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Australian zinc refinery to build 100MW solar plant

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Australian zinc metals producer Sun Metals is to build a 100MW solar PV plant to supply its refinery located near Townsville, in northern Queensland, in a landmark development in the Australian renewable energy landscape.

The project marks the biggest intervention yet in Australia by a major energy user to source some of its electricity needs from renewable energy. While major international corporate players – such as Google, Apple, Amazon and others – have long had a 100 per cent renewable energy target, little has been done in Australia.

The decision by Sun Metals to build a 100MW solar farm 15kms south of Townsville – it may be increased in size to 116MW – also flies in the face of widespread political and media rhetoric that adopting renewable energy will be the death of manufacturing in this country.

It also flies in the face of a push by some conservative MPs for a new coal fired power station in the area. Given other projects in region – the Kidston gold/hydro and Windlab’s Kennedy wind/solar/storage projects – there would appear to be no need for new “baseload”, least of all high emitting coal “baseload.”

Sun Metals CEO Yun Birm Choi. Photo credit: Townsville Bulletin.

Sun Metals CEO Yun Birm Choi. Photo credit: Townsville Bulletin.

Indeed, Sun Metals says the $155 million solar project forms a key part of its plans to expand the output of the refinery by 25 per cent. Sun Metals plans to invest $460 million in the upgrade, according to a speech by CEO Yun Birm Choi made in October and reported by the Townsville Bulletin.

The Korean-owned Sun Metals, as a large electricity consumer, has also been pushing for significant regulatory changes to Australia’s wholesale electricity market.

The company has petitioned for a “five minute settlement rule” to be put in place, which would open the door for demand response and battery storage to play a larger role in electricity markets and help address the huge price spikes that are often the result of bidding practices by fossil fuel generators.

Those proposals, although supported by the Australian energy regulator and the market operator, have been fiercely opposed by the owners of coal and gas fired power stations.

Work on the Sun Metals solar project will begin immediately, with construction set to get underway in April. The 100 MW single axis tracking should be completed in Q1 2018 and will feed electricity directly into the company’s existing 33/132kV substation.

WA-based RCR Tomlinson Limited has picked up the EPC contracted for the Sun Metals Solar Farm, with First Solar set to supply it thin-film CdTe modules. The project will create 250 jobs.

“The award of this project reflects RCR’s position as a leader in EPC delivery of large-scale solar farms and follows our successful completion of the 53MW Broken Hill Solar Plant,” said RCR CEO Paul Dalgle in a statement.

That Sun Metals has decided to develop its own large PV array to supply its operations demonstrates that its CEO has a clear understanding of the opportunities distributed generation and storage is presenting not only to the grid but also to industrial electricity consumers.

Corporate PPAs and the direct supply of PV electricity to C&I customers is likely to accelerate in the near future, with high prices for large scale renewable certificates (LGCs) combining with rapidly falling solar module costs.

The ARENA large scale solar program, with the first arrays receiving grants likely to begin construction this year, has assisted in developing a competitive EPC environment. Financing costs too are falling, with international and domestic lenders and investors will to invest in renewable projects at rates that are globally competitive.

(Jonathan Gifford is an Australian journalist specialising in solar and renewable energy on secondment with RenewEconomy).

 

   

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  • Robert Comerford

    Looks like a good move, win-win for the environment and the company. Only losers are the fossil fool electricity suppliers. They have already started their new year radio campaign to scare the public.

    • john

      Really a scare campaign.
      I take it this would be from the parrot.
      As to the plant it make sense for them and i expect to see many more go down this path.

      • Robert Comerford

        The scare campaign started on or about the first of the month on networked local radio news with quotes from electricity suppliers of big rises in electricity for NSW consumers due to renewable energy supply. No prizes for guessing who is paying for these disinformation ‘news’ stories.

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  • GlennM

    Great,
    Small consumers (households) are adding solar. Now large consumers are adding solar. The fossil fools are getting eaten from both ends. Expect more moaning and groaning from them all year long.

    First they ignore you, then they laugh at you, then they fight you, then you win.

    Mahatma Gandhi

    so 3/4 of the way there then

  • David Pethick

    Fantastic news. Great to see a large energy user in Australia making a rational decision to invest in renewable energy.

    It makes a pleasant change to the rent-seeking behaviour from others (I’m looking at you Alcoa) for subsidised access to below market prices (“think of the employees”).

