Powershop signs huge deal for solar, wind projects – “stunned” by low prices

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Energy retailer Powershop signs up for new 200MW solar farm and two major wind projects and says it was “stunned” by the low prices offered. It will also buy three hydro generators, but will need to more than double customers to match output.

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The ambitious renewable energy-focused power retailer Powershop Australia has signed a huge deal for the output of a 200MW solar farm and two big wind farms, after being “stunned” by the low prices offered after it went to market for proposals last year.

Powershop, owned by New Zealand’s biggest utility Meridian Energy, will also buy three hydro power plants in NSW as part of its plans to more than double its customer numbers and meet their needs with 100 per cent renewable energy.

The deal will enable Victoria’s biggest solar project, the 200MW Kiamal Solar Farm near Ouyen, to be built by Total Eren, the first investment in Australia from a joint venture that combines the French oil giant and a renewable energy developer.

Powershop will also take the output from the 54MW Salt Creek wind farm, currently under construction near Woorndoo, around 250km west of Melbourne, and part of the output from CWP’s 135MW Crudine Ridge wind farm, to be built south of Mudgee in NSW.

Powershop CEO Ed McManus said his company was stunned by the results of a request for proposals (RFP) that it began some six months ago.

“We have gotten an overwhelming response from the market,” McManus told RenewEconomy. “I can’t disclose the price but I am happy to tell you that prices we are getting these PPAs at is well below wholesale price of energy.

“There are many non believers out there … but we were surprised at the prices we saw for wind, and shocked at the prices we saw for solar.”

Asked if the prices for these new projects matched recent PPAs such as the sub $55/MWh obtained by Origin Energy for the 530MW Stockyard Hill wind farm in Victoria, and reports of below $70/MWh for solar projects, McManus said:

“We saw prices that were at or around what had been reported in the media as one-offs,” he said. “If you said two and a half years ago that this is where solar will be, we would not have believed it.”

Powershop had been seeking around 300GWh of wind and solar capacity when it started its tender process, but because of the low prices it has signed up for nearly 800GWh. The PPAs last until 2030.

That will require Powershop to more than double its current retail base of just over 100,000 customers (up more than 10 per cent over the year), but McManus says the prospect of cheaper prices from these contracts should help that.

“Over the next year we will get new renewable energy generation that is priced under the market,” he said. “We will prove to people that renewables is the cheapest form of generation, because we will be able to pass on corresponding lower prices to customers.”

Powershop also seized an opportunity to buy three hydro power stations – Hume, Burrinjuck and Keepit – in NSW from another New Zealand company Trustpower.

Together they total more than 100MW of capacity, although McManus said that they will not be strictly “dispatchable” because their output is dictated by irrigation needs and environmental flows.

“Powershop’s steady growth is proof that Australians have a strong desire to support a green energy company,” McManus said in a statement.

“Our business model has always been based on having a balanced portfolio of generation and retail. Powershop’s growth has created the need for us to make this move in the market. As Powershop continues to grow, we will invest in more renewable energy generation.

“Additionally, the opportunity to acquire hydro assets in Australia is extremely rare and having a balanced portfolio of wind, solar and hydro allows us to more effectively manage risk in the market.”

He said Meridian and Powershop would continue to monitor new technology, such as pumped hydro, batteries and thermal solar, “so that we can ensure we have a diverse range of technologies and generation.”

Powershop had previously sourced its renewable energy generation from two wind farms – Mt Mercer in Victoria and Mt Millar in South Australia – but said it would add more sources as it grew its customer numbers. “We have delivered on that promise,” McManus said.

In a separate statement, CWP said the PPA with Powershop meant that the Crude Ridge project could begin construction in April 2018.

It will comprise 37 wind turbine generators, and got approval despite some local opposition.

CWP’s Ed Mounsey said the project is set to provide regional benefits by contributing over $160,000 per annum to Community Enhancement Funds established with Mid-western and Bathurst Regional Councils, as well as upgrades to over 20 km of local Council roads.”

A total of 19 host landowners will benefit from rental income throughout the life of the project and neighbour agreements will help distribute funds to others in the local community. 75 full-time equivalent jobs are expected to be created during construction.

