Snowy Hydro smashes price benchmarks for “fair dinkum” wind and solar

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Snowy Hydro sets stunning new benchmark for “firm” wind and solar, awarding contracts to eight new wind and solar farms that will produce fair dinkum power at prices well below fossil fuels.

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The federal government-owned utility Snowy Hydro has announced stunning new prices for “firm” wind and solar power after awarding contracts to eight new wind and solar projects as a result of the largest completed renewable energy tender held in Australia.

The average price for this 888MW of mostly new wind and solar capacity will allow Snowy Hydro to deliver “firm” renewables at a price of less than $70/MWh – significantly below the current wholesale price of electricity in the National Electricity Market, and below the cost of “baseload” coal generation pushed by its shareholder.

CEO Paul Broad, who flagged the scale and scope of the winning bids during recent Senate Estimates testimony – reported in RenewEconomy here – describes the tender results as “game-changer” and an important prelude for its proposed Snowy 2.0 pumped hydro scheme.

Snowy Hydro says the eight projects contracted for 15 years – four wind farms and four solar farms – are located across NSW and Victoria and would generate about 2.8TWh annually (that’s about 1.5 per cent of total generation on the main grid).

It did not name the eight, but they include Clenergy’s 115MW Metz solar project in New England, and half the output from the 336MW Dundonnell wind project in Victoria, whose owner Tilt Renewables announced the signing of a long-term PPA with an un-named utility on Wednesday.

A 105MW solar project owned by Lightsource BP was also a winner, and so too was 100MW of wind capacity by CWP Renewables, in its Grass roots partnership with Partners Group. Its share is a mix of existing and new capacity. Another winner was solar developer Total Eren, presumably with one of its developments in Victoria.

Bizarrely, each of Lightsource BP, CWP and Total Eren declined to reveal the names of their winning projects, although may do in coming days. RES Australia and Macquarie, with the Murra Warra wind farm, was another rumoured winner.

“The new renewable energy generation, ‘firmed’ by existing Snowy Hydro assets, is a game-changer and will push down future energy prices,” Snowy Hydro said in a statement.

“This will bring on significant new energy supply and therefore much-needed competition to the market, and will enable Snowy Hydro to pass on lower wholesale prices to our customers.

“The renewable energy we have contracted will enable Snowy Hydro to offer very competitive, firm wholesale prices (ie. the cost of the raw renewable energy plus the cost of ‘firming’) – for below $70/MWh for a flat load, for up to 15 years.”

Snowy Hydro did not release the prices for the solar-only and wind-only parts of the contracts, but it is safe to assume that this signals a new benchmark low for wind and solar projects in Australia.

Snowy has said previously that the cost of firming is up to $40/MWh. It’s unlikely to be that much in this case, but this tender certainly points to the cost of wind and solar below $50/MWh, as Broad has suggested in previous appearances at Senate Estimates.

Snowy Hydro launched the tender back in May, seeking around 800MW of wind and solar. It needed to do so because while it plays a key role in balancing the grid and providing power at times of high demand, it does not produce that much electricity in total.

That means it has to buy electricity from the wholesale market to meet the demands of its more than one million customers, mostly through Red Energy and Lumo Energy, and it will need to buy more if the $6 billion plus Snowy 2.0 project goes ahead.

“Over the last 12 months, there have been rapid changes in the NEM and competitive pricing across all generation technologies has seen the cost of renewables fall,” the statement said.

“Snowy Hydro was overwhelmed with the level of interest in our Renewable Energy Procurement Program, which saw more than 17,600MW of projects submitted through the procurement process. All eight winning projects are expected to come online within the next two years.”

It said that in simple terms, ‘firming’ works by transforming intermittent energy into reliable energy so it’s available on-demand when a customer needs it. While the energy output of individual projects varies, Snowy Hydro’s power stations can work in combination with wind and solar, creating ‘firm’ reliable energy.

Clenergy, a Sino-Australian joint venture, says the Metz solar project will use single-axis tracking technology and will begin construction early next year, with completion about 12 months later.

“Securing such a prestigious offtake agreement with Snowy Hydro is an outstanding result, and we are pleased to work with Snowy in delivering sustainable clean energy for Australia”, Daniel Hong, CEO of Clenergy, said in a statement.

CWP’s Alex Hewitt says the tender “has firmed up renewables, dispatchable, fair dinkum, call it what you like, and it shows that the world of renewable energy can be firmed up and be the lowest cost dispatchable energy in Australia.”

RE’s take: The message from the Snowy Hydro tender to the federal government is clear. It has stated it wants “fair dinkum” power, and this is it, as billionaire Mike Cannon-Brookes has been pointing out in his social media campaign about the true meaning of “fair dinkum power”.

It would be extraordinary, given the result of this auction, if the federal government were to seek to tilt the playing field of its own underwriting scheme in favour of new coal assets, or even extend the life of coal assets.

As energy minister Angus Taylor discovered when he visited a solar and battery-powered classroom in Brisbane this week – using renewables and storage and deliberately not connecting to the grid because it was cheaper, cleaner and more reliable – fair dinkum power comes in many forms.

Note: An earlier version of this story erroneously said Wirsol was awarded one of the contracts, rather than Total Eren.

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