The future of solar power in New South Wales
Australia is ideally placed to be one of the largest solar-generating countries in the world. With our high volumes of sun and an increasing number of large-scale solar (LSS) projects in the works, the future is looking bright for solar-generated power across the nation.
Despite some favourable conditions in certain geographic regions, LSS generation is still gradually integrating into the Australian electricity grid in conjunction with wind generation where wind assets are better suited to geographic regions. According to the Australian Government’s Energy Agency, as at March 2021 almost 7,000 MW (DC) of LSS generation has been connected to the Australian electricity grid. But there is opportunity to increase this number dramatically, especially if Australia is to reach its various federal, state and local sustainability targets.
In Australia’s most-populated state – New South Wales – there are big plans to build generation capacity faster, while also improving how power is transmitted through the grid. Especially as coal-fired power plants start to enter their end-of-life stage.
Planning for coal-free energy generation
The impending withdrawal of coal-fired generation assets is planned by asset owners for assets throughout Australia with recent evidence showing that some assets are now scheduled for retirement earlier than their originally intended operating life. In New South Wales, the government is pushing to secure more reliable energy supplies, in particular, from solar-generating assets.
Recently released guidelines by the NSW government are making the assessment of LSS projects clearer, with the government pushing for local solar farms to service nearby communities and councils.
With a goal of 12GW of renewable energy generation projects intended before 2030, the race is on for local government authorities around the state to not only secure significant developments in their area, but to ensure they are built in a way that truly benefits the communities they’re designed for.
But regulatory approvals, financing, designing, planning, building and grid connecting these assets takes years. Ideally, solar-generated power generation would be able to completely replace the certainty of existing coal-generated assets. Unfortunately, replacing coal with a singular sustainable energy source is not a simple process. In reality, many councils will need to rely on a mix of generating assets to replace coal. Specifically, they’ll likely rely on a mix of solar, wind and hydroelectricity operating in conjunction to support each other’s generating variability. With four of New South Wales five coal-fired power plants scheduled or expected to close in the next 15 years, more capital and capable infrastructure is needed immediately to ensure the transition from coal to sustainably sourced energy can happen sooner rather than later.
Local governments and communities are looking for answers now to their sustainability challenges. That’s where Power Purchase Agreements (PPAs) are coming in to make a substantial difference to the short and long-term sustainability planning for local communities and governing bodies.
The power of the PPA for large-scale solar generation
Power Purchase Agreements (PPAs) are gaining popularity as an aggregated energy solution for industry and government generally speaking.
A PPA can be structured in a number of ways. However, it generally takes the form of a long-term agreement between a renewable energy generator, a retailer and the energy consumer. Price and generation variability risks can be borne differently and can provide different commercial risk and outcomes inclusive of renewable power and Large Scale Generation Certificates (LGCs) from an asset. This provision is given at an agreed price, which may be structured in a fixed format providing long-term price certainty for those who wish to purchase more renewable energy at a non-fluctuating price.
There are great benefits for everyone involved under such a symbiotic arrangement. The renewable energy generating asset can be assured of ongoing off take investment and commercial certainty, retailers can also rest easier knowing that a reliable supply of increasingly demanded energy is possible and available for sale, and customers can recognise the path to renewable energy, and ideally, a net zero future.
PPAs are not easy to negotiate or arrange. There are untold variables to consider when constructing a PPA, including the capacity of the generator, the ability of the retailer to effectively retail the power, and the type of investment from those who need the power and supporting retail services.
While many PPAs have tried and failed to get off the ground, either due to a falling short of investment or regulatory approvals, some have managed to find the sweet spot to gain binding agreements from all parties. One such PPA involves one of Australia’s largest renewable energy generators, Snowy Hydro.
How PPAs are shoring up 100% solar energy in New South Wales
Most councils around Australia are taking action towards reducing their greenhouse gas (GHG) emissions. The most pragmatic amongst these councils are turning to the power of PPAs to secure reliable renewable energy now, not in the distant or uncertain future.
The PPA with Red Energy (wholly owned by Snowy Hydro) is one such PPA that is assisting councils to keep the promises they’ve made to local communities. Namely, to transition to renewable energy in a way that is reliable, value-aligned and achievable.
Facilitated by Procurement Australia’s Strategic Sourcing team, this PPA will utilise the Metz Solar Farm, one of the critical solar locations that are so vital to the state’s transition to large-scale renewable energy.
From January 2023, seven pioneering New South Wales councils will see up to 100% of their renewable energy requirements being facilitated via the Metz Solar Farm and retailed via Red Energy. For Red Energy, this PPA demonstrates their commitment to lead the charge towards a renewable energy future. For Metz Solar Farm, the 10-year arrangement with numerous and diverse councils means there’s a built customer base for a decade to come.
And for us at Procurement Australia, this PPA is representative of the ideal energy solution we can provide members. One that aligns with councils’ environmental targets, fulfils promises made to sustainably-conscious communities, and delivers pricing volatility in the face of wider market uncertainties.
Our next NSW PPA is already in the early stages of planning. To find out more, contact an energy procurement representative. Together, we can work towards a NetZero future that harnesses Australia’s natural resources in a way that is sustainable and replicable.
