South Australia's plans to fix its power crisis could involve Elon Musk

The sunrises over the Hazelwood Power Station is seen on February 27, 2017 in Hazelwood, Australia. The French owners of the station, Engie, announced plans to shut the brown coal fueled power station, which is located in Victoria, a state neighboring South Australia.
Quinn Rooney | Getty Images

Australia's most renewable-energy dependent state outlined plans on Tuesday to spend A$510 million ($385 million) to keep the lights on, just four days after Tesla boss Elon Musk offered to save the state from blackouts by installing large-scale battery storage.

The plan includes A$150 million to encourage development of a 100MW battery storage plant, possibly from Musk or from a number of local providers. The state will also build and operate a new A$360 million gas power plant to help stabilize its electricity system.

The South Australia (SA) government came up with the emergency plan after a state-wide blackout last September during a wild storm that left homes and businesses in the dark for up to eight hours and paralyzed some industries for up to two weeks.

The state, which relies on wind for about a third of its power capacity, has become vulnerable to outages and soaring prices as it doesn't have enough back-up power when the wind isn't blowing.

South Australia's last coal-fired power station shut down last May, as it was making losses, and one of two units at a gas-fired power plant has been mothballed as its owner, France's Engie, has struggled to secure affordable gas.

How South Australia ended up with an energy shortage
How South Australia ended up with an energy shortage

"Today, SA takes hold of its energy future. We have a national electricity market which is failing not only SA but failing the nation," South Australia's Premier Jay Weatherill said in a statement.

Asked about the proposal for new battery technology, Weatherill said he was speaking to a range of providers.

"We want as much local content as possible," he told a news conference. "We also need to put in the balance the reputational effect of attracting an international player of the size of Elon Musk to SA. These are all things that we are going to balance."

Weatherill spoke to Musk on Saturday after Australian tech entrepreneur Mike Cannon-Brookes said he would work to raise funding and political support for the Tesla chief's offer to build a 100 megawatt hour battery farm within 100 days of signing a contract, or supply it for free.

The situation for South Australia could get worse with the closure this month of a major coal-fired plant, Hazelwood, also owned by Engie, in neighboring Victoria state, another crucial source of back-up power via an interstate link.