Corporate Renewable PPA Deal Tracker

Energetics is tracking the uptake of corporate renewable power purchase agreements (PPAs) in Australia. These long-term deals are being concluded by some of Australia’s largest energy users. A well-designed PPA has the potential to deliver multiple benefits: electricity cost reductions, the ability to hedge against energy market volatility, greater budget certainty and emissions reductions in keeping with a net zero or carbon neutrality commitment.

The market for renewable PPAs has grown rapidly in recent years from one deal concluded in 2016 (Victorian Government, own use of LGCs). Since 2017, corporate PPAs have supported projects with a combined capacity of more than 9,000MW, of which approximately 7,700MW enabled investment in new projects. After a subdued 2019, 2020 broke the Australian record for corporate PPA deal flow as measured against both metrics being tracked by Energetics:

  • generation capacity supported by PPAs (MW)[1]
  • annual output contracts (GWh).[2]

Similar to 2020, 2021 has seen a slow start. However, 2021 is now the second best year on record following the announcement of the Sun Metals’ PPA with McIntyre Wind Farm (now the largest corporate off taker in Australia, overtaking Amazon that held the top spot until then), as well as significant transactions by the Victorian Energy Collaboration (VECO, supported by Energetics), Woolworths’ first PPA and Telstra’s third PPA. Announcements of concluded corporate PPAs continue to flow in with Dexus announcing their second and third PPAs (also supported by Energetics). With many active transactions currently in the market, the third quarter of 2021 is expected to show strong growth.

NSW projects remain the biggest beneficiary of corporate PPAs accounting for 34% of renewable energy project capacity (about 3,000MW) supported by corporate PPAs since 2017. However, as illustrated in the 'Generation capacity of projects supported by PPA' figure below, the Queensland made significant gains in 2020 and 2021, and now accounts for 28% compared to Victoria with 29% measured in project capacity of projects which have a corporate PPA.

Clients supported by Energetics that concluded transactions in 2020 included ALDI Stores, Amazon, CSIRO, Transurban, MREP 2.0 and Newcrest Mining. These clients jointly accounted for about 60% of the output in MWh contracted through PPAs in the National Electricity Market and about 90% in NSW and Victoria.

Generation capacity of projects supported by PPAs (MW)

Queensland is dominated by a few very large transactions, whereas the scale of projects supported in the 'Generation capacity of projects supported by PPA' figure above, as well as the size of the output contracted by individual organisations illustrated in the 'Size of contracts' figure below in NSW and Victoria are more varied. 

 

Commitment by energy users (estimated annual offtake – GWh)

Retailer-intermediated PPAs accounts for 28% of the announced volume (i.e. MWh) contracted in 2021. The relatively low number is due to the significant scale of the Sun Metals 2 transaction which underwrites the output of 30% of the MacIntyre Wind Farm following a direct equity investment by its parent, Korea Zinc Co. However, demand for this contract type varies significantly from year to year from a low of 4% in 2018, to a high of 57% in 2019. 

 

Contracts by technology type and industry

As at 19 September 2021, solar projects benefitted slightly more than wind from corporate offtake market support since 2017 based on total project generation capacity (MW) that are supported by corporate PPAs, with blended or hybrid offtakes gaining ground. Furthermore, the resources and heavy industry sector and multi-sector buyers groups account for nearly half the annual output in GWh contracted under corporate PPAs.[3]

 

Footnotes

[1] This reflects the size of the utility scale project (larger than 10 MW) that has successfully incorporated corporate PPAs in their revenue strategies. For many this meant a number of separate transactions – often over an extended period of time. The year reflects the first transaction. For others, it was one big transaction with a single corporate or a buying group. Nonetheless, even if the PPA was for only part of the project capacity, the project often would not have secured financial close without the PPA

[2] This reflects the annual size of the offtake volume (larger than 10 GWh) an energy user contracted for in a single transaction, in the year the transaction was concluded or announced.

[3] Note that this is based on annual contracted volume and does not take account of PPA tenures which vary from 5 to 20 years.

Further insights

Energetics Exchange podcast episode 2 - COVID-19 and its impacts on Australia's renewable energy markets

 

Thought leadership articles

  • mrep2png
    Melbourne Renewable Energy Project 2.0 - Renewable PPA transaction advisor
    Issued: July 2020

    Energetics was engaged in 2019 to advise on electricity contracting options. We also supported the end to end PPA transaction process from engaging the market, drafting RFP documentation, providing technical and financial assessments of the diverse range of product offers from retailers, and supporting negotiations. The work to drive negotiations was undertaken with Norton Rose Fulbright to secure a shortlist of preferred suppliers to reduce the buying group’s risk exposure.

  • dexuspng
    Dexus - Supply-linked corporate renewable energy supply agreement advisors
    Issued: January 2020

    Energetics assessed the opportunity for cost and emissions reductions, and how best the deal could be structured to meet Dexus’ objectives. The overall value proposition for Dexus hinged on both the attractiveness of the power side of the proposed transaction and the supply of Large-scale generation certificates (LGCs).

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