    Cheers.

    Dave P.

    • Chris A

      “Rent seeking,” This just makes me angry. Alcoa uses 600MW of Electricity. Thats more than 10% of the Vic grid at most times of the day. There are advantages to grid security of having stable large base-loads always taking power, particularly in a renewable generation context with a grid facing the imminent “duck curve”. Tell me David, when you buy in bulk do you expect to get a discount? Is that “rent seeking”? Could this energy be sold to someone else in the market if the smelter shut down? Record low demand suggests not. So the crux of all this is that we’re just going to push production capacity to environmentally awful jurisdictions like the Middle East and China at the expense of Australian jobs .

      The only rational decision here is Sun Metals investing in their survival because Australia’s (and in particular QLD’s) energy policy settings are failing manufacturing and they feel the need to insulate themselves from the risks associated with a dysfunctional energy market. I’m sure they would rather be making Zinc than tinkering around in this energy debacle.

      • David Pethick

        Hi Chris

        Alcoa want *below market* prices and have received them for the last 30 years. In fact, it could be argued that they actually want *below cost* prices. That’s not a bulk-buy discount – it’s a subsidy. They want AGL to sell them power for less they can sell it elsewhere AND they want the Victorian taxpayer to stump up $150m per annum to further reduce their costs.

        On the “duck curve” – there is absolutely nothing stopping Alcoa from deciding *not* to enter a hedge contract and instead to purchase their energy on the spot market. This would allow them to take full advantage of low prices created by solar during the middle of the day.

        Your point about the impact of this is understood. I’m not against a deal being struck because the smelter uses brown coal or because it employs Australians. I’m against it because propping up dying industries always fails in the long run (e.g. Australian car manufacturing).

        Perhaps calling them a rent-seeker was too harsh. They are a multinational corporation that will produce their product in whatever jurisdiction allows them to maximise profits.

        Cheers.

        Dave P.

      • Peter F

        a) They buy large quantities, b) it is a stable load, so for both reasons they should get a discount but for most of the time the discount has been up to 90% off. Also they want very high security so they demand spinning reserves which they don’t directly pay for. In sum they want cheaper power than any sensible bulk discount can be justified

        Overall the use of the economics terminology of “rent seeking” is correct

        • hfrik

          In germany aluminum smelters get discount prices – when they offer continuous demand balancing in return. So reducing power demand at high price times and increasing demand at low price times. Seems this works fine.

          • Peter F

            It would be really interesting to compare power prices to German Aluminium refineries to those paid by Alcoa at Portland but i suppose in both cases they are very deep commercial secrets

      • Andy Saunders

        As I think Paul Keating said, always back self-interest in a horse-race, at least you know it’s trying. Rent-seeking per-se isn’t a problem (we can probably assume that almost everyone does it), it’s “rent-succeeding” that’s the problem.

        Given that Alcoa can trade demand-reduction back into the NEM, there’s little reason for them to get special reliability guarantees (except from HV transmission faults), given they are likely to basically sell their stoppages into the market…

      • Jason Van Der Velden

        Even if it was just cheaper, why wouldnt they?

  • Tomfoolery

    Really surprised this isn’t happening more. I guess price spikes on the NEM this year with Hazelwood closing should really start some conversations about alternative energy options for big consumers.

    Weatherill and co are set on gas in SA so doesn’t look like their prices will level out any time soon. NSW has quite low levels of investment in new renewable developments because of the policy landscape. NSW govt has historically had a tendency to favour the coal and gas interests who have the ear of the NSW Liberal Party, not helped by overly strict rules for Wind Farms in terms of visual and noise impacts.

    So it’s up to QLD and VIC to bring down prices with reverse auctions and aggressive RET policies or else corporate Australia will start looking for alternatives to the NEM. Watch this space though – looks like the QLD and SA governments are down in the polls and might get kicked out before things get better. We’re in for a rough few years of inaction on climate change.

    • Richard

      Yes, but a lot of the action is in Victoria, where we have a traditional Socialist Labor government.
      Expect them to do the opposite of what Federal Lib’s want.

    • neroden

      SA is so wonderfully far along in the energy transition — it’s already mostly wind — that I don’t think even the Libs can stop it. I think natural, unstoppable private-sector buildout of “behind the meter” solar and batteries is going to bring SA to 100% renewable sooner rather than later, regardless of government action.

