The Clean Energy Finance Corporation has committed $60 million to the Moree Solar Farm, which could be the first large scale solar project in the country to by-pass the major utilities and be built on a “merchant” basis.
The go-ahead for the plant is still conditional on obtaining extra finance, but the 56MW facility in northern NSW – being developed by Spain’s FRV and Australia’s Pacific Hydro – is looking to sell its output into the wholesale electricity market, rather than relying on a fixed price power purchase agreement (PPA) from a major utility.
A larger 150MW version of the project was selected as a winner of government funding in the Solar Flagships program in 2011. But a controversial 11th hour decision by a utility to reject a PPA meant it could not obtain finance, and its grant was forfeited. The grant was later given to AGL Energy for its 155MW solar project at Broken Hill and Nyngan.
Utilities have been reluctant to sign contracts with wind farm and solar farm developers because of uncertainty over the future of the renewable energy target. Some of those utilities have been actively campaigning against it.
Some wind farms have been built on a merchant basis in the past, but such a move would be a truly significant one in the development of a large scale solar industry in Australia. Insiders said that the project could have gone ahead 18 months ago if utilities had been willing to sign a PPA.
CEFC CEO Oliver Yates, who earlier this week predicted that developers of wind and solar energy would bypass utilities (See our story Bugger the utilities, wind and solar will get built anyway), said on Friday that building a plant on a merchant basis would be a precedent for the Australian market. He said solar energy was “more predictable” than wind energy and tracking will allow the facility to capture a higher volume of peak priced electricity.
“The CEFC financing can bridge the required debt funding in the immediate term to enable the sponsors to proceed to construction and provide flexibility to secure a PPA in the future,” Yates said in a statement.
“This utility scale project should help drive down future construction costs as industry participants gain experience building large scale solar projects. The supplier selection process for this project is getting underway and the CEFC expects its participation will encourage greater development of a local supply chain.
The Moree Solar Farm will feature high efficiency panels mounted on single-axis trackers. It will cover around 350 hectares and provide enough solar power for approximately 15,000 homes. Based on the AGL costings of around $3/watt, it could cost around $165 million, but could be more expensive due to its use of tracking technology.
The project is still dependent on further finance, possibly debt from other banks, or possibly a grant from the Australian Renewable Energy Agency, which repeated this week that this was one of two projects – along with Infigen Energy’s Capital solar farm – under consideration for funding.
Pacific Hydro and FRV said in a statement they were continuing to work on other commercial elements of the project, but said that uncertainty surrounding the future of the RET after the next election was still hampering progress. The Coalition is insisting on holding another review of the RET in 2014, with many fearing that the target will be diluted due to falling demand and pressure from incumbent generators.
FRV is also about to begin construction of a 20MW solar PV project in the ACT after winning a tender by the ACT government. Pacific Hydro owns numerous wind farms in Australia, and hydro and wind projects overseas.
