The ambitious renewable energy-focused power retailer Powershop Australia has signed a huge deal for the output of a 200MW solar farm and two big wind farms, after being “stunned” by the low prices offered after it went to market for proposals last year.
Powershop, owned by New Zealand’s biggest utility Meridian Energy, will also buy three hydro power plants in NSW as part of its plans to more than double its customer numbers and meet their needs with 100 per cent renewable energy.
The deal will enable Victoria’s biggest solar project, the 200MW Kiamal Solar Farm near Ouyen, to be built by Total Eren, the first investment in Australia from a joint venture that combines the French oil giant and a renewable energy developer.
Powershop will also take the output from the 54MW Salt Creek wind farm, currently under construction near Woorndoo, around 250km west of Melbourne, and part of the output from CWP’s 135MW Crudine Ridge wind farm, to be built south of Mudgee in NSW.
Powershop CEO Ed McManus said his company was stunned by the results of a request for proposals (RFP) that it began some six months ago.
“We have gotten an overwhelming response from the market,” McManus told RenewEconomy. “I can’t disclose the price but I am happy to tell you that prices we are getting these PPAs at is well below wholesale price of energy.
“There are many non believers out there … but we were surprised at the prices we saw for wind, and shocked at the prices we saw for solar.”
Asked if the prices for these new projects matched recent PPAs such as the sub $55/MWh obtained by Origin Energy for the 530MW Stockyard Hill wind farm in Victoria, and reports of below $70/MWh for solar projects, McManus said:
“We saw prices that were at or around what had been reported in the media as one-offs,” he said. “If you said two and a half years ago that this is where solar will be, we would not have believed it.”
Powershop had been seeking around 300GWh of wind and solar capacity when it started its tender process, but because of the low prices it has signed up for nearly 800GWh. The PPAs last until 2030.
That will require Powershop to more than double its current retail base of just over 100,000 customers (up more than 10 per cent over the year), but McManus says the prospect of cheaper prices from these contracts should help that.
“Over the next year we will get new renewable energy generation that is priced under the market,” he said. “We will prove to people that renewables is the cheapest form of generation, because we will be able to pass on corresponding lower prices to customers.”
Powershop also seized an opportunity to buy three hydro power stations – Hume, Burrinjuck and Keepit – in NSW from another New Zealand company Trustpower.
Together they total more than 100MW of capacity, although McManus said that they will not be strictly “dispatchable” because their output is dictated by irrigation needs and environmental flows.
“Powershop’s steady growth is proof that Australians have a strong desire to support a green energy company,” McManus said in a statement.
“Our business model has always been based on having a balanced portfolio of generation and retail. Powershop’s growth has created the need for us to make this move in the market. As Powershop continues to grow, we will invest in more renewable energy generation.
“Additionally, the opportunity to acquire hydro assets in Australia is extremely rare and having a balanced portfolio of wind, solar and hydro allows us to more effectively manage risk in the market.”
He said Meridian and Powershop would continue to monitor new technology, such as pumped hydro, batteries and thermal solar, “so that we can ensure we have a diverse range of technologies and generation.”
Powershop had previously sourced its renewable energy generation from two wind farms – Mt Mercer in Victoria and Mt Millar in South Australia – but said it would add more sources as it grew its customer numbers. “We have delivered on that promise,” McManus said.
In a separate statement, CWP said the PPA with Powershop meant that the Crude Ridge project could begin construction in April 2018.
It will comprise 37 wind turbine generators, and got approval despite some local opposition.
CWP’s Ed Mounsey said the project is set to provide regional benefits by contributing over $160,000 per annum to Community Enhancement Funds established with Mid-western and Bathurst Regional Councils, as well as upgrades to over 20 km of local Council roads.”
A total of 19 host landowners will benefit from rental income throughout the life of the project and neighbour agreements will help distribute funds to others in the local community. 75 full-time equivalent jobs are expected to be created during construction.
ANZ has been selected as financial advisor on the deal with Norton Rose Fulbright performing the legal advisor role. Construction consortium details are expected to be announced in the coming weeks.
Giles Parkinson is a journalist of 30 years experience, a former Business Editor and Deputy Editor of the Financial Review, a columnist for The Bulletin magazine and The Australian, and the former editor of Climate Spectator.