Corporate deals backstopping Aussie renewables, already beating 2019

LNG is out of favour and coal demand is well down, yet corporate renewable energy deals in Australia are already beating those signed for the whole of 2019.

Data from BloombergNEF shows the number of power purchase agreements (PPAs) signed this year are already up 50 per cent on 2019, thanks to large deals by multinationals.

Amazon closed the biggest PPA in Australia ever in June to buy 105 megawatts (MW) of output from the 150MW Suntop facility in NSW, while in April Aldi contracted to buy about 6 per cent of the output from Tilt Renewables’ (ASX:TLT) flagship Dundonnell Wind Farm project in Victoria.

“[They are] attracted to the flexibility of Australia’s corporate procurement market, which mirrors the US in many ways,” the BNEF report said.

“Outside of PPAs, companies can use sleeved contracts, purchase certificates or work through re-insurance providers using products like proxy revenue swaps.”

Companies were originally interested in PPAs to protect themselves from power price shortages and price spikes, as happened in the summer of 2017, and the complexity of these deals limited the field to large companies or those with expertise to understand what they were signing.

However, energy retailers have started offering PPAs and effectively offering to stand as a middleman negotiator for companies that are not capable of entering into complex PPAs directly, or are not large enough to provide meaningful financing for new projects.

PPAs must double to beat 2018

However, according to consultancy Energetics’ PPA tracker, the amount of power contracted will have to double to beat 2017 and 2018, with the latter year seeing almost 2000MW of power contracted to private companies.

The market has grown from a single deal signed by the Victorian government in 2016. Since then corporate PPAs have added up to 5200MW of power.

Energetics data shows that by June 30, about 51 per cent of PPA projects by total capacity were solar, 7 per cent were a mix of wind and solar, and the remainder was wind. Projects in Victoria make up 33 per cent of corporate PPA capacity since 2016.

2019 was a bad year for new PPAs as grid connection issues throttled the ability of projects to start generating power.

PPAs are picking up around the world, with deals in Latin America seemingly unaffected by the pandemic ravaging the continent as companies particularly in Brazil continue to migrate to the wholesale market.

Taiwan Semiconductor Manufacturing alone bought 1.2 gigawatts (GW) over 20 years from a new wind farm.

The world’s biggest PPA market, the US, has seen activity slump to 4.3GW this year so far as the COVID-19 pandemic causes power demand to drop significantly. China, India and Mexico are also seeing power demand, and consequently demand for PPAs, fall due to the pandemic as well.