Last week on the 4th and 5th of September the Business Renewables Centre Australia (BRC-A) delivered its second Buyers Bootcamp at the Community Hub at the Dock in Melbourne.
Prospective corporate buyers of offsite renewable energy, representing sectors including food and beverage production, pharmaceuticals, resources, telecommunications, insurance and local government administrations, were put through the paces on Power Purchase Agreement (PPA) fundamentals. They were certainly in good company with the opportunity to learn from an equal number of ‘BRC-A Buyers Faculty’, trailblazing corporates that have already undertaken some of Australia’s landmark PPAs.
The bootcamp began with an introduction to the National Electricity Market (NEM) with Buyers Basics 101, followed by John Griffith’s (City of Melbourne) discussion on aligning buyer objectives and priorities, including learnings for a streamlined aggregated deal that emerged from the Melbourne Renewable Energy Project (MREP).
Advice for navigating the myriad possible deal structures and understanding Large-scale Generation Certificates (LGC) for verified emissions reductions claims was then administered by Jonathan Prendergast (BRC-A). Jarrah Bassal (Transurban) also took participants through an overview of drivers for sustainability initiatives like corporate PPAs and outlined their potential to make a measurable impact within an organisation’s broader climate strategy.
Anita Stadler (Energetics), while unpacking market and PPA risk principles, reiterated an unofficial slogan of the event: if someone says they can tell you what electricity prices will be doing in 3 years, they’re lying! Price trajectories can be estimated but mitigating risk exposure through a partial PPA wins out over business-as-usual electricity procurement. Corporates should also understand how wind and solar generation profiles function against the backdrop of the growing ‘devil’s horns’ and ‘duck curve’ (growing evening peak demand and the impact of distributed solar on daytime supply and prices) when considering deal structure.
The workshop later erupted into a bookie’s floor with an activity pairing-up new and experienced energy buyers, pitting them against each other to stake fake cash on how market events like coal-fired generator outage or summer heatwaves might affect prices, with the aim of demonstrating the function of a Contract-for-Difference (the financial instrument underpining wholesale PPAs).
Other session highlights included:
- Mel Cutler (ANZ) likening the PPA procurement experience to arranging dinner: first you choose to go solo or invite guests (aggregation), pick a cuisine (financial or retail), select a main from the menu (specific product), and beware of everyone’s spice tolerance (risk)!
- Michael Wheelahan (IWN/Proud Mary Consulting) calling for a display of leadership amongst corporates and councils, to ‘infect the Tower (government)’ with the sustainability mindset, and leverage newfound agency with your PPA in the ‘Square’ (market). He said positive social outcomes have got him out of bed for the past 20 years… fortunately, the social, environmental and financial benefits of PPAs are symbiotic.
- Stephen Sasse (Nectar Farms) recounting the process from an agtech startup perspective involving an off-grid, battery-firmed setup for impressive savings and even better greenhouse tomato yields!
A favourite feature of BRC-A Bootcamps, participtant-faculty paired walks, allowed our prospective buyers some headspace and time to process new information, air internal issues and stoke motivations with one-on-one strolls around the Docklands.
Another activity then ensued which brought together prior content to consolidate understanding of factors affecting generator performance and deal suitability, including strike prices, participation factors, marginal loss factors, technology type and price escalation. The deal with the lowest strike price didn’t stand the test of tenor, all things considered…
Jonathan Filbey (Octopus Investments) then demystified some concepts of project finance including capital structure, credit ratings and the price/tenor/security trifecta with the help of a mortgage metaphor – they need not be overly complicated!
Between the aforementioned and sessions on the manner and timing of external consultant engagement, building and maintaining internal momentum, Term Sheets, firming options and lastly the post-commercial operations date discussion, participants developed a strong foundation of knowledge over the two days from which to initiate or continue the PPA procurement process within their organisations.
The BRC-A would like to express its gratitude to all Buyers Faculty for volunteering their time to share their knowledge and expertise, and of course to all participating corporate representatives for their attentiveness and engagement throughout the event in addition to their display of leadership in embarking on the corporate PPA journey.