Australia’s first ever large-scale renewable corporate Power Purchase Agreement has been signed between Flow Power and Australia’s third-largest wind generator, Ararat Wind Farm in Victoria.
The agreement is to supply 50MW of renewable energy, “but we’ll go well beyond that,” says Flow Power founder and managing director Matthew van der Linden. “We’d like to get to thousands of megawatts over the coming years.”
“We’ll hopefully be able to establish more of Ararat and the numerous other wind farms and solar farms around; the advantage of Ararat is that it’s operating now. Customers can get a chunk of that today, and that’s very important for customers who are trying to resign [contracts for electricity] at double or triple the price they were previously on.”
Renewable corporate PPAs can secure energy supply at rates up to half the current retail rates, Flow Power said.
Flow Power will announce customers in the weeks ahead, van der Linden said.
Same but different
PPAs are a fairly common arrangement for consumers to purchase electricity from rooftop solar PV systems, but this is the first time clients will be able to sign up to access a portion of a large-scale renewable energy project.
Part of the challenge of designing such an offer is in luring the generator away from the more lucrative spot market, van der Linden said.
“They’re getting huge revenues off the spot market at the moment, but the reason they’re doing it [the PPA] is it’s a long-term contract; they get surety of price over a 10-year period, and that’s what they’re after to get better lending rates and maximise their return.”
Flow Power’s ambition is to deliver agreements with its customers that reflect the same terms it has with Ararat “as much as possible”, he says. “They may even advertise that we’ve got 5% of Ararat Wind Farm.”
The retailer is currently “reaching terms” with three other generators but has been sounding out renewable energy suppliers other than Ararat for about a year. Since the announcement others have made contact to offer their output, he says.
“There are no real issues with us having the discussions with more farms, the challenge will be reaching the right terms that are good enough for our customers to take,” he says. “But we’re very optimistic that won’t be a problem.”
New game, new rules
Most wind and solar plants sell their output to the big three retailers, who mostly offer fixed-rate contracts to their customers.
The Flow Power model offers a different mechanism for plants to secure long-term offtake, which van der Linden hopes may even provide the impetus for the next load of large-scale renewable energy farms to be built.
“We’re hopeful through what we’re doing we’ll force many retailers to reassess and maybe follow us a little bit in what we’re doing and hopefully reduce costs across the market, much more widely than what we’re offering ourselves.”
Flow Power hopes to offer electricity in the range of 10-11c/kWh bundled, depending on the customer and the term. “That’s roughly half the market cost at the moment,” van der Linden says.
Renewable PPAs are already at the heart of many corporate energy strategies in Europe and North America, with companies like Google, Amazon and Facebook recognising the fact that they offer both long term price security and are one of the fastest ways to reach sustainability goals.
Of course, the PPAs will expose customers to the variability of renewables. Flow Power has thought ahead on this issue and will advise its clients on battery storage and demand response technologies.
“This model not only gives them cheap energy, it will actually go a long way to fixing the reliability concerns in the market as well,” he says.
“It will change the market. It will make renewables work a lot better.”