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Telstra signs up for 429MW wind farm, at stunning low cost

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MurraWarraA1_20160422 copyA consortium of Australian corporations including Telstra and ANZ have signed a major new deal to buy more than half of the power generated by what stands to be one of the largest wind farms in the Southern Hemisphere.

The deal, announced by Telstra on Thursday, commits the consortium to power purchase agreements covering all of the output of the 226MW first stage of the Murra Warra Wind Farm near Horsham in western Victoria, which has a total permitted capacity of 429MW.

The price for the PPA has not been revealed, as is the standard for such deals in Australia, but James Gerraty, Telstra Energy’s general manager for strategy and commercial, said it had secured long-term supply and price security “well below the current market level”.

RenewEconomy understands that the price is around the same as the stunning sub-$55/MWh price negotiated by Origin Energy earlier this year for the 530MW Stockyard Hill, proving that that price was not a “one-off” as some suggested.

That project also landed its financing today, and is notable because the cost of electricity from that project, even including renewable energy certificates, is just over half the cost of wholesale power in Victoria this year.

The new contract means that RES Australia – which is developing Murra Warra –  can make a start on construction, having secured contracting certainty over the output from the first stage of the project.

RES, of course, is the same company through which Telstra made its debut in the energy market, signing a long-term contract to buy the output of RES’s 70MW Emerald solar farm in Queensland, in May of this year.

But as Gerraty notes in a company blog on Thursday, this time around the deal is a good deal bigger – not just due to the size of the wind farm, but because Telstra have done it as a consortium with other energy major users.

“From our perspective it’s a clear win, win – indeed it’s a win, win, win,” he said. “We get to lock in costs for one of our major inputs, energy, for the long term at well below current prices.

“We are supporting a high quality renewable energy project in a regional community that will generate enough electricity to power almost 220,000 Victorian homes.

“On top of that we get to bring some of our enterprise customers and some of Australia’s leading organisations in ANZ, Coca-Cola Amatil and the University of Melbourne along for the ride.”

Ben Burge, who is the executive director of Telstra Energy, also stressed the importance of the consortium, in locking in market leading pricing for both energy and renewable certificates, at levels well below the current wholesale market prices.

“ANZ, Coca-Cola Amatil and the University of Melbourne have shown leadership on how to collaborate in this space,” Burge said in comments on Thursday.

“From a Telstra perspective it is another example of how we can use our in-house capabilities to help our enterprise customers and some of Australia’s leading organisations become more involved in
the sector, support renewable energy and make a sizeable dint in their power costs.”

Other companies are also building their own solar and wind projects, or contracting them. Zinc refiner Sun Metals is building a 116MW solar plant in north Queensland, Nectar Farms plans a wind farm and battery storage to power the country’s biggest greenhouse, and the Whyalla Steelworks is planning a huge 1GW solar and storage investment.

According to Westpac, some 20 corporates are currently tendering for similar wind and solar opportunities.

Matt Rebbeck, RES Australia CEO, heralded the Murra Warra PPA as another landmark deal in the Australian market.

“RES operates in 10 countries and is the world’s largest independent renewable energy company. …Telstra has co-ordinated another landmark deal, which underwrites the first stage of this wind farm, which will bring investment and create a real jobs boost for regional Victoria, and reduce Australia’s emissions,” he said.

Construction of the Murra Warra Wind Farm will now begin in 2018 and the project is expected to be fully operational in mid-2019. Telstra will provide ongoing energy market services to the other consortium members as part of the transaction.

It is expected the construction of Murra Warra Stage 1 will create around 150 jobs as well as other opportunities for businesses in the local area.  

  • MaxG

    Let the games continue where everybody makes their own energy; we won’t need a grid … I know wishful thinking, but these stories are telling that we are moving in the right direction.

    • Matthew Jenkinson

      I disagree, we will always need a grid, but it is set to become way more dynamic and stable due to distributed generation and storage that just can’t be matched by the old guard. Retaining the grid means that neighbours can shore each other up in times when larger generation plants may go offline, though that is far less likely with wind and solar – if you lose a couple of turbines or solar arrays the grid will likely not even notice.

