Fund says Australian solar output slumps 20 pct below budget in 2021, prices cannibalised

The UK-based solar funds manager Foresight Solar has reported that output from its portfolio of Australian solar farms in calendar 2021 was more than 20 per cent below budget as it battled a combination of poor solar conditions, grid curtailment and negative pricing events.

Foresight owns four solar farms in Australia – 48.3 per cent of the 110MW Bannerton solar farm in Victoria, and the 30MW Oakey 1, 70MW Oakey 2 and 17MW Longreach solar farms in Queensland. It bought the outstanding 51% interests in the Oakey 1 and Longreach solar farms in December for $14.5 million.

It also owns 51 solar farms in the UK and four subsidy free projects under construction in Spain, but one quarter of its production come from Australia because the assets here are bigger.

Still, like other solar investors, including French-based Neoen which announced this week it has written down the value of one of its biggest Australian solar assets, Foresight reports that solar conditions in the past year have not been great.

“During 2021, the Queensland assets (Oakey 1, Oakey 2 and Longreach) experienced significant levels of generation reduction due to negative prices in the central hours of the day,” it said.

“Incidents of negative pricing have increased due to the Queensland-New South Wales interconnector outages, resulting from specific upgrade activities by the transmission network service provider.

“Whilst the interconnector is down, there is no opportunity for Queensland producers to sell electricity to its neighbouring state and thus oversupply has been common at peak production times.”

It said Bannerton’s performance has been affected by network outages, network constraints and irradiation levels below budget in the second half of the year.

“The Asset Manager has also been working with the tracker manufacturer to implement a new tracker algorithm, to increase energy yield in diffused light conditions and early/late winter sun hours, which is expected to be implemented in the first half of 2022,” it added.

All told, total output of 210GWh for the year was 20.7 per cent below budget. The worst performing asset was Oakey 2, which was 25 per cent below budget.

According to Foresight, the average price secured for Large-Scale Generation Certificates (LGCs) across the portfolio assets in Australia for the full year was $A30.29.

It noted that the sale of LGCs for Bannerton and Oakey 2 that were contracted at a fixed price with Origin Energy until 2030 contributed to providing improved debt terms when Bannerton converted its debt in June 2021.

Foresight is bullish about the possibility of expansion in the UK, and in the subsidy free market of Spain, and also its first foray into battery storage in the UK. But it seems less keen on the Australian market.

It said while the wholesale power price in Australia is expected to increase steadily in the 2020s, driven by the increase in supply of state-backed renewables and a recovery from low gas prices, and the anticipated closure of many coal fired generators, solar prices may not rise as much.

“The solar capture price discount to the baseload price is forecast to widen as solar (including rooftop solar) continues to build throughout the forecast period and increases the price cannibalisation,” it says.

16.1 million revenue, gross profit of $10.6 million.

“In Australia, the Company is in the process of restructuring the capital structure of the operating assets and will then review opportunities to add further resilience to the portfolio.” It did not elaborate.