AGL will build pumped hydro energy storage facility at Kanmantoo after $31 million deal with mine operator Hillgrove Resources | VIDEO

Energy giant AGL will build a pumped hydro energy storage facility at Kanmantoo after agreeing to a $31 million deal with copper mine operator Hillgrove Resources.

The facility will be able to dispatch power into the national grid whenever it is needed, in the same way as the so-called "big battery" near Jamestown.

AGL wholesale markets executive general manager Richard Wrightson said the "exciting" project matched his company's plan to invest in new technologies.

"If we proceed and the project is approved ... it would help us to meet the changing needs of the South Australian energy market, in which energy storage assets are likely to be needed to provide dispatchable capacity as renewables generation increases over coming years," he said.

Hydro energy storage requires water to be pumped between two ponds: one up high, another down low.

The mine's pit will serve as the lower pond, while a valley 1.5 kilometres to the north will be dammed and used as the upper pond.

When wholesale power prices are high, water can be allowed to flow downhill, through a turbine, to generate electricity; when prices are low, it can be pumped back up the top.

The Kanmantoo facility will be able to produce 250 megawatts of power - 2.5 times as much as Jamestown's "big battery" - for several hours; and will be able to switch on within about 10 seconds, compared with up to 20 minutes for most pumped hydro facilities.

Photo: Hillgrove Resources.

Photo: Hillgrove Resources.

Hillgrove chief executive officer Steven McClare said the project would be one of the most cost-effective in Australia due to the steep walls of the pit, the short distance between the two ponds and the availability of treated effluent from Mount Barker to fill them.

Such projects were increasingly needed, he said, as the national energy market moved away from coal and gas and towards more intermittent renewable sources.

"If it proceeds, it would be a good weapon for AEMO (the Australian Energy Market Operator) to stabilise the grid," he said.

"By our estimation, this project alone could enable a 60 per cent increase in renewables in South Australia."

Energy and Mining Minister Dan van Holst Pellekaan said the project also aligned with the state government's desire to deliver "cheaper, more reliable and cleaner" energy to South Australian businesses and households.

Image: Hillgrove Resources.

Image: Hillgrove Resources.

Up to 100 workers are expected to finish up at the mine within weeks, upon the completion of drilling and blasting operations.

About 90 more jobs will go at the mine as it winds down over the next six months, leaving about 70 staff to keep processing the ore already dug up.

Hillgrove will retain ownership of the processing plant so that ore from any future discoveries nearby, whether at Kanmantoo or further north at Sanderston, can be sent there.

However, it will shelve plans to mine underground beneath the giant pit.

"The board determined the AGL pumped hydro energy storage offer represented a lower risk and higher-value proposition to shareholders," Mr McClare said.

AGL will apply for development approval for the project next year, and hopes to complete it by 2024.