Australia’s Pacific Hydro – the largest renewable energy specialist in the country – has quit the consortium building the 56MW Moree Solar farm because of what it described as the “ongoing political and market uncertainty” in Australia.
The 11th hour decision by the PacHydro board to pull out of the $164 million project stunned consortium partners – and many within the company itself. But it was prompted by board concerns about the company’s exposure to market risk.
“It is with deep regret that the Pacific Hydro Board has decided to withdraw from the Moree Solar Farm project due to the continuing uncertainty impacting the renewable energy industry,” Lane Crockett, the company’s general manager in Australia, said in a statement.
“With a number of projects in our Australian portfolio already exposed to market risk, the board has decided that it is not prepared to expose the company to further risk at this point in time.”
The unique nature of the Moree Solar project means that it will be the first large-scale solar farm to have single axis tracking, and the first to seek revenue by selling into the National Electricity Market, rather than relying on a power purchase agreement.
PacHydro, however, now has around 60 per cent of its mostly wind energy portfolio exposed to market prices, which are hovering near record lows, and it is thought to have been reluctant to increase that exposure.
Its concern about the uncertainty of government policy follows the withdrawal from Australia of leading US solar developer Recurrent Energy, and similar warnings from Chinese solar and wind energy giants, Goldwind and Yingli.
Still, PacHydro’s decision was particularly surprising given that $101.7 million of the cost of the project will come from the Australian Renewable Energy Agency, under a deal signed off by the board and the then energy minister in March, 2013.
ARENA CEO Ivor Frischknecht said the project, which is also being supported by $47 million in finance from the Clean Energy Finance Corporation, would aim to demonstrate that large-scale solar power plants can be constructed and operated within Australia’s major electricity grids.
“ARENA will work with FRV to share the valuable knowledge gained in delivering the Moree Solar Farm with the rest of the industry,” Frischknecht said. “We recognise reducing early mover disadvantage and supporting the transfer of information will help advance development of more utility-scale solar plants in Australia.”
Asked why such a large grant was needed, Frischknecht told RenewEconomy that it was because of the unique nature of the project – the tracking technology, its ”merchant” status, and the fact that it would be the first solar farm with “full recourse debt.”
This relates to the fact that the finance is provided on the basis of the project only, rather than the balance sheet of a larger shareholder. ”This is where the market needs to get to so it can develop,” Frischknecht said, adding that commercial banks were showing interest in the project.
He noted that the cost of finance was the main difference between the cost of wind and solar technologies in Australia, In the US, where financing for solar was more mainstream, there was little difference in the cost in the technologies.
PacHydro’s withdrawal meant that the entire equity component will be taken up by Spanish group FRV, which is also completing the 20MW Royalla solar farm, which will be the first large-scale solar farm to be connected to the NEM. (There is one 10MW solar connected to WA’s grid).
FRV country manager Andrea Fontana said construction of the project will begin immediately. It will create 130 jobs in the two-year construction phase.
“This is a significant and exciting moment for large-scale solar in Australia and for the Moree community,” Fontana said in a statement.
Moree Solar will be one of the largest solar projects in Australia (56MW A/C, 70MW peak) and will use mechanical devices (trackers) to continually orient its solar panels with the sun to increase their power output each day.
Once completed it will produce 150GWh a year, enough electricity to power the equivalent of nearly 15,000 New South Wales homes and abate nearly 95,000 tonnes of carbon pollution each year.
Greenlight Contractors – a subsidiary of Elecnor – is the EPC contractor for the project. The plant’s module supplier is not yet disclosed. Inverters are by Ingeteam.