TFS SUNPACT Renewable Energy Solutions Corporate PPA Procurement July 2017
Contents. The Problem what s the challenge for corporates? The Corporate PPA models & Integration A Solution Modeled Renewable PPA Options The TFS Green Procurement Process
The Problem What s the issue C&I?
THE HOLE IN THE MARKET IS STRUCURAL NOT LACK OF PROJECTS The Structural Issue is one of a lack of Products and Integration THE GEN-TAILER MARKET LACKS FIRMING FACILITY TO INTEGRATE WITH LOAD THE REASON CORPORATE PPAs HAVENT EXPLODED IS RISK REWARD DISTORTION - PRICE & FLEXIBILITY IS KEY FOR C&I - NEED TO CONSIDER A PPA AS A HEDGE - DISRUPTION WILL REBALANCE RISK ALLOCATION
NO CLEAR STRUCUTRAL SOLUTION FOR PPA & RETAIL INTEGRATION
The Common Corporate PPA models
HIGH LEVEL: CONTRACTING WITH A RENEWABLE ENERGY GENERATOR Customer can access long term value by entering into a contract with one or several renewable energy generators. The contract structure can take the form of either: Option 1: Contract for difference (CfD) settlement via the solar farm with no physical delivery of electricity Option 2: The Sleeved model whereby the retailer contracts the Renewable Generator and Prices the customer Option 3: Fully integrated retail contract for 2-3 years Solar farm VIC C & I Customer Fixed-price PPAs Solar farm NSW Electricity National Electricity Market Wind farm CfD settlements on electricity Spot market settlements on electricity
COMMON OPTIONS FOR MANAGING RETAIL RELATIONSHIPS DO THEY WORK FOR BUYERS? Option 1: 10 15 year PPA Contract for difference (CfD) settlement via the generator with no physical delivery of electricity Solar Farm Customer Contract held outside retail arrangements Fixed price / MWh Pro s Con s Retailers prefer this model Provides economic hedge to long-term power and LGC prices Price risk on variable spot price as income Cash flows on revenue and retail costs are not aligned Electrici ty Gross Retail Price Simpler contracting More moving parts AEMO Electricity Market Retailer
COMMON OPTIONS FOR MANAGING RETAIL RELATIONSHIPS DO THEY WORK FOR BUYERS? Option 2: Solar Farm 10 15 year PPA Customer Solar farm meter allocated to retailer Retailer pays a fixed price for solar generation Pro s Con s Provides long-term hedge, but managed by retailer within retail contract Less benefit if market moves upwards Electricity Gross Retail Price Certainty of income/savings over the duration of the retail contract Gentailers will value solar generation differently, based on their own portfolio Fixed price / MWh Cash flows on revenue and retail costs aligned Electricity Market Retailer Fewer moving parts
A Solution Retail Integration Firming & Risk Management with a PPA
EXAMPLE VIC LOAD AND SIZED SOLAR OUTPUT ; LGC HEDGE Comments Summary Annual usage (VIC sites) 183,462 MWh Stable energy use across the year with a relatively high level of predictability and consistency Enough surrendered to cover more than 100% of LGC obligations from VIC operations 100% offtake of Solar Farm LGC obligations Solar farm details Solar farm generation ~36,700 p.a. Northern Victoria (19.3MWp) 37,460 MWh Percentage of LGC obligation filled 102% Load Curve and Solar Production Seasonality
THE CUSTOMISED RETAIL ENERGY AND PPA SOLUTION Option 3: Fixed price hedge OR firm volume strips Solar Farm 10 15 year PPA Customer Solar farm meter allocated to retailer Third party provices a fixed price for solar generation then provides a firm price, floating volume swap to retailer Pro s Provides long-term hedge, but managed by retailer within retail contract Certainty of income/savings over the duration of the retail contract Con s Retail tenure can only last 3-5 years Gentailers will value solar generation differently, based on their own portfolio Electricity Fixed price / MWh Fixed price / MWh Gross Retail Price / Buyback 3-5 year fixed retail contract Cash flows on revenue and retail costs aligned Case by case pricing Electricity Market Firming services Retailer Mechanism to share upside if market moves
The Customised Retail Energy & PPA Procurement Process
$ / MWh THE FIRM PPA MODEL DEALS WITH FLOATING PRICE & VOLUME TO CREATE A REAL HEDGE Pricing scenarios $250 $200 $150 $100 $50 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Market price (forecast, bundled) $184 $141 $108 $104 $101 $99 $95 $97 $102 $103 $106 $114 $118 $110 $112 $114 $121 $124 $121 Time-weighted market price (bundled) $0 $198 $152 $116 $114 $111 $109 $106 $104 $102 $99 $97 $94 $94 $88 $90 $91 $97 $99 $97 PPA Price (bundled) $76 $78 $80 $82 $84 $86 $88 $90 $93 $95 $97 $100 $102 $105 $107 $110 $113 $116 $119 Retail contract (bundled) $144 $144 $144 $144 $144
Thanks. Chris Halliwell 0409 012 591 chris.halliwell@traditionasia.com