The plants future has been in doubt in recent weeks, as the consortium including BP Solar, Fotowatio Renewable Ventures and Pacific Hydro were unable to secure funding. The groups problems stemmed from an inability to secure power purchase agreements (PPA) for the electricity produced at the plant. Bloomberg Businessweek confirmed today that BP will leave the consortium and does not wish to be part of any new bid process.
Earlier this month, the Federal Government reopened the Moree Solar Farm to updated proposals from the four developers, which were placed on a shortlist for the project. The Government is funding part of the plant as part of its Solar Flagships program, which will also see a concentrated solar power (CSP) plant built.
The Moree Solar Farm will receive AUD306.5 million (US$328.3 million) in Federal Government funding of a total proposed project investment of AUD923 million (US$988.7). The remaining shortlisted companies are AGL, Infigen-Suntech and TRUenergy.
The inability of the BP Solar consortium to secure PPAs for the Moree Solar Farm, and therefore willing bankers, has raised a series of doubts regarding the future of large-scale photovoltaic power plants in the country. Australia enjoys high levels of irradiation throughout most of the country and also features a renewable support program, which requires utilities to purchase renewable energy through a market-based mechanism. The mechanism uses Renewable Energy Credits (REC), which are generated when renewable energy is installed. However this mechanism, in which renewable energy certificates are created and then traded, has not resulted in as much demand for PPAs from renewable energy providers as was expected.
Ray Wills, from Australias Sustainable Energy Association, told pv magazine that the structure of the Australian energy market is to blame. "The circumstances in Australia are that we have vertically integrated gen-tailers, companies that are generating their own electricity and are vertically integrated all the way through to retail. To access those markets [occupied by the gen-stailers] we need those PPAs for renewable companies to get in."
Wills continued that government subsidies of these power generators are also a part of the problem. Some Australian states only liberalized electricity-supply markets in recent years.
Some of these utilities and generators have also purchased large numbers of RECs, when the market was oversupplied with them, on the back of a surge in residential photovoltaic installations. The utilities now have little demand for them.
If the Moree Solar Farm is to be realized, a wholesale price for the electricity will need to be found and PPAs signed. Wills said a genuinely free market for electricity will have to be in place for that to happen. However, with such market conditions not likely to evolve in the near future, Wills added, a feed-in tariff for large-scale solar would be the best way to encourage growth in the sector.
"It would offer better financial certainty, it would manage the risks from the banks point of view," said Wills. "Banks in Australia are still inexperienced with renewable energy projects, therefore still risk averse and thats what has been challenging the funding of these projects."