Sustainable Energy Research Analytics checks against its predictions for large-scale solar projects for 2017.
Back in January we highlighted a number of areas to watch for those interested in the Australian utility solar sector. Our video, featuring our two best-dressed representatives, contained some predictions around the level of activity we expected to see in 2017.
Making predictions is always a dangerous game, and revisiting them is even more so, but now that the first quarter is behind us it seems fitting to review a few of those bold statements.
“We expect 21 projects to reach financial close this year, representing over 900MW of capacity.”
So far this year we have seen nine utility-scale projects publicly reach financial close, almost half the total we are expecting for the full year.
Reach Solar announced financial close for the first stage of the South Australian Bungala project in April and promptly sold the project to ENEL Green Power and DIF.
Towards the end of March, First Solar announced financial close for the Manildra project in NSW, and earlier in the month Edify Energy announced financial close for its trio of projects Whitsunday, Hamilton and Gannawarra.
Earlier in 2017 Neoen secured financing for Griffith, Parkes and Dubbo. And Genex Power followed closely with financing for its Kidston solar project.
The assets which have reached this key milestone account for 583MW AC of capacity, or 64% of our prediction for the year.
But before we congratulate ourselves too heartily it is worth noting that Bungala – the largest project to reach financial close in Australia so far at 220MW – took us by surprise. And there are likely to be others, in particular fully equity funded projects, which we did not account for at the beginning of the year.
Do not be surprised if our capacity prediction for financial close is exceeded by year-end, possibly by some margin. Lyon Group’s Riverland project and SolarQ’s Lower Wonga project (both incorporating battery storage) are key assets to watch.
“2017 will be a record year for Australian solar, as we expect an additional 202MW AC to be added to capacity.”
There is no doubt 2017 will be a record year for Australian solar on a whole host of metrics, and our expectations around capacity build are growing. Our base-case view of likely capacity additions in 2017 has risen to 221MW, largely as a result of Gullen Solar Farm progressing faster than we anticipated, and delays to the connection at Normanton pushing commissioning into 2017.
There is considerable upside potential to capacity growth this year. We track five projects which we expect to start in the first two months of 2018; if construction of these solar farms progresses faster than we have accounted for new capacity this year could exceed 400MW.
The biggest upside risk to our prediction is the giant Riverland project in South Australia. Public announcements suggest a start date for the 330MW project of December 2017. At recent build rates in Australia this seems an aggressive assumption to us. But if even an initial stage is up and running by the end of the year there is a chance our prediction will end up looking very conservative.
“Watch out for a flurry of EPC announcements in January and February, as a selection of projects – predominantly those involved in the ARENA funding process – edge towards financial close.”
OK, this one might not be the most specific of predictions but we’re going to run with it anyway. There has been strong action in the solar engineering, procurement and construction (EPC) sector, although admittedly much has spilled over into March and April.
RCR Tomlinson, Bouygues and Elecnor have been front and centre in the public EPC announcements.
RCR picked up contracts for Manildra and Gannawarra, Bouygues secured contracts for Whitsunday & Hamilton and Elecnor won the first stage of the Bungala project. This places them both in the top three of the EPC rankings by project pipeline capacity according to public announcements.
A number of “preferred contractor” arrangements have also been struck, including between RCR Tomlinson and Origin Energy, and Downer and Lyon Group. If these evolve into final EPC contracts the EPC leader board will get a considerable shake up.
But this sector is highly dynamic. We anticipate there is almost 1GW of preferred EPC arrangements sitting behind the scenes, waiting for projects to reach financial close. If, or when, this volume of capacity is firmed up, our EPC charts could look very different.
“We expect owners of established operations will be looking for buyers as they move solar farms off the balance sheet … new entrants from overseas will be actively looking for Australian opportunities.”
While we expect 2017 to be a big year for utility-scale solar M&A it has probably been a slower start than we might have anticipated. But two big deals provide strong support for our view on the general trend.
In February Elecnor sold the Barcaldine operation in Queensland to Foresight for $33 million. Foresight is a British investment management company, and the equity providers for the purchase are the Korean Development Bank and Hanwha Energy. All three parties are new to owning Australian solar assets and you can read more about the deal in our analysis here.
More recently, in April Reach Solar sold the Bungla project to a joint venture made up of ENEL Green Power and DIF for an undisclosed sum. While DIF already owns the Royalla Solar Farm, ENEL is another new entrant to the sector.
For more analysis of the Australian clean energy sector, visit our blog at www.seranalytics.com/blog
Our analysis of the Australian renewables sector is largely based on our extensive SERA Tracker client data set. We have detailed coverage of over 110 utility-scale solar assets and have recently introduced coverage of over 100 wind operations and projects and utility scale battery storage projects. To gain access to our insight-rich data, containing information on project size, location, owner, EPC, financing status, PPA status and much more, please get in touch today.