New solar “firming ” contracts to boost corporate demand for big solar farms

While debate rages around the National Energy Guarantee and the nature of contracting requirements to meet its proposed emissions and reliability obligations, the market is getting on with the job in its own way.

TFS Green has announced what it says is a first-of-a-kind “firm solar contract” product – and the first transaction in Victoria – a step it says will help pave the way for more companies and big energy users to source part of their energy supply from solar PPAs (power purchase agreements).

Corporates  already showing huge interest in both large-scale solar farms and wind farms to reduce their soaring electricity bills, and they are expected to account for the bulk of new wind and solar projects, particularly if the country’s electricity sector emissions targets are not lifted.

Some, like Electrolux, are already building solar-based micro-grids, while others like SA Water are installing solar and storage “behind the meter” to slash their bills to zero. Nectar Farms will rely only on wind energy and battery storage for a new $550 million greenhouse in Victoria.

Others, like Sun Metals, are building their own solar farms, while the likes of Telstra are contracting both solar and wind energy to offset their costs.

One of the main problems, however, has been to shape contracts that match the load of the buyers. If solar is not generating – because it is night-time, or because of heavy cloud cover, then the buyer needs to go to the market.

TGS Green’s manager of renewable energy and environmental markets, Chris Halliwell, says the new “firm solar contract”  transacted on Monday for the first time with ERM Energy, a retailer that focuses on the corporate market, will manage that wholesale price risk.

The contract replicates the “shape” of solar generation, and then matches the buyer’s needs with contracts for supply to the wholesale market. This guarantees a flat and fixed price for that power.

“It is de-risking and firming up solar generation for project owners and market participants,” Halliwell tells RenewEconomy.

“We are going to start seeing a lot more of these sort of contracts as corporate buyers and market participants look to integrate renewable contracts.

TFS Green sees more financial instruments – including those for wind generation – will emerge in the market. AGL recently wrote of its new “wind firming” contract, while others are known to be exploring instruments that combine both wind and solar.

Products like this will be part of TFS Greens upcoming  “Renewable Energy Hub”, which will create a marketplace to   standardize, firm and integrate  wholesale renewables transactions with energy retailers and energy buyers.

There are two initial solar products, one a “solar shape”, and another a “solar firming” (inverse solar shape), as explained in these graphs below.

In the first product, a Victoria generic solar shape with stapled LGCs, the buyer will buy all the half hours for the relevant period (profile attached).

Each MWh will have 1 LGC  stapled to it and aims to represent a bundled solar deal. The minimum lot size is 10MW capacity with associated LGCs.

In the second product, Victoria generic solar firming, the buyer will buy all the half hours for the relevant period, which is essentially the inverse of Product 1, but there will be no stapled LGCs.

The profile aims to represent the energy required to firm solar to a flat swap and is available across the NEM

David Guiver, executive general manager of wholesale markets for ERM, also says the product will be the first of many in a rapidly evolving market.

“This supports corporate investment in renewables by providing fixed price certainty for organisations wanting to hedge solar generation production,” he said in a statement.

“The intermittent nature of solar generation can provide challenges to organisations seeking price certainty on their renewable project output, or on their corporate power purchase agreements,” Mr Guiver said.