Poles and wires owner Spark Infrastructure has continued its foray into generation, purchasing development rights to a string of new renewable energy projects with a collective capacity of 1.5 gigawatts.
The announcement comes after the company opened its first 100 megawatt solar farm last year. Spark says it has earmarked $1.15 billion to invest in new solar, wind and battery projects, and is even having “a look at” green hydrogen.
Chief executive Rick Francis said the company had paid for the development rights, but had made no final commitment to go ahead with any of the new projects. He said the final decisions could be months away.
Until recently Spark was exclusively an investor in transmission and distribution. It owns 49 per cent of South Australia’s distribution network operator SA Power Networks, a 15 per cent stake in transmission network operator Transgrid in NSW, and a 49 per cent stake in Victorian distribution operators Powercor and CitiPower.
But as the nation moves rapidly away from concentrated baseload power plants towards less centralised renewable generation, Spark decided to get a piece of the action through the Bomen Solar Farm, a 100 megawatt project near Wagga Wagga in NSW which it built from scratch. The solar farm, which is wholly-owned by Spark, started feeding energy into the grid in June last year.
It has power purchase agreements with banking giant Westpac for 10 years, and with energy retailer Flow Power for a range of contract tenures.
Francis gave no details on where or what the next pipeline of renewable projects will be, but confirmed the rights had been bought, and that Spark intended to be the controlling stakeholder. But he added the projects would be expensive, and so he would be open to bringing in other investors.
“As we look at some of those other projects that are in the hopper, they are quire large individually, and should they move ahead they would require quite substantial capital commitment,” he said.
Asked about plans for green hydrogen, he said it was something the company would “have a look at”, but had not made any commitments to.
“Green hydrogen does involve renewable generation, and sighting renewable generation near those facilities, so it’s something that we’re interested to pursue,” he said.
“It generally involves substantial outlays of capital, so we’d need to go in with eyes wide open. So we’re just kicking the tyres and understanding that opportunity,” he said.
So far the economics of green hydrogen, which is manufactured by electrolysis using renewably-generated electricity, have not been proven. Bloomberg New Energy Finance estimates a carbon price of at least $US50 per tonne, and much higher for some uses, would be required to make it competitive with other fuels.
Mr Francis said another opportunity was in grid investment. He said the Australian Energy Market Operator’s Integrated System Plan would require billions of investment in New South Wales alone.
The ISP requires 23GW of new renewable capacity, backed up by 6-19GW of despatchable energy – probably from a mix of battery and pumped hydro rather than gas, though AEMO doesn’t completely rule out a role for gas if the price somehow stays consistently below $6/GJ.
The ISP also requires major investment in transmission infrastructure as new generation sights need to be connected ad. The NSW government’s ambitious renewable energy policy, announced in November, will likely further boost demand for transmission.
“There is a $17.3 billion investment opportunity this decade through committed and actionable projects in NSW, and we expect Transgrid to play a significant role in each of these projects,” said spark chief financial officer Gerard Dover.
James Fernyhough is a reporter at RenewEconomy. He has worked at The Australian Financial Review and the Financial Times, and is interested in all things related to climate change and the transition to a low-carbon economy.