How solar and storage developers got their market forecasts completely wrong

The biggest solar farm in Australia is now officially open – and partially complete – but it offers a fascinating insight into some of the challenges facing developers as they seek to deliver on the country’s ambitious renewable energy targets.

Acen Australia this week officially opened the New England solar farm near Uralla, in the heart of the northern Tablelands. The local federal member, Barnaby Joyce, wasn’t there, but the state Nationals member Adam Scott was , and so too was Chris Bowen, the federal energy minister.

Bowen has gone out of his way to attend as many wind and solar projects as he can, and to attend openings like this which were invariably snubbed by the previous federal Coalition government.

And Bowen will need to attend a lot more if the country is to get anywhere close to the 82 per cent renewables target set for 2030.

But it’s going to be a rough road to hoe, and Bowen will have learned, in his discussions with the New England solar farm developers, just how tough it is to get such projects over the line.

Anton Rohner, the CEO of Acen Australia, part of the Philippines-based Ayala group, says solar costs have jumped 20-30 per cent since the company gave the financial go-ahead on the project several years ago, and so too have battery costs.

But it hasn’t all been bad news for the project: It has actually been rewarded for going “merchant” on its financing – meaning that it will take the market price rather than a fixed contracted price – and prices for both electricity and large scale generation certificates have been way higher than anyone thought.

“When we got the notice to proceed, which is financial close, one of the things that happened was the price of panels went up by approximately 20 to 30%.,” Rohner tells RenewEconomy in the latest episode of the Energy Insiders podcast.

“If you remember that period where we around this looking at low panel prices, and that got changed for one reason or another.

“But the other thing that impacted us was that just before we got the notice to proceed, we had had four years of no rain in New England. And it’s pretty much rained from the day we signed.”

Rohner says prices of labour, steel, and the PV panels have all gone up, and interest rates and currency movements have not been favourable.

And they show few signs of going down, which is important as the company embarks on a new 400MW solar project at Stobbo, and considers a 320MW extension to the first 400MW stage of New England.

“So I guess that … we see project costs going up anywhere between 20 and 30 per cent, and that is whether it be cost per megawatt, whether it be foreign exchange issues, cost of labour, or just insurance,” Rohner says. “If anyone’s tried to get insurance and solar project, you will understand my comments.”

The flip side, says Rohner, is that electricity prices – particularly during the day – have not fallen to zero as often as people suggested because it is a big market, and there is growing evidence of storage and time shifting of energy.

That has justified his company’s decision to ignore contracted prices of the high $30s and low $40s (per megawatt hour), and go merchant.

“I’ll also suggest that a lot of participants in the marketplace misread the price of LGCs, quite considerably,” Rohner says.

“The  market forecasts of two and a half years ago were saying the price (would be) zero today, and we had a firm belief that they are worth much more than that.

“We thought there would be a movement more towards carbon pricing. But what’s obviously occurred is the voluntary surrender of renewable energies tickets, which is different. The price, so we kind of got it right, but we got the reasoning wrong, which is OK at the end of the day.”

Acen says the company is looking at various battery storage projects, including adding up to 400MWh of storage at New England, but it is not easy to make it work financially.

Part of the problem is the connection challenges, but the biggest is the lack of market signals.

“Everyone’s very aware that battery prices went up quite considerably over the last few years,” Rohner says.

“At the end of the day, the market signalling isn’t quite there, but we’re getting a lot closer. And, of course, it just doesn’t add, obviously, the time shifting as to support services in the cleaning of the energy, which is vitally important for us to export the energy.

“We’re very keen on the battery projects. But the real challenge we have is making sure that we’re they’re  economic. And it’s just the signals aren’t quite there yet.”

To listen to the interview on the Energy Insider podcast, including his comments on the controversial Robbins Island wind project in Tasmania, now heading to the courts, please click here.