      The big deal is VIC, NSW, and QLD, which are all still heavily reliant on coal. Unfortunately I see no hope in the near future in NSW and you’re right that QLD may see regression. So the big action in the next few years is probably going to be from VIC.

      • Andy Saunders

        Oh, don’t assume that “behind the meter” is unstoppable. It wouldn’t take too much administrative hindrance to really dent it. I could imagine a situation where a government over-reacts to, say, a fire or a consumer complaint, and enforces some sort of lengthy and costly certification process on both hardware and installers, allowing only a couple to be certified which then jack up prices and kill demand (a fair bit – true, I can’t see all demand being choked off). Or where they enforce costly “system stability” investigations on all new installs.

        Conversely, I can also imagine situations where demand is increased for new installs. For instance, rental properties do not yet have a good solution and are currently excluded from the market. FITs are not competitive with wholesale prices yet, let alone with the retail price that my neighbour may be currently paying (it’s one thing to insist on T&D charges if the power is going huge distances, but most will be consumed within an extension-lead distance…)

        • Richard

          Maybe. But all this will do is piss people and business off to such an extent, that it will backfire. Utilities are already hated and if the government is seen to be pandering too much to their interests it will hurt them at the ballot box.
          Renewable energy and solar is very popular in Australia even among people who aren’t on board yet.
          The truth is once things like the powerwall and powerpack develop a little more business and domestic will taking them up in spades.

  • nakedChimp

    We’re watching the first mover on this.. couple months/years down and every big electricity user will do this as the economy is just there.
    It’s a no-brainer really.

    • MaxG

      Unfortunately is is not a ‘no-brainer’ as the ones without a brain in this country simply do not get it. :))

    • Bristolboy

      I’m really surprised that more Australian companies aren’t doing this since in the UK many businesses are installing solar for economic reasons. Whilst I accept in the UK the feed-in-tariff helps justify the investment, it also has to be remembered the UK’s irradiation is rubbish compared with Australia!

      • Richard

        The economics are finally stacking up without subsidy in Oz. There will be a lot of industrial scale installations from now on. Business wasn’t offered much incentive to go solar by governments in Australia, while there has been generous subsidies for home solar. Hence the high uptake of home solar in Oz.

  • George Michaelson

    How much does this *depend* on adjusting the bid mechanism to five minutes? Sometimes, the goal is not what it seems. I would assume the thermal and electric load demand for smelt is constant but it’s possible there is some cunning plan to us their huge thermal mass as energy storage and capitalize this back as demand management revenue?

    • Peter F

      Unless someone is lying, there is little connection because the plant is being built and there is no certainty that the rule will be changed. In fact if a 5 minute rule damps spikes as expected then the average price of grid power will fall and the economics of the solar plant will decline.
      However the logical explanation is that the company wants both. It’s internal cost for solar will probably be about 5c based on contracts elsewhere but solar at best might form 30% of its total consumption. Currently its long term grid price is around 7-9c so if the 5 minute rule reduces that a bit all to the good, not just for them but for everyone else.
      The third leg as you say by reducing demand during 5 minute spikes may save them some money but by depressing demand and therefore price, also saves everyone else money.
      In fact getting all heavy users such as Aluminium smelters to do the same would have a significant benefit for both prices and grid stability

      • George Michaelson

        ok. So there is a plant which is a high energy consumer, and its owners discuss investing in a significant capital spend to make a huge PV. They also ask for a change in the bidding rules to 5min. If the entirety of the generated PV is consumed internally, the bidding regime is irrelevant: they are not seeking to sell surplus load, they have none.

        What I suspect, is that they are counting on the huge residual thermal mass of the process, to permit them to re-sell PV back into the grid on short cycle sells, the reason being that they can ride out a 5 minute bid window with their thermal mass, but cannot ride out a 30minute or 1hr contracted window because of heat loss in their process. I have only faulty, old knowledge from applied maths at uni in the 80s, but I believe the heat regeneration issues in smelting are analogous to steel foundry, where huge amounts of cost are avoided by robbing heat going up the chimney into large thermal masses and then using it as pre-heat. In like sense, if you have a white-hot smelt body, its thermally stable for some window. If that is more than 5 minutes but less than 30, you can use that heat to re-direct PV when its financially viable, and earn money from it by bidding into the supply chain.