      • MaxG

        🙂 There is nothing to agree or disagree with…
        I said: “we won’t need a grid … I know wishful thinking” 🙂 because of the second premise being wishful thinking the first premise has been negated; meaning: we need the grid. So, we are on the same page 🙂

        • Barry Manor

          Just to be clear here, Telstra has entered a “financial” Power Purchase Agreement (PPA). This means they continue to source their energy from retailers, but in the background, the same amount of energy they use will be pumped into the grid from the wind farm. This type of arrangement, which is essentially a Contract for Difference (CfD) hedge against wholesale energy price fluctuations, absolutely requires the grid, as both Max and Matthew seem to agree. Behind-the-meter (BTM) renewable energy installations (e.g. solar PV arrays that provide energy for local use, including rooftop solar PV in residential and SME applications) don’t need the grid for distribution of their energy. But having a BTM direct PPA for offtake from installations of more than a few MW would require a substantial amount of surplus land around a very energy-intensive facility. So, long live the grid, or at least a multitude of (not necessarily connected) microgrids, so we can all contribute to and share from the renewable energy pool of Australia, NEG or otherwise!

          • Matthew Jenkinson

            Hi Barry, thanks for that comment, I wasn’t sure how it actually worked, with the solar farm not necessarily connected to some big datacentre or such thing, but as a CfD it makes sense.

          • Ian

            Good explanation, Telstra is being a bit cheeky then isn’t it. You say they source their energy like other consumers do from the grid but they pump the same amount of energy into the grid and thus secure a hedge against price increases. That’s very nice but they are getting 24/7 reliable electricity from the grid for the same price as intermittent wind. Too clever by half.

          • Alastair Leith

            I suggest the time for including the cost of stoarage for balancing variability (which you refer to as intermittency which is more akin to poor mobile reception or a power transmission line on the blink) is when penetrations of RE hit 80% and higher on he NEM and WEM and most grids overseas. Until then RE will easily outcompete new coal and gas (which themselves have issues around unscheduled outages and the need for spinning reserve and backup capacity, hence FCAS and on the SWIS reserve capacity payment markets, and emergent DSM markets).

            If you want to learn more the American Wind Energy Association has some excellent papers where the authors make these comparisons and determine what reliability and security entail for Fossil Fuel and for RE supplied grids. It’s a story that I wish more people understood, which might preclude knee jerk repsonces such as yours.

            We’re nowhere near 80% RE penetration on the NEM and even SA at 50% is only just facing balancing issues which are cheaper to solve with solarCST and battery storage (and PHES) than a return to coal generation.

          • Ian

            Variability, as you call it , of wind and solar is a fact of life. You are right that these resources are no where near high levels of penetration . Electricity demand across the NEM is about 190TWh/year or on average 22GW. This project is 429MW or 2% of that average demand. These sorts of projects are being announced thick and fast. The only impediment against the build-out of renewables is the resistance of existing gas and coal generators, and as has been pointed out, many of the coal assets are old and often fail – the intermittency you talk about, so these may close down quicker than most would think.

            You are very pessimistic to think that the current renewables penetration %age will remain low, but as you point out 80% wind, hydro and solar should not affect reliability of the grid. My comment refers to the last 20% of renewables penetration. Presumably that part of reliability will cost a lot more than the first 80%. That’s none other than the Pareto principle.

            Just for fun, consider storage as having a cost similar to wind or solar , let’s say $55/MWH as per this story. We have a mix of storage technologies such as batteries and hydro with about 80% round trip efficiency. This gives a cost of storage electricity of (55 + 55)/0.8 = $137.5/MWh. Feeding this result back into what Telstra should be paying wholesale using our 80/20 rule 0.8×55 plus 0.2×137.5 = $121/MWH. In other words in a perfect world, in the not too distant future Telstra has locked in a $55/MWh wholesale price but factoring in storage they should be paying (according to the above assumptions) $121/MWH wholesale. Someone will have to foot the difference , and that will be the average Bruce and Sheila.

