Clean Power

Published on February 15th, 2017 | by Joshua S Hill


Corporate Renewable Energy PPAs Could See Big Year In Australia, Says Energetics

February 15th, 2017 by  

Corporate renewable energy purchase agreements are a big deal in the United States and Europe, but Australia is lagging well behind the rest of the world. However, new analysis from Sydney-based energy market advisor Energetics suggests 2017 could be a good year for large energy users to begin turning to renewable energy PPAs to mitigate rising electricity prices.

Energetics, an Australian energy market advisor intent on helping businesses reduce greenhouse gas emissions, published a new analysis by Principal Consultant Anita Stadler this week, which advocated for large energy users to “Consider a corporate renewable power purchase agreement” — an agreement between generator and off-taker which facilitates the purchase of electricity from a renewable energy project. The issue is an increasingly important one in Australia, given the current politicization of the energy landscape in the country. As Stadler points out, a number of events over the past few years have raised the profile of renewable energy sources — not least of all the controversy over the South Australian blackout, which many politicians and media outlets incorrectly attributed solely to the fact that the state has a lot of intermittent wind energy.

Further, the issue of which source of electricity generation should be the future of Australia’s energy mix has recently been raised to an even higher fever pitch, with the Australian Government, and its Prime Minister Malcolm Turnbull specifically, advocating for the development of ultra-critical coal-fired power stations. However, as we have already seen thanks to a report from Bloomberg New Energy Finance earlier this month, any new coal generating capacity is well and truly the most expensive option. Specifically, Bloomberg reports that the Levelized Cost of Energy (LCoE) of new ultra-supercritical coal-fired power in Australia sits at AUD$134-$203/MWh. This ranks well above the current LCoE for new build wind (AUD$61-$118/MWh), solar (AUD$78-$140/MWh), and combined-cycle gas (AUD$74-$90/MWh).

Price worries aside, Australian Energy Council’s Chief Executive, Matthew Warren laid it out explicitly: “While lower emissions coal-fired power stations could be considered theoretically, in practice there is no current investment appetite to develop new coal-fired power in Australia.”

“Why the strong support by industry peak bodies for renewables?” Anita Stadler asked, pointing to the massive price decreases renewable energy technologies have benefited from over the past few years. Further, while prices for renewable energy development are already cheaper, they are only likely to continue to fall: “consider that in the roughly five years or so it would take to bring an expensive new ultra-supercritical coal-fired power station on line in the Australian market, the cost of renewables will continue to come down.”

Stadler also points to the integration of energy storage as increasing the utility of renewables. Energy storage has found an unlikely proving ground in Australian energy markets, and some estimates suggest that the cost of many energy storage technologies could fall by as much as 40% over the next few years.

As such, as seen in the graphic below, Energetics now believes that a tipping point has been reached for large energy consumers to begin considering renewable energy Power Purchase Agreements (PPAs).

“The rising costs of grid-supplied electricity, coupled with the falling costs of renewable energy production have resulted in a narrowing of the price difference between renewable and traditional energy sources,” Stadler explains. “For large energy users contracting with a renewable energy generator and / or retailer to meet all or part of your energy supply needs is now a commercially viable proposition.”

There has been some recent interest in renewable PPAs in Australia, but it is nevertheless a nascent market, but one that Energetics expects to grow in 2017. Three specific options were put forward as attractive options for Australian large energy users:

  • Self-sourced Large-scale Generation Certificates (LGC)
  • On-site solar PV
  • Alternative electricity procurement and heding strategies

With large-scale renewable energy projects also expected to surge in 2017, and a strong year in small-scale solar, renewable energy options in Australia are becoming more commonplace, despite the apathy of the country’s national leaders.

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