In what is being billed as Australia’s largest renewable tender, Snowy Hydro has contracted a total of 888 MW of wind and solar energy under long term off-take arrangements at lower than current wholesale prices. The new generation capacity will enable the utility to provide cheaper energy to 500,000 households.
The eight projects are located across New South Wales and Victoria and are expected to generate about 2.8 TWh of energy annually after they come online within the next two years.
“The new renewable energy generation, ‘firmed’ by existing Snowy Hydro assets, is a game-changer and will push down future energy prices,“ the utility says in a media release.
On the back of the renewable energy PPAs, Snowy Hydro says it will be able to offer very competitive, firm wholesale prices for below $70/MWh for a flat load, for up to 15 years – the price which is significantly lower that the current wholesale price of electricity.
The firm wholesale prices include the cost of the raw renewable energy plus the cost of ‚firming’. Snowy Hydro plans to use its existing hydro, gas and diesel assets to ‘firm’ up vast amounts of intermittent renewable generation to ensure energy is available when needed. It explains the process as follows:
“In simple terms, ‘firming’ works by transforming intermittent energy into reliable energy so it’s available on-demand when a customer needs it. While the energy output of individual projects varies, Snowy Hydro’s power stations can work in combination with wind and solar, creating ‘firm’ reliable energy.“
The tender was launched back in May, when Snowy Hydro invited potential energy suppliers to submit their proposals with the aim to contract up to 400 MW of wind and 400 MW of solar generation in order to cater to the need of its customers.
The utility says it does not generate enough energy from own power stations to cover all of its customers, so it has to purchase energy from the wholesale market, and thus is exposed to high wholesale prices.
The new renewable energy generation will bring on significant new energy supply and therefore much-needed competition to the market, and will enable Snowy Hydro to pass on lower wholesale prices to its customers.
“Over the last 12 months, there have been rapid changes in the NEM and competitive pricing across all generation technologies has seen the cost of renewables fall,“ the utility said.
Snowy Hydro did not name the winning projects, or release the prices for wind and solar specifically. It has, however, said that the tender was heavily oversubscribed.
“Snowy Hydro was overwhelmed with the level of interest in our Renewable Energy Procurement Program, which saw more than 17,600 MW of projects submitted through the procurement process,“ the utility said in a media release.
Previously, Snowy Hydro had signed PPAs for only two renewable energy projects: the Tailem Bend Solar Project, a 127 MW solar PV plant in South Australia, and the 212 MW Lincoln Gap wind farm, a project coupled with a 10 MWh unsubsidized battery that last year secured $150 million in debt finance from the Clean Energy Finance Corporation.
Earlier this year, the federal government announced that it will acquire the full ownership of Snowy Hydro, as it agreed to buy stakes held by New South Wales and Victoria for more than $6 billion.
It is believed that the offtake deals will pave the way for the landmark Snowy 2.0 pumped hydro project, which according to the CEO of Snowy Hydro, Paul Broad, can outcompete new coal on price and on reliability.
Snowy Hydro owns Red Energy and Lumo Energy, which together have more than one million customers.