These cleantech energy stocks are starting to look good as costs plunge
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The cost of building large scale solar projects has fallen by 60 per cent in the last three years, which is helping driving investor interest in renewable energy plays.
That’s good news for ASX-listed renewable energy stocks as they battle for investment attention against traditional energy providers.
>> Scroll down for a list of ASX cleantech energy stocks
Three years ago the federal government’s renewables fund — the Australian Renewable Energy Agency — capped investment in big scale solar projects at $135 per megawatt hour.
(A megawatt hour or MWh is 1000 kilowatts of electricity used for an hour — or enough to power about 330 homes per hour).
New industry gossip indicates that projects are now being built for above $50/MWh, says the agency’s chief financial officer Ian Kay.
That compares favourably with existing coal plants which can generate power at a marginal cost of $40/MWh. The Finkel review found that building a new supercritical coal plant would come in at $75/MWh.
Deals like Origin Energy’s (ASX:ORG) power purchase in 2017 to buy 540MW of power from the Stockyard Hill Farm between 2019 and 2030 was for less than $60/MWh.
A credible alternative
The numbers look good for ASX-listed cleantech energy plays trying to crack the renewable sector.
They can now offer a credible alternative to coal or gas generation – and therefore take a share of the investment dollars racing to buy a position in the sector.
Mr Kay says the long-term renewable energy price ambition is $40/MWh – a number based on targets from the US and that five years ago was laughable, but today is looking increasingly doable.
Bloomberg New Energy Finance analyst Leonard Quong said also noted an expected 20MW oversupply of solar panels that will need to find a home this year, pushing prices down by up to 30 per cent in 2018 and contributing to ever lower build costs in Australia.
Managing the ‘time shift’
But as large scale solar plants begin pumping intermittent power into the national grid, the question is increasingly how to integrate it into systems that aren’t yet able to “time shift” generation.
Mr Kay says mixed projects are the way of the future.
“You can’t just focus on simply developing a solar or a wind farm now. You have to think about how it fits into the wider system,” he said at the Large-scale Solar & Storage conference in Sydney on Wednesday.
There are a range of renewable energy generators that are already preparing for this scenario, which is good news as there is 7.8GW of intermittent large scale solar due to come online by 2020, according to Bloomberg New Energy Finance data.
Mr Kay pointed to Windlab’s (ASX:WND) Kennedy solar, wind and battery farm, and Genex’s (ASX:GNX) Kidston solar, wind and pumped hydro project in northern Queensland as examples of projects that can manage their integration with the wider grid.
This way solar, which generates best during the day, and wind can be stored to send into the grid at peak demand periods.
Others like Tag Pacific (ASX:TAG) offer a suite of different technologies that can be adapted to different circumstances.
The deals backstopping the sector
These are being supported by power purchase agreements (PPAs).
A power purchase agreement is a deal between a business or the government to buy power from a generator, locking in prices for a period of time. The other option is for generators to sell their electricity into the national energy market as and when they have it — a system know as selling on the “spot market” — and receive whatever price is going at that time.
Baker Mackenzie’s Paul Curnow says these will be a backstop “as I see that as the way to keep solar’s momentum moving as we move from the RET to the NEG.”
The Renewable Energy Target (RET) finishes in 2020 and the government wants to replace it with the National Energy Guarantee (NEG).
For example, Genex’s recent grant from Queensland funding body Northern Australia Infrastructure Facility (NAIF) is conditional on them achieving a PPA for the $1 billion second stage of its Kidston project.
Genex director Simon Kidston told the conference that a deal is close and NAIF would not have made the funding announcement if they weren’t aware of that fact.
Here’s a table of ASX-listed cleantech energy stocks showing their performance over the past year:
Scroll or swipe to reveal full table. Click heading to sort
|ASX code||Company||Focus||One-year price change||Price Jun 27 (intraday)||Market Cap|
|14D||1414 DEGREES (due to list Jul 31)||Battery maker||0||-||N/A|
|AST||AUSNET SERVICES||Power generator||-0.0728862973761||1.59||5.7B|
|BUD||BUDDY PLATFORM||Energy manager||0.141304347826||0.105||112.6M|
|CCE||CARNEGIE CLEAN||Power generator||-0.526315789474||0.027||77.8M|
|EOL||ENERGY ONE||Energy manager||1.225||0.89||17.3M|
|GNX||GENEX POWER||Power generator||0.363636363636||0.3||91.2M|
|KPO||KALINA POWER||Power generator||-0.730769230769||0.014||7.5M|
|MNS||MAGNIS RESOURCES||Battery maker||-0.264150943396||0.39||220.6M|
|NEW||NEW ENERGY SOLAR (listed Dec 2017)||Power generator||0||1.5||488.3M|
|PEA||PACIFIC ENERGY||Power generator||-0.173913043478||0.57||253.1M|
|POW||PROTEAN ENERGY||Battery maker||0.45||0.029||8.8M|
|RNE||RENU ENERGY||Power generator||-0.3125||0.011||10.7M|
|SIS||SIMBLE SOLUTIONS (listed Feb 2018)||Energy manager||-0.15||0.17||15.3M|
|TAG||TAG PACIFIC||Battery maker||0.46511627907||0.063||7.8M|
|TLT||TILT RENEWABLES||Power generator||0||1.75||547.7M|
|VPR||VOLT POWER GROUP||Power generator||1||0.002||16.5M|
|WND||WINDLAB (listed Aug 2017)||Power generator||-0.1775||1.645||110.6M|
|ZEN||ZENITH ENERGY||Power generator||0.919191919192||0.95||91.1M|