        I am not saying this is bad btw: I just want to understand what is going on. I think having 100Mw of PV which can be used to satisfy a 5min bid model is both good, and useful. But its also possibly hugely profitable for them, as a side effect of what is their primary investment in “energy” -a thermally stable store of heat energy latent inside their smelting process.

        • john

          What is happening is that with the 30 minute time frame big producers the incumbents are gaming the process they bid up the price and reap large windfalls.
          Reducing the time frame will reduce this situation.
          At times over 30 mins the price can rise to thousands of dollars per MW.

          • George Michaelson

            I think I understand this John. That price variance only hurts them if they remain a net consumer overall, of centrally generated power. So it goes to the ‘we remain consumers but have to buy at spot-price’ side of the problem

            So what I wrote, went to the ‘we become exporters, but can only export in small time increments’ side of the problem.

          • john

            They would net be better off going to 5 minute bid as would he rest of the consumers big or small.

          • Malcolm M

            The 30-minute rule is inconsistent with most economics and purchasing policies, where the purchaser wants to know the price before deciding how much they will buy. This is because a spike in the last 5 minutes of a 30 minute window means the price in the entire 30-minute period increases, and this AFTER they have consumed the power. Whereas a 5-minute window allows them to reduce power consumption during a spike.

            Their own solar farm would only help them during the daytime. They would be power consumers in the night and evening, plus when it’s cloudy, hence their lobbying for the 5 minute settlement time.

            Their own solar farm would have several advantages over a power purchase agreement:
            1. No doubt some enormous tax advantages, through an upfront tax right-off followed by low operating costs in subsequent financial years.

            2. They could claim the RET.
            3. No need to pay for network charges on power that flows through their own wires from the solar farm to the plant.

          • john

            yes I think that the 30 minute period as you said is being abused as we have seen so best to get rid of it.
            As to the company being able to take advantage of their output over a short period I do not think this will be in anyway significant. It is a 100 mw solar farm not exactly a 20 mw farm after all.

          • Mark Roest

            Storage will be $100/kWh capacity within 2 years, most likely, and the levelized cost of charging and discharging a battery will be 1 to 2 cents /kWh within 4 to 6 years (battery life will increase, while cost falls).

          • Mark Roest

            The way reducing the time frame reduces the situation is that the fossil plants cannot respond to a 5-minute opportunity, but the solar and wind producers can, so it drives down the profits of the fossil dinosaurs, and then they wind up going out of business (or suffering the ignominy of incomes like the rest of us). Meanwhile the cost of wind and solar and storage keeps falling through each new floor. It ultimately takes over the entire grid (after reducing demand with efficiency and conservation) and everyone saves amazing amounts of money, especially after they pay off the financing in 1 to 3 years. Then the next generation says how could you wait so long? How could you be so stupid and selfish? Look what you’ve done to our world!

        • Peter F

          I think we both agree that it is a “good thing”. However depending on the dynamics of the market, a 5 minute rule is expected to depress average prices (otherwise why are many power users arguing for it) Therefore any saving they make by installing solar will be reduced.

          Unless we knew much more about the thermal dynamics of the plant, we are in no position to say whether a 5 minute rule will allow them to trade either by selling solar into the peaks or reducing demand for 5 minutes

  • MaxG

    Mind you, the company is non-AU management, hence, no surprise there… 😉
    My fellow Aussies, at least the majority, is just plain stupid.

  • Freeman A Ford

    If this plant has a thermal load then PVT might be cost-effective. Fafco’s CoolPV system http://www.coolpvsolar.com delivers about four times thermal plus electrical power more than PV alone.
    Is there a thermal load?

  • Radbug

    Luke Howarth has written to me assuring me that such operations are not “commercially viable”!

  • Well as of now I loose $ 900 t0 $1500 for power put into the grid and get a measly .12 cents per kilowatt . Instead of .60 but i recon a reasonable rate would have been at the minimum .30 cents a kilowatt saying that , Solar has no losses on the grid as it is always used locally and in my case off setts peck hour costs that increase the costs to the suppliers from the wholesalers these things need to be taken into consideration when they purchase solar as a daytime energy supplier . It is Excellent to see a gigantic new Solar unit being built to supply an Industrial Aluminum Smelter That will reduce massively their reliance on dirty brown coal power it is more polluting than black coal or biomass energy Wind and wave energy can also be used in this area for added supply .