UK “green steel” billionaire Sanjeev Gupta has unveiled a stunning, landmark agreement to provide cheap solar power to five major South Australian companies, promising to slash their electricity costs by up to 50 per cent.
The eight-year deal signed with a consortium brought together by the SA Chamber of Mines and Energy (SACOME) – and including some of the heavy hitters in the resources industry – will enable Gupta’s SIMEC ZEN Energy to fast track the construction of the 220MW Cultana solar farm near Whyalla.
The eight-year supply deal is the just latest in a flood of contracts between large energy users and solar companies to slash their electricity costs by sourcing power directly from their own or third-party solar farms.
Just in the past few weeks, companies such as CUB, Mars Australia, and University of Queensland have signed contracts to meet all their electricity needs with large-scale solar plants, and others such as zinc refiner Sun Metals, Telstra and CC Amatil will use solar and/or wind to supply a large part of their needs.
Gupta’s deal is doubly significant, because it is the start of his own plans to create an Australian solar-powered economy, with plans to build 10GW of large-scale solar to slash the energy costs of his own manufacturing businesses and others.
It is also another stake in the heart of the coal industry and their apostles in the right wing of the Coalition, whose claim that only coal power can deliver cheap and reliable energy is looking more ridiculous by the day.
“We wanted energy affordability, energy reliability and energy security, and this deal with SIMEC ZEN Energy delivers all three,” Rebecca Knol, the CEO of SACOME, told RenewEconomy.
Knol kicked off the plans for a corporate bulk-buy of renewable power way back in 2016, in response to wholesale electricity prices that she describes as the highest and most volatile in Australia, if not the world.
Out of 20 businesses that became part of a corporate bulk-buy purchasing group, with the blessing of the ACCC – as long as it resulted in new generation – five businesses have signed up, including leading miner Hillgrove Resources and retailer Foodland.
The others are copper mine and carbonate producer Adchem, storage and handling group Viterra, and the Central Irrigation Trust, the largest irrigation infrastructure operator in South Australia.
Since launching its “baseload” renewables product, SIMEC ZEN has inked retail power supply deals with the South Australian government and a Victorian steel mill, and installed solar across four shopping centres in Adelaide.
“This is a landmark deal – a first of its kind – and is expected to inspire a host of similar initiatives across the country,” the two groups said in a join media statement on Friday.
“This outcome demonstrates what can be achieved when businesses decide as a collective that the status quo is not acceptable,” said Gupta.
“Ultimately what is needed to fix the energy market in this state is more competition in wholesale generation and retailing – this result delivers both.”
Indeed, while South Australia’s high and volatile power prices have been blamed by conservatives and ideologues as the fault of renewables, in reality the state has always experienced such high prices, even causing the state grid provider to investigate wind energy more than half a century ago.
Now it is patently clear that wind and solar – combined with the plunging cost of storage and the emergence of “firming contracts” – is easily beating fossil fuel generation as the most reliable source of cheap energy.
The expected bill savings from the customers of 20 to 50 per cent were from the “firm” solar contracts – i.e. backed up with storage or other sources – not just the solar power purchase agreement.
“While delivering SACOME members with electricity at a price below what could be achieved through a standard market tender, this contract also allows SIMEC ZEN Energy to fast track plans to replace the capacity lost when the Northern Power Station closed two years ago,” Gupta said.
“This capacity will be a mix of generation assets suited to the new energy landscape, such as the Cultana Solar Power Station and our other projects in the Upper Spencer Gulf.”
Those projects include an 80MW solar farm that will be installed “behind the meter” near the Whyalla steelworks, a massive pumped hydro facility in an old iron ore mine in the Middleback Ranges, and a massive 120MW/140MWh lithium-ion battery in Port Augusta.
A “sod-turning” ceremony is anticipated in the next week or two at Whyalla for two solar farms, with completion due in the third quarter of 2019. The contracted supply begin on July 1 next year.
In all, Gupta plans 1GW of large-scale solar in South Australia alone, and plans to sign up more business customers. For an insight into his plans, please read the story published earlier today: Inside Sanjeev Gupta’s plans to create Australia’s solar-powered economy.
SIMEC ZEN director Ross Garnaut told RenewEconomy that SIMEC ZEN had been working for some time to supply GFG and other users of power with firm contracts, backed by renewables and storage.
“We secured through competitive tender the supply of the south Australia goernment late last year. This is a continuation of the roll out of that strategy. It confirms the competitive of that product that SIMEC Zen is able to put together.”
And are there more deals to come? “We’re talking to a lot of people and it’s all going pretty well,” Garnaut said.
Knol said that with electricity representing up to 40 per cent of input costs for the group’s members, savings could be redistributed to new business investment opportunities for the state’s economy.
“This cross-sectoral collaboration has delivered affordable power to some of South Australia’s largest energy users and underpinned the development of new supply for the collective benefit of state,” Knol said.
“Following the Australian Competition and Consumer Commission’s (ACCC) green light in May 2017, SACOME’s flagship joint-purchasing electricity group banded together to leverage their strength in numbers and bring down electricity prices for their businesses.
“The group’s approach to this complex commercial negotiation in a fast-changing electricity environment has been inspirational.
“The outcome is a credit to the stamina and commitment of our participating members* who represent a diverse slice of South Australian business,” she said.
Know told RenewEconomy that she expected other members of the business community in South Australia to join the buying consortium.
Steven McClare, CEO and managing director of Hillgrove, said the contract will provide electricity purchase security during unforgiving price peaks. “This stability enhances the role that Hillgrove can play ingrowing South Australia’s copper production.”
Adchrm’s managing Director, Mark Woodhead said: “Electricity costs are a substantial portion of our total cost to manufacture value added copper chemicals on a large scale. This contract represents a positive long-term outcome to secure electricity supply at acompetitive price.”
Update: In a statement, the ACCC said it welcomes the announcement, pointing to the advantage of increased competition in the S.A. market, which is dominated by AGL, and two other retailers.
“The ACCC authorised SACOME members to go to market to find a more competitive supplier of electricity. We did this because, as a group, they had a better chance of securing supply from a new source of generation that would bring new competition to the market,” ACCC Chair Rod Sims said.
“We are pleased that SACOME has been successful in its efforts to sponsor new generation capacity in South Australia, and source a lower price for electricity for its members. New independent generation capacity is critical to improving competition and helping bring down electricity prices,” Sims said.