.
(average)
%
Target IRR
9% to 10%
Operating costs
~$5m p.a.
Participation across
physical, reserve and
frequency-keeping
markets
North Island location,
close to retail load,
reducing North/South
Island price separation
Reduces reliance on
gas peakers
by offering
intra-day peaking
Expansion option
with Tesla to
increase capacity to
130 MW / 260 MWh
Supports new
wind and solar on
an intra-day and
intra-week basis
✓✓✓✓✓
Sources of value
Supports retail
shape and can support
price cap and virtual
battery products for
tier 2 retailers

✓
Storage duration /
discharge
2 hr /
~200MWh

5
Project delivery approach
COMMISSIONING
BATTERY
ELECTRICAL
CONNECTIONS
SUPPLIER /
CONTRACTOR
COST
STRUCTURE
PROJECT
MANAGEMENT
LONG TERM
MAINTENANCE
To be confirmed
RFP completed
Fixed Price
NZD
Fixed / Variable Price
NZD
Various
BALANCE
OF PLANT
Fixed Price
NZD
EARTHWORKS +
FOUNDATIONS
Variable
NZD
Fixed annual fee (+
escalations)
NZD
Included in
Purchase Price
SCHEDULE
Q3 CY 2024
Start
Q1 CY 2026
Completion
Q1 / Q2 CY 2025
Delivery
Term of 20 years
Contractor
selected
✓✓✓
End-to-end, overall project management to be provided by Contact