Meridian Energy, a state-owned utility across the Tasman, is pushing forward on the oft-delayed 131 MW Mt Mercer wind farm without a power purchase agreement as it sets its sights on building a vertically integrated renewable energy business. Already the company has launched a trial of its online electricity retail offering in Victoria – Powershop – and if it goes well, a national rollout is on the cards.
It is a sign of growing frustration amongst indepedent power producers, who can see the need for new projects to meet the renewable energy target, but have been unable to interest electricity retailers in long-term power purchase agreements (PPAs).
Meridian has made a name for itself in Australia through the Mt Millar and Macarthur wind farms, as well as being the former owner of Southern Hydro, which it sold to AGL. The Macarthur Wind Farm, a $1 billion joint venture with AGL Energy, is to be fully commissioned next year and will be Australia’s largest operating wind farm. The former, Mt Millar in South Australia, was bought by Meridian in 2010 and has a power purchase agreement in place until the end of this year. As such it provides further impetus for the company’s plans to have a vertically integrated business that runs from electricity generation right through to consumer sales.
The Mt Mercer wind farm, 30km south of Ballarat, will begin construction in December this year and be completed in two years’ time. With no offtake agreement in place, it is a signal of intent for its retailing operations.
When Mt Mercer is complete, Meridian will have full ownership of 201 MW of capacity through Mt Mercer and Mt Millar – and potentially no offtake deals for either of them. Macarthur will be irrelevant for its retail operation however, with the power generated committed entirely to AGL.
Powershop, Pacific Hydro
Last month Meridian said it had initiated a small trial of its online electricity retail business Powershop and it will expand out from Victoria within the national electricity market.
“Powershop’s business plan focuses attention on Victoria in the initial stages of development, with expansion into other states in future years,” the NZ-firm said in its submission to the Australian Energy Regulator.
Powershop has grown rapidly in New Zealand and placed first in the 2011 Deloitte Fast 50 Index for New Zealand and sixth in the Asia Pacific Deloitte Fast 500. Expansion in Australia would see this swift growth continue.
In the statement accompanying the Mt Mercer announcement today, the company’s chief financial officer, Paul Chambers, said Powershop “could be a natural adjunct” to its renewable energy business in Australia. In other words, it can be the consumer sales side of a business that starts with electricity generation at Mt Mercer and Mt Millar.
Meridian is not the only renewable energy generator looking to vertically integrate in Australia, with locally-based Pacific Hydro also going down the same route, albeit in a different way.
Back when the Moree Solar Farm failed to reach agreement on a PPA with Origin Energy, Pacific Hydro said it intended to pursue a retail business. A revised Moree Solar Farm tender as part of Solar Flagships was submitted with a PPA deal in place with PacHydro and while the bid was unsuccessful, the company is pushing on with both a retail business and the Moree Solar Farm (which is looking for funding through ARENA).
Pacific Hydro, like Powershop Australia, was granted an energy licence from the Australian Energy Regulator on July 1 of this year.
Pacific Hydro will focus its attention on large customers in the national electricity market, while Meridian’s Powershop is directed at households.
Retailing success for either of them would be a great fillip for the renewable energy sector as a whole.