South Australia announces Tesla as backer of world's largest battery

South Australian Premier Jay Weatherill.
South Australian Premier Jay Weatherill.

South Australia has announced Elon Musk's Tesla as the principal builder of the world's largest lithium ion battery to expand the state's renewable energy supply.

The mega-project will be built in conjunction with French renewable energy firm Neoen and paired with Neoen's existing wind farm at Hornsdale north of Adelaide.

Company executives gathered at Adelaide Oval on Friday for the announcement with Premier Jay Weatherill, and were expected to be joined by chief executive Elon Musk.

Mr Weatherill said the "historic agreement" meant his state was now leading the world in battery storage of renewable energy.

"Battery storage is the future of our national energy market, and the eyes of the world will be following our leadership in this space," he said.

Mr Musk first expressed interest in the mega-project over Twitter in March, when he wrote: "Tesla will get the system installed and working 100 days from contract signature or it is free."

The project is intended have a storage capacity of 100 megawatts, or 129 megawatt hours, to be delivered by December 1.

"The battery will take renewable energy and store it ... and then play it into our electricity market at a time when we need it," Mr Weatherill said in March.

Romain Desrousseaux, deputy chief executive of Neoen, said the project would demonstrate "large-scale battery storage is both possible and now commercially viable" and can provide "dependable, distributable power".

South Australia's electricity troubles, including numerous blackouts, have become a politically contentious issue between the state and federal governments, amid debate about the capacity of renewable energy.

A freak storm in September destroyed transmission lines, triggering backup systems. A key interstate connector with Victoria was ultimately tripped "off" due to automatic safety precautions. But early responses from Energy Minister Josh Frydenberg and other commentators pinned some of the blame on the state's reliance on renewables.

In a final report, the Australian Energy Market Operator said a higher reliance on "non-synchronous" forms of energy such as wind and solar meant the power grid was "experiencing more periods with low inertia and low available fault levels", and was more susceptible in times of crisis.

"AEMO is working with industry on ways to use the capability of these new types of power generation to build resilience to extreme events," the report noted.

Tesla, which had become the most valuable carmaker in the US, has seen its share value fall by 20 per cent since June 22, losing $US12 billion ($15.8 billion) in market capitalisation.