Power prices in Australia have risen significantly. All of the experts are expecting that trend to continue. However that’s not an option for businesses around the country. Each price rise cuts into their profitability. That’s why they need a new way to buy power. Flow Power’s recent webinar on Getting PPAs deal done, walked attendees through how they can short circuit the power market with Renewable Power.
Here’s a quick summary and a case study about a manufacturer.
Renewables pose a great opportunity for the Australian power market and businesses are getting on board. For businesses that want to take charge of their power costs and secure low-cost power for a long term period, Power Purchasing Agreements or PPAs are the solution. PPAs are agreements to purchase power directly from a generator, usually wind or solar, for a long term period and Flow Power is leading the way.
Despite having taken off globally, PPAs are just starting to enter the Australian market. Coupled with their newness, the different types of PPAs now available has caused confusion, making it difficult for Australian businesses to navigate.
At Flow Power, we’ve cut through the confusion and explored the PPA options available to find what works best for Australian businesses. That’s how we were able to lock in PPAs for Olam, ANCA and many more businesses.
At a top level there are two types of PPA – onsite and offsite.
- Onsite PPA allows the customer to draw power from onsite generation. Benefits include offset network costs, flexibility around expansions but negatives include higher cost per kWh and the need to maintain the equipment.
- Offsite agreements come in when a customer does not need or want to have the infrastructure on site. This can be because they don’t have the space or would rather not maintain the asset.. Instead, the customer will buy a share of generation from a large-scale renewable project such as a wind farm. These deals can be purely financial or energy based, wherein a businesses energy usage is matched to a generators output.
After working with customers, we found the best outcome for business was the latter – an offsite PPA which is energy based. We look at what wind or solar farm best matches a business’s needs, this can be anything from purely wind or solar to a mix of sources. All of this aims to minimise the amount of power bought from the power market, helping to reduce their power costs and giving them maximum price certainty.
Businesses that already have onsite generation like solar PV, can benefit from an offsite PPA too. Adding wind to their Power Tool Kit can make significant reductions in their power bill. There’s flexibility to layer multiple sources into a PPA to get the best outcome. Things to consider when looking at a PPA.
1.Your business usage profile
2. The structure of your agreement
3. The term, how long you sign for
4. The price.
George needs to cut his manufacturing business power costs. He’s heard of other businesses signing PPAs and wants to see how it could work for him. So, he contacts Flow Power to understand how a PPA could work for his business.
Flow Power assesses George’s business’s power usage and concludes that his business is consuming the most power during the day.While solar energy peaks in the middle of the day, wind is a constant source that runs reliably through the day. Both sources work to keep George’s power costs down.
Flow Power found that, nearly 90% of George’s power could be met with a renewable PPA. George has the security of knowing how much his power will cost for the next ten years and – more importantly – it is significantly cheaper than current market rates. His manufacturing business profits are maintained and he still has the flexibility to explore other power solutions in the future.
Renewable power rates are significantly less than fixed rate offers. In this example, George saved 35% on his power costs in the first year.
For some, the savings can be as high as 45%. And this is without incorporating demand response, which can yield even greater savings.
Q & A:
Q. Is it prudent to set up a PPA with that 2% over?
Our analysis aims to find the best fit for each business. While we aim to minimise exposure to the market, the price risk can be managed with other tools and in some cases provides more flexibility for the future. It’s dependent on how each businesses needs. Different businesses will be driven by different needs some may want to buy extra LGC’s to offset carbon and others will want to use low energy costs to reduce their overall power prices. Our analysis ensures we source as much power as we can from renewables – without too much oversupply or undersupply. We match generation to our customer’s profile to minimise this, so the 2% is an example of an actual customer but it can vary significantly.
Q. Where does Flow Power get the solar and wind energy from? Do you own multiple
renewable energy sites, or are your procuring the energy from third parties?
Flow Power works as an offtaker with renewable developments across the country. We enter agreements with renewable projects to buy or sell a certain amount of future power production. We look for projects that will match our customer profiles. In particular, we are looking for projects that will come online now.
Q. How long do you sign a PPA for?
The market term at the moment is ten years but this can vary.
Q. What about seasonal changes to use?
All business have peak and troughs in their power demand – that’s what makes our energy based model so important. It’s integral to ensure that the generator supplying the PPA is suited to the power use of the business
Some other PPAs being signed are sheerly financial contracts. That means businesses can’t optimise the output of the plant.
Q. Can your analysis indicate what is an optimum investment in onsite solar (to cover overs) combined with Flow Power renewable supply?
Yes, we can look at an onsite solution as well as offsite. If the customer already has onsite generation or is considering it, our modelling considers these types of generation in the overall procurement strategy. This onsite generation doesn’t need to be solar either, it can be biogas, biomass, diesel or gas-fired generation. For example, if a customer has onsite solar, we would look to balance this with offsite wind generation. When the match is right, we find that it provides a good overall coverage for customers.
Watch the recording
Check out the slides