Tracking corporate renewable power purchase agreements (PPAs) in Australia over 10MW
These long-term deals are made by some of Australia’s largest energy users. A well-designed renewable PPA has the potential to deliver multiple benefits: electricity cost reductions, the ability to hedge against energy market volatility, greater long-term budget certainty and emissions reductions in keeping with net zero or carbon neutrality commitments.
The market for renewable contracting has grown rapidly since 2017. After a subdued 2019, a record was set in 2020 and again in 2022.
As of mid-October 2023, the volume of energy contracted for annual delivery through renewable PPAs with end users since 2017 is estimated at ~17.0TWh. The annual offtake volume during the calendar year 2022 was ~3.6TWh; with total 2023 year to date announced volume of 3.5TWh[1].
Aside from changes in the market overall, what else do we learn? Between 2017 and mid-November 2023, retailer intermediated PPAs accounted for 45% of end-user contracted renewable electricity volume measured in GWh p.a., followed by financial PPAs accounting for ~43%. Retailers, acting as aggregators, have become a more attractive option as they have the ability to better support corporates with smaller electricity loads and de-risk contracts. During this period, we also saw wind being the favoured technology type (54% of contracted volume) over solar (39% of contracted volume). This is because the production weighted average price realised by wind tends to be higher than that of solar.
What do our experts predict for the remainder of 2023?
We expect 2023 will be another record-breaking year with ~2.3TWh of deals, including a further ~1.5TWh p.a. of transactions facilitated by Energetics, that have been concluded but not yet been announced, are currently in the market, or are expected to be released to the market during 2023. Some of these transactions may however only be announced early in 2024.
Cost pressures experienced by developers are likely to impact both wind and solar PPAs for some time. These pressures range from financing costs, exchange rate volatility, increased commodity (eg. steel) and equipment costs, high interest rates, through to supply chain constraints and skills shortages. PPA prices have risen as a result. Energetics has seen these effects, not only in the transactions we’ve supported, but also other deals, where Energetics has acted as a peer reviewer, or advisor to members of a buyers group facilitated by a third party.
Also, while leading developers are signalling that equipment cost pressures for solar are easing, costs are still higher than 18 - 24 months ago. The cost of wind equipment is expected to remain elevated for some time relative to the historical technology “learning curve” trend[2].
An increasingly important consideration are the reputational risks arising due to project delays, which can result in a failure to meet emission reduction targets and, at times, negative associations with projects deemed to carry environmental impacts. A recent example has been tech giant Apple’s termination of its agreement with Windlab’s Upper Burdekin Windfarm in 2023[3]. The project faced strong community opposition on environmental grounds, with reports indicating an unavoidable and significant impacts on the habitats of threatened species which resulted in the project being scaled back to 80 turbines, down from 136 and significant delays.
During 2023, Energetics has observed the start of what could be an emerging trend of renewable PPA’s being signed with the exclusive intention to enable green hydrogen production. The two deals recorded so far, both in Queensland, are substantial, totalling ~1.7TWh p.a. Whilst we included the 25-year Fortescue / Genex Power PPA[4] in our tracker; the 15 year Stanwell PPA with Acciona’s Aldoga Solar Farm for its CQ-H2 project[5] is treated by Energetics as a wholesale (retailer to generator) PPA and thus excluded from the Corporate PPA tracker. This is based on our understanding that the Aldoga Solar Farm PPA is not with the hydrogen project, but with only one of its consortium partners Stanwell; and that the output, prior to the hydrogen project being energised will supplement Stanwell’s retail portfolio.
Energetics is a market leader in Corporate PPAs
Energetics played a leading role during the formative days of the renewable PPA market, providing commercial and technical advice on landmark deals such as Sydney Desalination Plant (2009), as well as the MREP1.0, Sydney Metro and Monash University (a member of the Telstra Club) in 2017.
Recently, Energetics advised Woolworths Group’ on their NSW transaction the third PPA for the Group, covering 100% of their NSW and ACT operations for 8-years. The retailer intermediated PPA, with SmartestEnergy, incorporates an innovative, structured renewable solution, backed by an offtake from Octopus Investments’ Darlington Point Solar Farm and Woolworths’ existing PPA with Squadron Energy’s Bango Wind Farm. Energetics also supported nbnCo with their most recent financial PPA with the Macarthur Wind farm in Victoria, following their earlier PPA with Wyalong Solar Farm in NSW.
Other Energetics’ clients who’ve announced PPAs include ALDI Stores, Brisbane Airport, Charter Hall, City of Adelaide, CSIRO, Dexus, Fujitsu, ISPT, Transurban, Woolworths (SA) and Newcrest Mining. We’ve also advised on a number of buyers groups such as MREP 1.0 and 2.0, the 51-member Victorian Energy Collaboration (VECO), as well as individual members of other buyers’ groups (i.e., IFM /QIC Buyers Group and the Lion / Australia Hotel Association Buyers Group).
We offer strategic and commercial transaction advice – from business case development to market engagement, evaluation, deal negotiation and, where required, AFSL intermediation. We also provide post-deal implementation and validation services.
Footnotes
[1] This is based on the year in which the deal was announced and the annual contracted volume, without taking account of PPA tenures which vary from 5 to 25 years. Shorter tenured renewable electricity transactions are not reflected; nor are sub-10GWh pa offtakes. Volume includes equity investments by end-users, as well as three very large Private Wire transactions where system output is estimated in excess of 200GWh pa on average.
[2] The rate of improvement in the technology’s performance and cost as more renewable energy units are produced and deployed.
[3] This transaction has now been removed from our PPA Tracker.
[4] Genex to supply 337.5MW of solar power to Fortescue (power-technology.com)
[5] ACCIONA Energy Inks PPA with Stanwell Corporation for Aldoga Solar Farm (blackridgeresearch.com)
