Eco Energy gets financing for two “merchant” solar farms in Queensland

UK and Monaco-based renewable energy developer Eco Energy World says it has reached financial close on two solar projects in Queensland that will be developed on a merchant basis, rather than under contract.

EEW says the 34MW Brigalow solar farm and the 20MW Chinchilla solar farm will sell electricity and large scale generation certificates (LGCs) on the spot market.

Both solar farms have been bought by Impact Investment Group”s latest investment vehicle, the Solar Asset Fund, which is currently seeking to raise around $180 million.

Solar Asset Fund already owns the 19MW Swan Hill solar farm, and it turns out that the Chinchilla solar farm is already nearly complete and is expected to begin production soon.

The Brigalow solar farm – near Toowoomba in the state’s south-west – reached financial close last Friday, according to Solar Asset Fund’s CEO Lane Crockett.

The solar farms will be built by Gildemeister Energy Services at a total capital cost of $70 million. Senior debt for one of the projects was provided by Infradebt.

EEW entered the Australian market a couple of years ago, with high hopes of rolling out a series of large scale solar plants on a merchant basis, rather than signing long term off take agreements with utility or large customers.

But it has taken longer than expected to roll out.

Svante Kumlin, founder and CEO of EEW, says “It’s been very challenging to develop merchant solar in Australia, but our innovative and hardworking team has delivered on our target,” said founder and CEO Svante Kumlin.

“We believe this is the new business model for renewables and will enable subsidy free renewables to out compete carbon energy in Australia and elsewhere in the world.”

The current price for LGCs is at three-year lows of just above $60/MWh, but still delivering a handsome return for those selling on the spot market.

However, the price of LGCs is expected to fall rapidly in coming years, because the 33,000GWh required by the renewable energy target has been easily exceeded. The futures market currently puts a price of around $25/MWh for LGCs in 2021. Some expect the value of LGCs to evaporate completely.

Snowy Hydro’s recent tender for large scale wind and solar indicated prices of less than $50/MWh for both technologies. In Queensland, that is below the average price in the wholesale market this year, although the build out of large scale solar and the continued uptake of rooftop solar has been depressing prices in day time hours.

Kumlin says EEW’s other projects in Australia – which include the 100MW plus Aramara solar project in north Queensland – are progressing well.

He says the company is expected to soon announce reaching financial close on the remainder of its 900MW “ready to build” solar projects. EEW has built 1200MW of solar projects since its establishment in 2008, almost entirely in Europe.