Origin signs 15 year contract to buy output from Moree solar farm

Origin Energy announced on Thursday that it has signed a contract to buy the output from Moree solar farm in New South Wales for a 15 year period. But developers of new projects must be wondering what they have to do to get a similar contract.

The 15-year power purchase agreement – the price of which was not disclosed – was described as a “landmark” by Origin Energy as it is the first it has struck with a large scale solar facility.

The 56MW Moree solar farm is the biggest in Australia using “single axis” tracking technology that helps the 223,000 solar modules follow the sun from east to west during the day, increasing output.

The Moree solar farm is expected to produce 145GWh of electricity a year, a capacity factor of nearly 30 per cent. It began producing last month after being built with the help of $101 million in grant funding from the Australian Renewable Energy Agency and finance from the Clean Energy Finance Corp.

Origin says the falling cost of solar technology means there has never been a better time to invest in large scale solar.

“Solar technology has improved dramatically over the past few years and the cost has come down as a result,” Frank Calabria, the head of Origin’s energy markets division, said in a statement.

“There has never been a better time for Origin to pursue large-scale solar opportunities – and fulfil its aspiration to be one of Australia’s leading renewable energy companies.”

Indeed, Origin Energy is pursuing a range of different large scale solar plants in Queensland. It recently contracted a company to design and engineer a plant of up to 200MW in the Darling Downs, the same plant that has made the short list of the latest round of grant funding from ARENA.

CEO Grant King recently suggested that the cost of large scale solar has fallen to around $80/MWh, although solar developers themselves think this is a “forward looking” estimate, and possibly a negotiating tactic for future PPAs.

The irony of the Origin deal with Moree is that it does not mean a new solar farm is built, as Moree was already constructed thanks to the support from ARENA and CEFC.

Other new projects are also struggling to get finance because they have been unable to secure PPAs of 15 years. Most can only get a contract of between 5 and 10 years, and this is making it difficult to get finance.

Indeed, the only projects to get financing since the election of the Coalition government have been those with long term contracts from the ACT government, or who have secured grant funding from ARENA.

This is the key reason behind ARENA’s current round of $100 million of grant funding for large scale solar projects.

However, the Coalition has announced it will stop grant funding after the current round of solar projects, as part of a package that proposes to pull $1.3 billion of funds from ARENA, and transfer $1 billion of funds from the CEFC to establish a new “innovation” fund.

ARENA issued a statement on Thursday noting that the Moree project, and the 22 projects applying for money in the current round of funding, would not proceed without grant funding.

CEO Ivor Frischknecht said the grant funds meant for Moree meant that project developer FRV was able to pioneer “an alternate PPA pathway” for project developers in the development and construction phase of large-scale solar PV projects.

“This could encourage other renewable developers to consider taking on market risk, and therefore result in more large-scale renewables being developed.”

ARENA has invited 22 high merit large-scale solar project proposals, with a total project value of $1.68 billion, to proceed to the full application stage of the competitive round. “None of the projects would proceed in the near future without the provision of grant funding from ARENA,” it noted.

In his statement, Calabria said Origin Energy would continue to enter PPAs on large-scale renewable projects like Moree, “as well as empowering our customers through our in-home solar and battery solutions.”

He said the contract would help Origin Energy meet consumer demand for renewable energy and helping it meet its obligations under the Federal Government’s Renewable Energy Target.

A spokesman said that Origin Energy would consider offering 15-year PPAs on a case-by-case basis to help it meet its RET obligations. AGL Energy recently announced the creation of a new fund to bring in co-investors to help meet its RET obligations, but said that PPAs would only range between 5 and 10 years.

FRV Chief Executive Officer Rafael Benjumea said the deal with Origin is “a key step” in achieving FRV’s strategy to develop and build renewable power generation assets across Australia and globally.

“The agreement is yet another Australian market first for FRV and demonstrates that stability is starting to return to the Australian renewable energy market,” Benjumea said in a statement.