        • Matthew Jenkinson

          I guess when I read wishful thinking it means to me that you would like for us not to need a grid, which I still disagree with. However, having it become a more dynamic set of microgrids, like Barry Manor commented below, is for me the optimum solution, allowing power sharing locally and distributed generation and storage to help fill gaps – ie. when wind and solar both fall off in an area for a day or two, then all of those houses can be serviced by neighbouring cities/suburbs or larger plants with extra capacity.

    • With Respect

      Off grid?

      https://onlineacademiccommunity.uvic.ca/2060project/2017/11/23/self-sufficiency/

      See if you can spot a dozen mistakes in the 2060 Project’s analysis of off grid costs.

      • MaxG

        I browsed through the article (based on their basic assumption), wasn’t looking for mistakes; all I can say, I do not use the word ‘self-sufficient’ but rather self-reliance. I have 12kW of PV and a 20kWh battery and have no need for the grid. I needed to find ~300kWh of energy per year, which has been pulled from the grid; however, w/o a grid, I would have generated this energy by using a generator. 1/2 of this energy was ‘convenience’ energy… replenishing the battery — because I could. So 150kWh would have meant some 30 hours of 6kVA generator.

        • falstaff77

          Anyone can go off grid with a generator and sufficient cabon fuel. The point must be to eliminate the need of big carbon plants, not replace them with smaller dirtier and less efficient ones in the home.

          • MaxG

            Fully agree 🙂
            As I said, at present I am pulling 200kWh per year from the grid (instead of using a generator), but will add another battery in due course.

          • falstaff77

            I share the desire for self reliance. Residential PV ($180 to $300 per MWh) and battery storage (li-ion $1000 per MWh) is a particularly expensive approach (unsubsized, 2017 US LCOE).

            Unless and until a real, clean, year round offgrid solution becomes available, that reliance on the grid as an always available source means that the entire grid must remain in place ready to go. Some 3/4 of the typical elec bill pays for just the grid infrastructure. So residential solar systems compete with only the fuel costs of the grid, a few cents per kwh, a competition the grid wins indefinately.

      • MaxG

        OK, got one… you need 131 Powerwalls to cater for this average house; I am glad I on’y skimmed; this article is not worth my time.

        • With Respect

          Keeping in mind, the Pacific Institute for Climate Studies is a group that is at the forefront of demonstrating the harms of AGW, and co-located with organizations like IESVic that actively seek decarbonization, in the province in Canada that leads the world in carbon pricing policy, and it still can’t manage to deliver on message.

          The authors were apparently trying to poke fun at journalists of the “why can’t we all go off grid?” mentality by showing how expensive it would be to take on a like-for-like replacement of grid with solar pv + Powerwall, if you did nothing else. But that message doesn’t come through clearly either, and it’s extremely point-missing.

          With 131 Powerwalls, a mini-grid of dozens of homes each with the same solar panel coverage would be just about as well-served as one, for the same cost, bringing the cost down dozens of times. The rate Powerwall and solar prices are droppining, every three years the cost will fall by half, so the absurd million dollar plus pricetag in a decade will be maybe below the $100,000 range — which in remote locations not serviced by grid would be like a miracle. And that’s the dark, rain-soaked British Columbia coast to a tee.

          Add wind to that micro-grid or small off-grid operation, get double duty from the Powerwalls, and again the effective cost falls by half. Put in some backup biofuel, and you’re down to just a single Powerwall, maybe two if you’re unbending in your need to exactly copy a conventional on-grid power consumption pattern.

          While it’s true BC is 100% renewable already (for a grid that caters to as many people as South Carolina — between ACT and Tasmania in population — over almost a million square kilometers, bigger than South Australia) on reliable, cheap hydroelectric power, the study seems blinded by technical elitism into missing the harm it does, and is as you say, the blog post is not worth the time it takes to read.