ANZ has been selected as financial advisor on the deal with Norton Rose Fulbright performing the legal advisor role. Construction consortium details are expected to be announced in the coming weeks.

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25 Comments
  1. Chris Drongers 10 months ago

    These amazingly low prices and the rapid continuing fall in price must be a real problem for would be merchant generators such as Sunbrilliance’s Cunderdin 100 MW plant.
    How can you justify building a ‘must dispatch’ fungible solar (or wind) plant today when you will be undercut on profitability by the next plant built tomorrow. And that by the subsequent plant built a month later?
    Surely a PPA or some other ‘lock in’ on profit needs to be in place.
    And then by the end of Q1 2018 peer-to-peer trading will disrupt the system again (low overheads could return some profitability to merchant plants).
    It will be fun watching the WA government in the west and the NEG in the east try to get ahead of these transformations.

    • Malcolm M 10 months ago

      NSW should be a relatively safe place for new solar investment, because of its huge market size and the increasing price of steaming coal. A recent AEMO report used a scenario of gradually increasing coal prices in NSW, presumably as earlier contracts expire. At the current $100/t coal price, 33% efficiency for a coal power station, and 8 MWh energy/t coal, this is a marginal cost of $38/MWh for any coal that needs to be purchased on the spot market. In addition there are the fixed costs of the power station.

    • Greg Hudson 10 months ago

      ”And then by the end of Q1 2018 peer-to-peer trading will disrupt the system again ” :
      Please let me know an example of a P2P that exists here in Melb. I’m ready to jump ASAP…

    • Jonathan Prendergast 10 months ago

      New generation does put downward pressure on future revenues for existing merchant projects. However, committed, underway & existing generators always have an advantage over new proposed projects, as the capital is sunk and the marginal cost to continue operation is low.

  2. Gyrogordini 10 months ago

    Excellent initiatives by Powershop

  3. Robert Johnson 10 months ago

    Its been interesting to observe the behavior of retailers signing up these PPA’s. Understandably there has been a strong focus on price of the PPA as well as speed to delivery in many cases given the high current spot prices. What seems to be absent is either the capability or the desire to do diligence on whether these projects can be delivered. In many cases the PPA is with an entity with no recourse beyond the assets of the project – which are worthless if the project fails. This seems to be one example – the location of the solar farm near Ouyen is well known to have significant issues within the grid with fault levels, short circuit ratios etc which require significant and very expensive upgrades to solve – which are seemingly unlikely to be afforded if Powershop was “stunned” by the pricing. So what happens? Maybe the government steps in an funds the upgrade of the grid? Maybe costs fall to a level that can sustain “stunning” PPA prices? Maybe the project fails and the retailer loses its stunning price, quietly and without media coverage as has happened a few times already or maybe the retailer is forced to come back to the table at different pricing or terms or delivery timing because the project has failed and they don’t have an alternative that meets their obligations. Project failure is becoming a growing global phenomenon – why wouldn’t it when the developer has little to lose and offtakers and governments have stars in their eyes and love the publicity that comes from “stunning” announcements.

    • David Osmond 10 months ago

      Hi Robert, you seem to have missed something. If a wind or solar project fails after it’s built, then it remains very valuable. This is because the operating costs are very low, so it can still sell electricity at a profit (it presumably went bankrupt because it couldn’t repay the capital costs).

      On the other hand, if a newly built a coal power station goes bankrupt, it may well become worthless. This is because it has much higher running costs (cost of coal) and may not be able to sell electricity at a profit. See for example the Mundra plant in India.

      http://www.thehindubusinessline.com/companies/tata-power-offers-to-sell-51-of-mundra-plant-for-1/article9732822.ece

      • Robert Johnson 10 months ago

        David, The project fails because its not economic due to fundamental flaws in the location, it only has a value if its built and built at a cost that can be recovered through income. My comment refers to it failing to proceed, sorry you missed that.

        • Ren Stimpy 9 months ago

          That is all sorted out before the project goes ahead. If it has gone ahead then that which you hyperventilate about will have all been sorted.

