An increasingly popular solution for businesses to secure reliable and cost- effective renewable energy is through a power purchase agreement (PPA), which also promotes the growth of the renewable energy industry and can hedge against rising energy prices by allowing businesses to lock in a fixed price over the term of the agreement and ensure price certainty.
Businesses consume the bulk of Australia’s energy supply, particularly energy-intensive industrial sectors such as manufacturing, mining, construction, agriculture and utilities, which together account for 51 per cent of national energy use.
Less energy-intensive sectors such as retail, education, healthcare and commercial transport account for another 27 per cent, while only 22 per cent of net energy use is by Australian households.
Developing a clean energy strategy can help businesses achieve 100 per cent renewable energy and emissions reduction, through an individually crafted mix of measures to reach clean energy targets.
Benefits of a strategy stretch across all aspects of a business, enabling growth through improved facility design and enhanced brand loyalty, better risk management by meeting investor expectations and improved energy security, more environmentally- friendly operations, and higher productivity.
Measures can include energy reduction, energy efficiency, onsite solar or other renewable energy, offsite procurement of renewable energy, and the purchase of carbon emission offsets.
Having a strategy can provide a better understanding of a business’s energy profile; identify where its energy costs come from; and give a roadmap to improve competitiveness, reduce costs, and enhance reputation.
It is increasingly optimal for medium-sized and larger organisations to develop and implement a PPA, which is a contract between an energy generator and an off-taker, such as a utility company or a large commercial and industrial consumer, that defines the terms of sale for clean electricity.
Corporate renewable PPAs reached a record high in 2023 with more than 1,700 megawatts contracted, up from the previous year’s record of about 1,500 megawatts.
According to the 2023 state of the market report by Business Renewables Centre Australia, there have been 165 corporate PPAs negotiated since 2017, contracting more than 7.4 gigawatts of renewable energy generation.
The authors wrote: “Many participants described the Australian corporate renewables PPA sector in 2023 as a ‘seller’s market’.
“Within this context of a slowdown in supply of new renewable energy projects due to a multitude of factors such as transmission constraints and slower planning approvals, many participants noted there was an excess of demand for PPAs relative to supply.
“Buyer demand, underpinned by net zero and sustainability targets, remains high.
“There were various manifestations of a seller’s market including higher prices (also reflecting supply chain cost increases) and reports of developers conducting quasi-auctions among buyers.”
“Growth in renewable energy production has mostly stemmed from solar photovoltaics (PV), with high state-level targets and power purchase agreements driving the expansion of utility-scale renewables.”
In February, Rio Tinto signed the largest renewable PPA in Australia to date for energy supply to its Gladstone operations in Queensland, contracting the majority of power from Windlab’s planned 1.4-gigawatt Bungaban wind energy project.
The Gladstone production assets include the Boyne aluminium smelter, the Yarwun alumina refinery, and the Queensland Alumina refinery.
The Windlab PPA contracts 80 per cent of all power generated at Bungaban over 25 years, while the remaining 20 per cent will supply the National Electricity Market.
Rio Tinto also finalised a PPA with European Energy’s 1.1-gigawatt Upper Calliope solar farm the previous month, making the miner the biggest industrial buyer of renewable power in the country.
The two PPAs combined will provide 2.2 gigawatts of renewable energy to Rio, with the potential to lower carbon emissions by about five million tonnes a year and generate the equivalent of 10 per cent of Queensland’s current power demand.
Rio is aiming to halve its global Scope 1 and 2 carbon emissions this decade, and the two PPAs combined with more renewable power and suitable firming, transmission, and industrial policy can provide the core of its Gladstone repowering solution.
Rio Chief Executive Officer Jakob Stausholm said the agreement with Windlab built on a momentum in its work to repower the Gladstone operations and provide a sustainable future for heavy industry in Central Queensland.
Stausholm said: “The task remains challenging, but we have a pathway to provide the competitive, firmed power our Gladstone plants need, and we are continuing to work hard with all stakeholders, including the Queensland and Australian governments, on getting there.
“Competitive capacity, firming, and transmission are critical to developing a modern energy system that can ensure more large-scale renewables development in Queensland and help guarantee the future of Australian industry.”
Growth in renewable energy production has mostly stemmed from solar photovoltaics (PV), with high state-level targets and power purchase agreements driving the expansion of utility-scale renewables.
Global solar panel installations reached a record 268 gigawatts in 2022 and are projected to reach 1,000 gigawatts by 2030.
A report by think tank Climate Energy Finance noted that the prices of polysilicon, which are used to make thin panel wafers, have decreased by two-thirds since December 2022, contributing to a global solar boom that was disrupting energy markets and speeding up the clean energy transition.
Australia leads the world in both solar deployment and integration, according to the Australian PV Institute’s (APVI) National Survey Report of PV Power Applications in Australia 2022.
APVI pointed out that 2022 saw commercial and industrial rooftop installations exceed residential installations for the first time, with 1.35 gigawatts of installs on residential roofs and 1.47 gigawatts on commercial and industrial over the year.
Professor Renate Egan, APVI Secretary and co-author of the report, explained that the rooftop market was expected to remain strong through 2030, with increasing interest due to price pressures related to the supply of coal and gas and increasing reliability issues with old coal-fired plants facing decommissioning in the next decade.
She noted that interest in AgriPV, or the use of photovoltaics in agriculture, continued to grow with a number of case-study plants built in Australia over the last few years.
Professor Egan said: “Large-scale solar is seeing a pipeline of projects that are being supported by state-led incentives, while ultra-large-scale plants — between 10 and 30 gigawatts — are also growing in interest for industrial use and electricity export, with several of these projects in the planning stage.
“All Australian states now have a zero carbon by 2050 target and plans for renewable energy zones.
“The newly elected federal government has made firm commitments to net-zero emissions, which stands to improve investor confidence leading to a projected growth in the solar PV sector.”
