The 70MW solar farm that telecommunications giant Telstra has contracted to build in north Queensland is just the start of its big solar plans, although it appears to have backed off any entry into the household electricity market anytime soon.
Telstra announced on Wednesday that it had signed a deal with RES Australia to take all the output – and the renewable energy certificates – from a new 70MW to be built near the Queensland town of Emerald. It should be complete in 2018.
The company is coy about whether it will contact any more solar (or wind) farms, saying it wants to bed down this deal first. But it seems inevitable, given the falling cost of wind and solar and the rising cost of wholesale electricity.
In the meantime, Telstra says it is going to focus on adding solar to its grid connected exchanges – a fit out that could amount to hundreds of megawatts – and it has already obtained a licence to act as an aggregator to sell the output of its existing back-up power (mostly diesel) into the National Electricity Market.
James Gerraty, the head of strategy for the newly formed Telstra Energy division, says he won’t be drawn on the savings to be obtained for the company through the deal with RES.
But clearly the savings are real. Wholesale electricity prices in Queensland are averaging more than $100/MWh so far this financial year, and industry analysts say the cost of solar farms in Queensland is probably around $70/MWh.
And Telstra will also be obtaining renewable energy certificates (LGCs), which are currently trading at around $80/MWh and will offset the cost of that solar.
“When you look at the delta between the bundled cost of electricity an the LGC price – and the cost of electricity, there is a clear value opportunity,” Gerraty told RenewEconomy in an interview on Wednesday morning. “This is about risk management. It makes a lot of sense for us.”
Gerraty works alongside Telstra Energy boss Ben Burge, and both worked together at Powershot, the upstart clean energy retailer owned by New Zealand’s Meridian Energy, and which has led the charge of new, smaller retailers contesting the energy market.
Asked if Telstra planned to contract more wind and solar farms, Gerraty said: “We will let the dust settle on this one for the moment, and make sure it is bedded properly. Whether or not it forms the basis for similar contracts or not is not something that we can say.”
But the opportunity, and the ability to manage its energy risk is obvious. Telstra accounts for around 1 per cent of Australia’s total electricity demand, or nearly 2TWh (terawatt hours, or 2,000 gigawatt hours, or 2 million megawatt hours).
The Emerald solar farm, which will have single axis tracking technology, will provide around 120-150GWh, or a little more than 5 per cent of its total usage.
Telstra does not have a specific renewable energy target, but it is important to note that companies such as Unilever UK, Ikea, Google, Facebook, Amazon, and Apple have either reached or are targeting 100 per cent renewable energy.
The corporate PPA market for renewable energy in Australia, however, is little developed. Only Sun Metals, with a 116MW solar farm in Queensland now under construction, and Monash University, with a tender for a new 40MW wind or solar farm, have entered it in a meaningful way.
Gerraty, however, thinks that will change soon.
“It is a novel concept in australia, even if it is well-trodden ground overseas, Gerraty says. “We would like to see it (the PPA market) take off …. it makes sense for it to take off,” he added, noting the falling cost of renewables and the rising cost of wholesale prices.
“The difference in prices means it an opportunity for businesses to take the same steps we are taking to manage that risk. This is the start of trend of corporates putting their name behind grid connected facilities, and it will help drive down prices in the (wholesale) market.”
Hopefully, big mining groups such as Glencore will take that advice.
Telstra’s immediate focus is to further reduce electricity costs by adding solar at its changes around the country, and battery storage in some instances.
These exchanges are already equipped with back-up generators for when the grid goes down, or there are localised back-ups, but Telstra now wants to use this capacity to trade into the wholesale market and help keen the grid stable.
Rather than switching them on only when the lights go out, it now plans to switch them on to prevent the lights going out.
“We have a lot of programs deploying solar on our facilities – on Telstra exchanges and buildings and we are aiming to ramp that up over the next couple of years,” Gerraty says.
“We have a large fleet of stand by generators – and we already registered with AEMO as a small generation aggregator – so we can participate in the wholesale market with our standby fleet.”
Telstra has hundreds of megawatts of grid-connected standby capacity, primarily diesel, with some locations having “tens of megawatts” in capacity which could be used to strengthen the grid.
Telstra also has a multitude of off-grid sites, such as towers, which are equipped with solar and storage. “It’s funny, with all the talk of people going off grid, we have been doing it for quite a while, but the program we have got now is to put solar on grid connected facilities.”
And what about Telstra’s push into the home solar and storage market, flagged early last year about the time that Burge and Gerraty were hired to head up the new division?
That appears to be waiting for another day. It’s a crowded business, Gerraty says, and “this is not the sort of business that rushes into things.”