  4. Malcolm M 10 months ago

    Burrinjuck would be a good power station to own, because below the dam is a gorge that could be dammed into a lower pool. An additional pump-generator would turn it into both a peaking and pumped storage hydro station.

  5. Rob Passey 10 months ago

    Hm, seems to me there is a bit of marketing-speak going on here. All the renewable electricity from these plant will go towards the Renewable Energy Target, which has to be met, so these plant (or equivalent) would have been built regardless of whether Powershop was involved. Powershop will just sell any LGCs that are in excess of their obligations under the RET so that other retailers can meet their RET obligations. Now if Powershop didn’t allow the LGCs to be used to meet the target, then it would be additional, and Powershop could be congratulated.

    • Giles 10 months ago

      Not sure thats entirely right Rob. There is every likelihood that more renewable energy will be built than required for the Ret, which means the excess LGCs will force the price down to negligible levels. don’t think any project developer is factoring in much value from LGCs apart from those going merchant and just over next few years.

      • Sunbuntu Ltd 10 months ago

        All new solar projects are valuing the LGCs at zero. But if Labor in Government increase the RET they may be worth something

    • Jonathan Prendergast 10 months ago

      It’s an extraordinary effort by Powershop and the developers. Powershop have bought enough renewables for double the amount of their existing customer base. A risky but brave move.

      If we relied on organisations to only do projects where they surrender the LGCs, we wouldn’t have any projects.

      • Rob Passey 10 months ago

        But it depends what is meant by ‘bought enough renewables’. They would be buying the electricity and the LGCs. The question is, what are they doing with the LGCs in excess of their RET obligations? Over the next few years they would be worth quite a lot of money so I’d be surprised if they weren’t selling it on to other retailers so they could meet their own obligations. Is there any evidence that Powershop is extinguishing the LGCs rather than just onselling?

  6. Greg Hudson 10 months ago

    OK, I may be a bit cynical listening to the ‘spin’ from any company claiming to have PPA’s at ridiculously low prices when they then on-sell this power to their customers at a jacked up price of 35.95c/kWh (plus GST) for my postcode of 3109. I have to ask… If solar and wind is so cheap, and we have a company extolling their ‘green’ credentials, why are they buying ‘low’ and selling ‘high’ ? Why can’t they sell ‘low’ too, and gain themselves millions of extra clients, not just 10’s of thousands. Makes you wonder doesn’t it? Who’s the bigger fool… The one sprouting the bullshit, or the one that believes it.
    Buy low sell high is what the stock market is all about (if you can do it) but since when do we compare the stock market to an energy retailer ? I guess the answer is now ?
    Or maybe it’s the kiwi’s still crying about underarm bowling ?
    Just my 2c worth…

    • GlennM 10 months ago

      Damn…you saw through our evil plan….next we will make you pay for stealing Pavlova and phar lap..

    • Daroid Ungais 87 10 months ago

      “35.95c/kWh”. To be fair to Powershop, they “bundle” all charges into this one per kWh price so that technically includes connection / distribution charges too. Then again the pricing scheme is complete opaque, and IMO border line illegal pricing practice, which is why I switched away from these a-holes.

      • Mike Shackleton 10 months ago

        They haven’t done the bundled charge for some time.

        However, if you’re paying 36c/kWh for power through Powershop, you’re not doing it right – that’s the full price rate – you’ll get 38% off that with the powerpacks they have on offer.

        • Daroid Ungais 87 10 months ago

          Not so sure about that. Are you sure they don’t just bundle it when it suits them? Like for example if you go away on holidays suddenly you realize oh there is an underlying fixed charge they were “bundling” in.

          Oh yeah, I remember about the discount; you have to log into the portal every month and press a big green button to get a ~30% discount. Literally, you have to log in, then you just press a big green button. Done. WTF. They could at least make it fun, like “get a high score in this space invaders game and we’ll give a discount”..

