Energy users rush to PPAs for cost certainty and clean power

28 October 2019 – Major energy users are moving away from traditional electricity supply contracts as they seek cost certainty, according to findings in a report published today by global engineering, design and advisory company Aurecon.

More than two in three energy users surveyed said they were considering a Power Purchase Agreement or long-term contract, while another one in four respondents were exploring self-generation.

Aurecon Managing Director for Energy, Resources & Manufacturing Paul Gleeson, said:

“The report’s findings are understandable given businesses’ desire for cost certainty in energy procurement and increasing demand for clean energy. However, it is important energy users do their due diligence and make sure they understand the technical complexities of the grid before rushing to sign a Power Purchase Agreement.

"When we compare our grid and market internationally, Australia’s population and loads are relatively sparsely spread out along our long coastline. This means our grid extends over much longer distances than other countries grids and is relatively ‘skinny’ and only weakly meshed with other parts of the grid. Those differences mean we are already experiencing major challenges at much lower penetration of renewables than we are seeing overseas.

"Managing this is becoming a headache for the Australian Energy Market Operator, for network owners, and for industry participants trying to connect to the grid. Power Purchase Agreements remain an excellent option for many organisations looking for clean power and cost certainty – what’s important is that they do the necessary work upfront to ensure they don’t get any unwanted surprises.”

Aurecon has advised dozens of organisations – users, developers and generators – on how grid technicalities can have a significant impact on Power Purchase Agreements, and how best to manage those risks within the agreement.

Mr Gleeson added: “You can never fully de-risk a project, but you can mitigate a lot of the risk by modelling how it will behave in a range of scenarios, and then allocating those risks to the right parties.”

Titled ‘Future Energy Ready: Remaining competitive in Australia’s changing energy market’, Aurecon’s report draws on perspectives from big energy consumers, project developers and owners, financiers, networks, retailers and policy bodies. It aims to identify and understand how stakeholders could adapt and thrive as Australia transitions to a low carbon future and energy systems transform the world over.

“The Australian energy system is large, complex and multi-faceted, with different market and policy forces operating on the participants and a variety of new technologies and business models being deployed to deal with transition and disruption. What does this mean for big energy consumers, energy suppliers, power producers, new projects and government and how can these stakeholders understand the current market state to better prepare for their future? This report aims to answer these questions” Mr Gleeson said.

READ FUTURE ENERGY READY REPORT