Infigen signs PPA with Kiata wind farm in play for Victoria C&I market

ASX-listed Infigen Energy has signed a power purchase agreement to buy the output of Windlab’s 31MW Kiata wind farm in Victoria, as part of its new focus on selling renewable energy to Australia’s commercial and industrial market.

The five-year deal was announced by Infigen on Monday as part of its 2018 Annual Report and results briefing, during which the company marked a year of “significant progress” and generation growth that saw earnings before tax up by 7 per cent to $149.1 million.

The deal with Kiata is part of a broader effort by the company to stabilise future revenue by diversifying its customer base, as well as its contracting strategy, and energy mix.

As managing director Ross Rolfe explained at Infigen’s half-year results briefing in February, the aim is to shift away from a heavy dependence on wind farms and spot market sales, and “towards being more of a “gen-tailer to C&I (commercial and industrial).”

The five-year plan is for Infigen to re-balance its current portfolio of wind generation to include one-third contracted under PPAs, one-third to C&I customers and the wholesale market, and the balance sold into the spot market.

The relatively new Kiata looks to be a valuable addition – it was named, last week, as one of two of the best performing wind projects in Australia, operating at a capacity factor of 45 per cent. And Windlab CEO Roger Price says that in July and August, the wind farm’s capacity factor has been even higher – at more than 60 per cent.

In its report, Infigen said the Kiata PPA – which will kick off in September – was the first closing of its Capital Lite strategy, and underpinned the company’s entry into Victoria’s commercial and industrial market.

“When coupled with the execution of firming initiatives, this contract provides an ability for us to commence our C&I sales strategy in Victoria,” the report said.

As for Infigen’s “firming initiatives,” a milestone in that department was confirmed just over one week ago, when Infigen revealed that a 25MW/52MWh Tesla battery energy storage system had been chosen to be paired with its Lake Bonney wind farm in South Australia.

The Lake Bonney BESS is expected to allow Infigen to firm at least an additional 18MW from the existing wind farm for commercial and industrial customers, depending on the customer’s load profile.

In its report on Monday, Infigen said the battery was also expected to reduce the company’s exposure to FCAS costs, create value through price arbitrage, and position it to manage the challenges of the 5 minute settlement rule – scheduled for implementation in 2021.

But Infigen also gave a nod to the recent ructions at the top of politics in Australia, that last week resulted in a change of leadership in the federal Coalition, and which for the renewable energy will no doubt mean continued uncertainty.

“It is now apparent that the NEG is headed for the well populated graveyard of attempts at Australian energy policy and a further period of policy uncertainty is likely,” the annual report said.

“In any event, equally significant to the success of any new policy settings will be government confidence in that policy’s capacity to deliver outcomes that are market based.

“This requires governments to refrain from sponsoring initiatives that undermine investor confidence and heighten risk,” it said.

“Infigen will continue to participate in the development of sound policy and monitor the impact of these and the impact of any government initiatives on the outlook for the energy market and our business.

“Infigen’s own business strategy is consistent with its underlying objectives – namely to produce and supply clean energy to consumers at affordable prices within a stable grid.”

But in comments during the webcast results briefing, Rolfe said that despite the backdrop of policy uncertainty, “the fundamentals of supply and demand” would remain.

“With the RET largely satisfied, new generation will respond to electricity price dynamics only,” he said.

And as noted in the energy market outlook table below, on this basis Infigen expects retiring coal generation to be replaced by a combination of renewables coupled with battery storage, gas or pumped hydro storage.

“Over the medium-term, this plant mix is likely to offer the most efficient energy supply solution that can deliver lower prices and system reliability,” the report says.