      • Greg Hudson 9 months ago

        It would appear (based on comments below) that PowerShop may be screwing people over just like every other retailer (with a few obscure community based exceptions).
        Red Energy USED TO BE good (3+ years ago), but it appears they have may now turned into money sucking leeches like most of the other companies…

        No matter what spin/BS their marketing depts come up with, they can’t deny that wind/solar cost less to buy than FF, so there should not be any reason to charge MORE for green power. It should be LESS, not more!
        IMO, going 100% green should be half the price of using coal, and the retail prices should reflect that.

        If anyone has valid reason for disputing my comment, please feel free to chime in…

    • Jonathan Prendergast 10 months ago

      The projects aren’t generating yet, so don’t expect price reductions for 1-2 years.

      • frostyoz 9 months ago

        Bear in mind also that they need to buy power from the dirty expensive grid for the 60-70% of the time that their cheap solar and wind farms aren’t generating.

  7. William 9 months ago

    Powershop customer – “stunned” by high prices

    Ah Powershop!…seems like only ~6 weeks ago I got an email from them announcing price increases for the new year.

    “From 1 January 2018, unfortunately there will be an increase to the price you pay for electricity.
    We know this isn’t ideal news and it’s not a message we like sending – you can find more info about what’s causing this increase and a link to your new prices below.
    Retail electricity rates are increasing mainly due to significant increases in wholesale prices.
    We delayed changing our rates during 2017 despite the increase in wholesale prices which have almost doubled in the last year or so – and we are not passing on this full increase to our customers from 1 January 2018.
    We don’t make the decision to increase prices lightly and we’re always doing what we can to keep prices low and fair.”

    In 2017 my ‘Standard Saver’ rates:
    all day usage 24.56 c/kWh
    daily supply charge 96.75 c/kWh

    after 1Jan18
    all day usage 29.48 c/kWh
    daily supply charge 95.78 c/kWh

    my daily supply charge has dropped by 1c/day…..$3.65/YEAR! – the saving wont even buy me a cup of coffee.
    However my all day usage (per kWh) charge has increased by ~20%
    29.48c – 24.56c = 4.92c/kWh
    4.92/24.56 x 100/1 = 20.03% increase

    10 TIMES greater than the average wage rise (if you can get one) or CPI increase.
    If I remember to regularly logon I can see the Online Saver rates:
    2017: 19.77c/kWh
    2018: 23.73c/kWh
    It’s still a 20% increase in the cost of electricity!

    My data averaged over the past year says:
    You’re currently using about $1.96 per day
    You’re currently using about 2.8 kWh per day

    I’m paying 70c/kWh for electricity in Melbourne, and I thought I was getting a good deal with Powershop until the egregious rise last month.

    It’s way, way, way, more than inflation adjusted old SECV rates – rates that covered employing and training hundreds of apprentices, building and maintaining a broad based electrical, mechanical, civil, power and systems engineering capability, and covered sending a very fat cheque to the government each year that offset the cost of my other essential government services. Not so now.
    The country is flooded with multi nationals developing and owning large scale wind and solar energy generators producing income streams that will cleverly bypass the clutches of the ATO and be diverted straight to a tax haven offshore before hitting the consolidated revenue accounts of a foreign country.
    A cash vacuum model similar to the existing Singapore/Hong Kong/Chinese Government ownership and dominant control of our generation, distribution networks and retail service businesses in both gas and electricity markets in Australia.

    Powershop is owned by Meridian Energy which is 51% owned by the New Zealand Government.

    I’m a pensioner in a rental otherwise I would have adopted solar panels and batteries years ago, but I would like to know if there are any green energy service providers with rates (~60c/kWh total unit cost) better than Powershop?

    In the meantime I’m off down to the air conditioned library to watch Youtube clips of clever people making cheap homemade 5 & 10kWh powerwalls out of used laptop batteries.

    • Greg Hudson 9 months ago

      G’Day William. I was hit by Red Energy (for being a loyal customer for 5+ years) with a 2018 price rise of 25.38% (plus GST) making my power still less than half what you are paying. I have now switched to Alinta and paying 18.xx cents/kWh (+GST). Alinta are on a customer buying binge, so jump on their 43% discount (like I did) while you still can.
      http://www.AlintaEnergy.com.au

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