French renewable energy and storage developer Neoen has enjoyed a huge surge in revenues from its growing fleet of big batteries, with revenue nearly trebling to more than $100 million so far this year, driven by the Victoria Big Battery.
The 300MW/450MWh VBB is the biggest battery installation in Australia to date, displacing the Hornsdale Power Reserve, the original “Tesla big battery” that is also owned by Neoen, and started operations late last year.
Neoen overnight reported a “hefty” increase in battery storage revenues for the first nine months of 2022 to €65.4 million ($A100.8 million), which it said has been largely driven by the VBB through its capacity reserve contract with the Australian regulator and arbitrage revenue.
The VBB has a lucrative contract with AEMO that helps unlock additional peak capacity on the existing Victoria to New South Wales Interconnector (VNI) during Australian summers.
But the battery has also generated sales from network services (FCAS) and arbitrage revenue amid highly volatile market conditions, especially during the second and third quarters.
Neoen is about to embark on another landmark battery project – a 300MW/800MWh battery storage facility at Blyth in South Australia, which will underpin a “baseload” renewable energy supply contract with BHP’s Olympic Dam mine with wind energy from the Goyder South wind farm.
Neoen is also building a 100MW/200MWh big battery in Canberra as part of a supply contract with the ACT government, and has numerous other battery storage projects in the pipeline, including at Goyder itself.
Revenue boost will translate to higher profits
The boost in storage revenue, also underpinned by strong performances at Hornsdale and the Yllikkälä battery, was the standout feature of the nine month revenue report, which also saw solid growth in wind and solar revenues, and a boost in forecast profits for the 2022 calendar year.
For the nine months, overall revenue was up 46 per cent to €354 million, and in the third quarter revenue jumped 68 per cent to €130.5 million, compared to the third quarter of 2021.
Solar revenue rose 26 per cent, with the contribution from assets that had entered operation since the third quarter of 2021 offsetting the revenue contraction recorded by the El Llano facility in Mexico, where generating activities were at a standstill for the entire quarter.
Wind revenue doubled, deriving mainly from the early generation revenue at the Mutkalampi facility and the stronger contribution from the Bulgana power plant in Australia. Battery storage revenue in the September quarter was double that of the same quarter a year ago.
Merchant revenue – from wind, solar and storage – doubled over the nine months, again reflecting high prices and volatile markets, particularly in Europe.
Two thirds of Neoen’s revenue still comes from contracted energy revenue, but the company says future contracts will be priced higher because of the higher spot prices and increased demand from customers wanting to lock in prices.
Prices for solar and wind PPAs to rise
“Even though our business model relies heavily on long- term power purchase agreements, we have also reaped the benefit of the high spot prices,” CEO Xavier Barbaro said in a statement
“Firstly, our model has provided us with an immediate revenue boost via the portion of electricity we sell on the markets. Secondly, it generates additional demand for long-term power purchase agreements, which will be priced at higher levels than in the past.
“Now more than ever, Neoen is ideally placed to benefit from the acceleration in the development of renewable energies, which provide green, local and competitive electricity.”
Neoen has lifted its profit target for the 2022 calendar year to a range of between €390 million and €410 million (adjusted EBITDA ), up from its previous guidance of between €380 million and €400 million.
Neoen also reiterated its target of generating double-digit annual growth in adjusted EBITDA between 2022 and 2025, and restated its goal of having more than 5GW of capacity in operation during 2023 and its aim of reaching at least 10GW in capacity in operation or under construction by year-end 2025.
