This blog post has been updated in Dec 19 to reflect the re-branding of NCOS to ‘Climate Active’.
As our company name suggests, we help organisations develop pathways that will help them reach 100% renewable energy.
Recently, we advised Eurobodalla Shire Council. The council needed help evaluating proposals for a Power Purchase Agreement, a Public-Private Partnership, and building their own solar farm. The ‘build’ versus ‘buy’ question was also evaluated in work we are currently performing for Inner West Council. This particular council wants to reach both 100% renewable energy and carbon neutrality.
The following infographic shows eight options we evaluated to reach 100% renewable electricity. In this blog post, we present a high-level overview of the ‘build’ and ‘buy’ options and factors that influence the business case.
GreenPower® and buying LGCs through a broker – ‘Buy’ options
The easiest way is to purchase GreenPower®, renewable energy generation accredited by the Australian Government. Buying GreenPower® means that you can ‘offset’ your energy consumption with renewable energy generation that is additional to Australia’s Renewable Energy Target.
Most electricity retailers have their own products sourced from accredited GreenPower® generators, and it is easy to make the switch. GreenPower® is a great option for smaller energy users who may not be able to enter into a Power Purchase Agreement. However, GreenPower® comes at a premium to grid electricity contracts. If you are interested in the combination of GreenPower® and PPAs, it is possible to source GreenPower®-accredited PPAs.
Another option to reach 100% renewable electricity is to purchase Large-Scale Generation Certificates (LGCs). LGCs are the green attributes of large-scale renewable energy production, and by buying and retiring them, you can claim the renewable energy generation, above and beyond Australia’s Renewable Energy Target.
Both GreenPower® and buying LGCs are recognised options for offsetting your electricity consumption under the Climate Active.
Power Purchase Agreement (PPA) – ‘Buy’ options
With Power Purchase Agreements (PPAs), you are contracting for renewable electricity for a minimum number of years, typically from seven years. You agree to pay a certain amount of money per MWh, which covers all costs including financing, construction and maintenance of the renewable energy asset.
If your aim is to become 100% renewable, you also need to purchase the LGCs. A bundled price for both electricity and LGCs can be very cost effective in the current market.
With a PPA, there is no capital investment from your end, and the renewable energy project developer owns the generation asset. The performance risk sits with the developer and you don’t have to worry about technical aspects. Your focus is on the price and supply of the electricity volume and LGCs.
Engineer, Procure, Construct (EPC) – ‘Build’ options
Under an EPC model, your organisation constructs your own renewable energy plant, typically a solar farm. This works if you have suitable land available, or if you can partner with someone who does.
Because the intention is to reach 100% renewable electricity, your solar farm will be connected to the grid, as opposed to a behind-the-meter installation. This is because most onsite solar PV installations can only meet part of your energy demand. A PPA will also form part of the deal.
You invest capital and directly or indirectly manage the construction of your renewable energy asset. Once your solar farm is operating, ownership is transferred to your organisation. It is important to note that you will take on the management and risk of the ongoing solar farm performance. Naturally, you will be more interested in the technical aspects with the ‘Build’ option.
Factors that influence the business case for ‘build’ or ‘buy’
When evaluating different options to reach 100% renewable electricity, there are many factors that need to be considered, in addition to risks and sensitivities. The three main factors that influence the business case for each option are
- Market pricing for electricity,
- LGC pricing, and
- EPC costs
EPC costs are typically expressed in dollars per watt installed. The key components are hardware (including solar panels, mounting and inverters), labour (including civil works, electrical, maintenance and project management), and network connection. These costs have been steadily dropping, especially with respect to hardware components, achieving a connection can be more challenging.
Market pricing for electricity has been volatile in recent times due in part to the retirement of coal-fired power plants. At the same time, a record amount of renewable energy is being installed.
LGC prices have been high in recent years, but with increased supply coming online and the Renewable Energy Target being met, they may have little value after 2020. You can use LGCs from your build or buy projects to meet your RET obligation, but you also need to retire enough LGCs to cover your energy consumption to claim 100% renewable energy.
Do you want to reach 100% renewable electricity?
As you can see in Figure 1, there are many options to reach 100% renewable electricity. Moreover, this space is evolving rapidly, and there may be additional methods in future. If you need help with evaluating your options, it is best to work with a company who has experience in this field. For further information, please do not hesitate to contact Barbara or Patrick.
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