Thanks to everyone who joined our webinar last week - slide deck attached for those who want to review our analysis of the #renewable PPA opportunity for energy users in Australia
1. Webinar presented on 26/06/19 hosted by:
Lachlan Jacobson
Senior Business Development
Manager
An analytical approach to renewable PPAs with the
University of Melbourne
The numbers behind
Power Purchase
Agreements
Sarah Cork
Senior Analyst
Ernesto Llamas Gomez
Graduate Student
2. The numbers behind Power Purchase Agreements + Page 2
Introductions
→ Many years of experience in
finance in Australia
→ Rides horses in her spare time
Sarah Cork
Senior Analyst
Lachlan Jacobson
Senior Business Development
Manager
→ 8 years of experience in energy
markets
→ Raised in a town called
“Katikati” which translates to
“nibble nibble” in English.
Ernesto Llamas Gomez
Graduate Student
→ Currently studying a Masters of
Energy Systems at the
University of Melbourne
→ Born in a state called “San Luis
Potosi” which looks like the
outline of a dog
3. The numbers behind Power Purchase Agreements + Page 3
Overview
1. Overview of Power Purchase Agreements
2. Creating a natural hedge
3. The research
4. Putting it into practice
5. Questions
4. Making sure you always have
innovative ways to access fair rates
and find efficiency savings fuels
us.
Flow Power is a licensed retailer
providing wholesale electricity. We’re
reshaping how Australian businesses
experience energy, so they can have
real power when it comes to their
energy.
5. The numbers behind Power Purchase Agreements + Page 5
Overview of
Power Purchase
Agreements
6. The numbers behind Power Purchase Agreements + Page 6
+ Coal fired stations exiting the market
+ Increased reliance on gas
+ Historically high wholesale energy prices
+ Excellent solar and wind resources
+ 7.5GW new entrant renewable pipeline
+ Currently, 21% of total electricity generated from
renewable sources – the highest ever level
The NEM
A snapshot of the changing energy market
7. The numbers behind Power Purchase Agreements + Page 7
Onsite
generation
ONSITE
+ Installed behind the meter on the customer site
+ Normally one source of generation and longer
term
+ Offsets energy, network and environmental
costs
+ Needs space and maintenance
OFFSITE
Financial
Power
Purchase
Agreement
+ Direct agreement with generator
+ Outside retail agreement and not
matched to load
+ Requires legal, compliance and
accounting engagement
+ No capital investment
Virtual
Generation
Agreement
+ Flow Power’s version of a PPA
+ Integrated into retail agreement
+ Offsets energy and possibly
environmental costs
+ No capital investment
+ Ability to have a hybrid of wind
and solar generation
There’s a few options…
8. In 2017, Flow Power launched its Virtual
Generation Agreement for businesses to buy
power from large scale wind and solar farms.
We now have 10 wind and solar offtake
agreements across all of the mainland NEM
states, totalling:
445 MW
The future is renewable
9. The numbers behind Power Purchase Agreements + Page 9
Common customer questions
What happens when
the wind does blow
and the sun doesn’t
shine?
Why should I contract
a PPA through a
retailer?
How does this
compare to a fixed
price contract?
What are the benefits
of using a
combination of wind
and solar?
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Creating a
natural hedge
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Looking at variability…
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Wholesale price 100% Solar
Financial PPA Wholesale
+ Exposure to variability from buying at a
fixed-rate and selling at floating wholesale
rate
+ Variability due to nature of the wholesale
spot market
12. The numbers behind Power Purchase Agreements + Page 12
Adding more certainty to the equation
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24Wholesale price VGA 50/50 Consumption (MWh)
Wind and solar hybrid VGA
+ Connect to a fixed wind and solar rate
+ Balance of supply delivered through
wholesale
+ Minimises exposure to variability
14. The numbers behind Power Purchase Agreements + Page 14
Some things to keep in mind…
This research:
+ An ‘energy only’ analysis
+ Excludes network and environmental charges
+ 100% renewable contracting
+ Excludes retail margins
15. The numbers behind Power Purchase Agreements + Page 15
The project aims
Demonstrate
benefits of wind and
solar contracting
Help customers
understand the impact
of volume risk
Test effectiveness
of renewables as
natural hedge
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The project method
A VGA modelled through a stochastic
model, that includes:
+ Wind generation
+ Solar generation
+ Market prices on the wholesale market
The model was run over 1000 years of
random simulation
Generate
random solar
month
Generate
random wind
month
Generate
random market
month
Financial
calculation for
the year
Annual
average $/MWh
Start
End
17. The numbers behind Power Purchase Agreements + Page 17
The solar results
RINA Model (run over 600 years)
Yearly Generation P50 (GWh) 626 627
Yearly Generation P75 (GWh) 599 594
Capacity factor P50-Average 24% 24%
P50 vs random year generation in half hour intervals
Jan Dec
18. The numbers behind Power Purchase Agreements + Page 18
The wind results
Jan Dec
P50 vs random year generation in half hour intervals
Engineering Yield Study Model (run over 1000 years)
Yearly Generation P50/Mean (GWh) 411 412
Yearly Generation P75 (GWh) 383 391
Capacity factor P50-Average 42.9% 43%
19. The numbers behind Power Purchase Agreements + Page 19
The market price results
+ Input is historic RRP from the last five years
+ Data is divided by half-hour, month, weekday/weekends
+ Exclude peaks based on price duration curves
+ Not a forecast model
QLD market price in half hour intervals
Q1
Q3
Jan Dec
$/MWh
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The market price results: Q1
Q1 – 3 day comparison
$/MWh
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The market price results: Q3
Q3 – 3 day comparison
$/MWh
22. The numbers behind Power Purchase Agreements + Page 22
-10% 0% 10%
Price variability against VGA rate
The project outcomes
Fixed
contract rate
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Putting it
into practice
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Julie is the Operations Manager of a large
manufacturer.
The company tasked her with finding an energy
solution to power them with 100% renewables.
But they have questions around the long-term price
outcomes and the variability of renewable power.
Julie reached out to Flow Power for a solution and
an answer to these questions…
She heard that we were working with other
businesses, and had offtake with wind and solar
farms across the National Electricity Market.
Sept 2017
Jan 2018
Julie chooses
Flow Power
Julie begins
looking at PPAs
Flow Power
runs a finds a
solution that
matches her
business’
needs to
renewables
Flow Power
runs a
simulation on
Julie’s output
From model to action
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Flow Power analysed how the business
operated and used the simulation tool to
compare different renewable energy strategies.
Julie’s business has a relatively flat load.
So, we ran our simulation on her annual
business load.
We then compared this to wind and solar.
Based on the results, a hybrid of wind and
solar would give the best outcome for the
business.
A hybrid solution
-30% -10% 0% 10% 30%
Hybrid
Solar
Wind
26. The numbers behind Power Purchase Agreements + Page 26
After modelling Julie’s business energy profile, Julie began to see the results
Access to lower cost
energy
Support renewable
energy development
More certainty around
price variability
Case study outcome