Photon Energy and Canadian Solar have signed an agreement to co-develop five major solar projects in New South Wales that together amount to 1.14GW in a sign that the large scale solar boom may continue beyond the meeting of the renewable energy target.
The projects are headed by a 316MW facility proposed near the town of Gunning, and four other projects at Gunnedah (165MW); Suntop (286MW) and Maryvale (196MW), both near Wellington; and Mumbil, near Dubbo (178MW).
Photon is effectively selling half of its interest in each project to Canadian Soar, which will hold 51 per cent in all projects, with Photon holding the balance of the equity in the Gunning project and sharing the balance of equity with Polpo Investments in the other four projects.
Photon and Canadian are both confident that the Australian solar market is not about to fall off a cliff, even with the Clean Energy Regulator and analysts suggesting that the 2020 renewable energy target is effectively met.
Gartner and Daniel Ruoss, from Canadian Solar both say that NSW is emerging as the “sleeper” in the large scale solar market, despite the fact (or possibly because of) it has had no meaningful state based incentives like Victoria and Queensland.
“NSW is for us is the number 1 market,” Ruoss told RenewEconomy. “NSW is unpopulated compared to its size –it’s the largest energy market in Australia,” Gartner added.
Gartner and Ruoss suggest the retirement of coal fired power generators, the fact that NSW has the biggest demand of all states, and relatively wholesale high electricity prices means large scale solar remains attractive.
To get the financing across the line, the two companies will likely rely on a mixture of merchant sales (particularly in next few years), corporate power purchase agreements, and some “traditional” PPAs with retailers and gentailers.
The two companies said that they would not be banking on significant revenue from large scale generation certificates (LGCs), whose value is expected to diminish rapidly once the 33,000MWh renewable target is met by completed projects.
Solar developers say that large scale solar costs in Australia are around $70/MWh, but falling to around $60/MWh in the best cases, particularly where grid connections are good. That price suggests room for profits in markets like NSW with average price of more than $85/MWh over the last year.
And Ruoss, who has previously concentrated on the Queensland market, where it has developed the Oakey 1 and Oakey 2 projects, and Longreach, expects grid connections via Transgrid and Essential to be quicker and easier than in Queensland.
Transgrid has made much of its efforts to establish several major renewable energy hubs – a proposal that has the strong support of the Australian Energy Market Operator – and sees no major technical impediments to going 100 per cent renewable energy.
“Australia is entering an exciting period where solar power will make a major contribution to national electricity needs,” Photon managing director Michael Gartner said in a statement,
“Photon Energy will make a significant contribution to developing solar generationto boost supply quickly, and then to operate and manage solar farms to deliver affordable electricity to homes and businesses across the country.”
“Photon Energy has been a pioneer in large scale solar, bringing world best practice to harness utility- scale solar which can increase electricity supply and replace aging coal generation capacity in Australia.”
The two companies said that the equity capital contributed by Canadian Solar is subject to certain development milestones, joint management processes and other terms customary for project co-development and covers the development budgets to bring all five projects to the ready-to-build stage.
Photon Energy will continue to manage the development phase of each of the five solar farms. Environmental Impact Statements for the projects are expected to be filed in the next few months, with the two companies hoping to begin construction by early next year.
“We want to get projects across the line as quickly as possible so we can neet market opportunities,” Gartner said.
Photon Energy NV’s financial advisor in this transaction was Pottinger, led by John Sheehy and Marcus Davidson, and its legal advisors were law firms Hogan Lovells and Clifford Chance, led by Reuben van Werkum.