By Sonali Paul
MELBOURNE, Oct 13 (Reuters) - An Australian company is looking to build the country's first lithium-ion battery factory by mid-2021, starting small after scaling back earlier plans and switching its proposed location.
Energy Renaissance said on Tuesday it plans to invest A$28 million ($20 million) to build a plant in Tomago, in the state of New South Wales, initially producing 66 MWh a year of batteries, Managing Director Mark Chilcote said.
The company hopes to invest a further A$200 million and expand to produce 5.3 GWh annually within 10 years. By comparison, Tesla Corp's Nevada Gigafactory currently has a capacity of 35 GWh.
"We could accelerate that to five years or less with support from the federal government," Chilcote said in an interview.
Energy Renaissance's batteries are being developed for energy storage for homes, buildings and power grids in hot climates.
"There's absolutely no shortage of demand ... But the challenge will be to be competitive with products out of North East Asia," said Gero Farruggio, head of global renewables for research firm Rystad Energy.
Research for Energy Renaissance's batteries was backed by a A$246,625 grant from the Australian government.
Two years ago the company planned to build a 1 GWh battery factory in Darwin in the Northern Territory, but changed tack after failing to reach a deal to sell batteries to the territory's power companies.
It now has letters of intent from a few firms, including ABB Ltd ABBN.S and Western Australia's Western Power and Horizon Power to buy its batteries, Chilcote said.
The company has sufficient funds to begin work on its factory and aims to start construction by the end of 2020, he said. It is in talks with private investors to raise the remaining A$10 million needed through debt and equity.
"That's our single biggest risk left," Chilcote said.
Energy Renaissance will have to import all of its battery materials but hopes it can eventually nurture a battery materials industry in Australia, including nickel supply from top global miner BHP Group BHP.AX .
($1 = 1.3837 Australian dollars)