S.A. begins search for energy provider after failure of solar tower project

The South Australian state government is going back to the drawing board – or at least, back to the market – to find a cheap and clean supplier for its electricity needs after the collapse of SolarReserve’s 150MW solar thermal power project at Port Augusta earlier this month.

Reports emerged on Monday that the $100 million, around 520GWh a year electricity supply contract for the state government was going to be flagged to the market as early as this week, to explore options of new projects and competitors. It was confirmed by a state government official.

The state government has a contract with Simec Zen Energy until 2020 – a contract signed to fill in the gap while the Aurora project was built – and it has an option to extend that contract if needed.

“The state government will ensure that taxpayers get the best deal possible whilst delivering more affordable, reliable and clean electricity for all South Australians,” said Coalition energy minister Dan van Holst Pellekaan.

“We’re seeing green shoots in our energy market, and we’re keen to get the best outcome in this new landscape.”

Van Holst Pellekaan says a formal “invitation to supply” would not be issued until later in the year, when the government had gained a better understanding of “potential innovative market responses.”

At this stage the government is not showing signs of favouring any one source of energy generation, but has stressed that the new contract is expected to meet several goals, including lowest cost of energy.

This, of course, bodes well for both solar and wind power, which have been found to be cheaper than new-build coal or gas plant, even with the added costs of energy storage.

New tenders would also have to offer energy generation technologies that improved innovation and competition in the state’s wholesale and retail energy markets; contributed to a cleaner, more affordable, reliable and secure network; and stimulated the economy.

The new search follows the abandonment of plans for what would have been the world’s biggest solar tower and molten salt storage plant near Port Augusta, after the company behind the project, the US-based SolarReserve, said it was unable to raise finance.

In 2017, it beat out competing tenders – mostly from gas plants – to deliver electricity to the South Australia government at no more than $78/MWh. This was below the actual costs of the plant but it was reasoned that the storage would enable it to sell electricity at the peaks and deliver an average price at the tendered number.

But, as we explained here, despite having approvals, contractors, off-takes, a commitment of $110 million from the federal government, and even MOUs with mining groups such as Oz Minerals in place, it proved hard to convince financiers.

The SA government said it had already extended the deadline for financial close from February 1, 2018, to May 31 this year, but had been told by SolarReserve that it would not be able to make this target.

A proposed addition of a 70MW solar PV last year in an effort to reduce the cost of supply didn’t convince potential lenders, who were also concerned about the performance of the Crescent Dunes facility, where a tank leak bedevilled operations, reduced output and caused some shut-downs.

It has also emerged since that time that SolarReserve has let lapse a proposal for a 2GW solar and storage project in the US.