MELBOURNE, Feb 21 (Reuters) - AGL Energy AGL.AX , Australia's top power producer, has scrapped a plan to develop a 250 megawatt (MW) pumped hydropower energy storage project at an old mine pit in South Australia, as the owner wants to continue mining at the site.
AGL and copper miner Hillgrove Resources HGO.AX said on Friday they had agreed not to proceed with the Kanmantoo pumped hydro energy storage (PHES) project, which was first announced last April.
Since the agreement was first signed, Hillgrove said it had conducted initial drilling work on an underground mining project below the giant pit which was going to be used for the pumped hydro project and in January won approval to begin underground mining.
"However, Hillgrove and AGL could not reach agreement on a way forward that enabled Hillgrove to commence underground mining and AGL to progress development of the PHES simultaneously," Hillgrove said in a statement.
AGL said it remained committed to developing energy storage projects to help back up wind and solar power in the grid, adding to battery projects it has already announced.
Pumped hydro acts like a giant battery, pumping water uphill when energy is abundant and releasing it to generate power when the sun is not shining or the wind is not blowing.
Scrapping of the Kanmantoo pumped hydro project marks the latest blow to pumped hydro plans in Australia.
Another 250 MW pumped hydro plan, Genex Power's GNX.AX Kidston pumped hydro at an abandoned gold mine, was put on hold last November when Energy Australia, owned by by Hong Kong's CLP Holdings 0002.HK , failed to sign an agreement to buy power from the project.