New Zealand energy group Meridian Energy Australia says it will begin construction of the $260 million Mt Mercer wind farm near Ballarat in Victoria, despite the fact that it has not obtained a power purchase agreement (PPA) from an energy utility. In the end, it didn’t want one.
The 64-turbine, 131MW Mt Mercer facility will be one of the largest to be built in Australia without a PPA, but more wind energy developers are deciding that the market for wind farms is improving and making investment possible without having to lock in to a long-term offtake agreement – at least for those with deep enough pockets to arrange their own financing.
Meridian has decided to go it alone because it has those deep pockets, and thought financing itself was a better option than taking any of the PPAs it canvassed. It is also considering whether it wants to set up its own renewable-energy focused, vertically integrated company in Australia and establish a new energy retailer called PowerShop – as a challenge to Australia’s big three incumbents.
“While entering into a PPA has been traditional model for wind farm development, we believe we can utilise better value using our own balance sheet, retail expertise and trading capability,” CEO Ben Burge told RenewEconomy in an interview.
“We’ve decided not to proceed with a PPA for this project at this time, and instead we’ve entered into medium term hedging positions through wholesale markets to manage the physical portfolio.”
Intriguingly, Meridian may in fact, decide to challenge their dominance of the incumbents, as its website, still under construction, suggests. “Cut off your power company,” it proposes. Other renewable energy developers such as Pacific Hydro and Infigen Energy are making similar moves, but what makes Meridian different is that it is a $NZ7 billion company and is already that country’s largest generator.
The New Zealand PowerShop business in 2011 achieved the number one ranking in the New Zealand Deloitte Fast 50 index in 2011, with its 5280 per cent revenue growth being the highest rate ever recorded. It also ranked 6th on the Deloitte Asia Pacific Fast 500 technology index and had the highest residential satisfaction among all retailers (96 per cent). Meridian said in a June presentation that it was trialling PowerShop to test Australian consumers’ appetite for a “power company with a different attitude.”
“We won’t make a decision on that until end of the year,” Burge said. “We need to test whether that model fits in on a regulatory perspective and work out if it resonates for consumers.” Given that Australian utilities experience a “churn rate” of nearly 25 per cent a year, there is clearly an opportunity for an alternative offering.
The Mt Mercer project was bought by Meridian in 2009 and is one of three wind projects it has in Australia. It is also building the 420MW Macarthur wind farm in Victoria in a joint venture with AGL Energy. That is the largest wind farm in Australia. Meridian also owns and operates the Mt Millar wind farm in South Australia.
Meridian says the wind farm is located 30km south of Ballarat and will provide sufficient renewable energy to meet the electricity needs of the entire population of Ballarat. It is using turbines from REPower systems.
Construction will begin in December and be concluded in 2014. The company said it will employ 200 people during construction and provide about 20 permanent jobs upon completion. It says it has a pipeline of projects of more than 1,000MW.
REpower, meanwhile, said the order for 64 of its MM92 wind turbines, each with 2.05 MW of rated power, is its first contract with Meridian Energy and the company’s largest ‘supply & install’ contract for its MM series turbines in Australia to date. REpower says it has sold over 1,400 turbines of this type.