BlueScope Steel will on Friday sign the largest solar power purchasing deal ever by an industrial energy user in Australia, to lock into cheap renewables generation and rein in its energy costs which have ballooned by more than $50 million in the past two years.
The seven-year contract will underpin a new 500,000-panel solar farm to be built in the NSW Riverina district by ESCO Pacific and will cover a fifth of all the steelmaker’s Australian electricity purchases.
John Nowlan, head of Australian steel products at BlueScope, said the supply will sit alongside the steelmaker’s existing arrangements for round-the-clock power to feed its plants.
The contract “will help keep downward pressure on our energy costs, and will support the gradual transition to renewable energy,” Mr Nowlan said, also reiterating BlueScope’s support for the aims of the National Energy Guarantee.
BlueScope is joining other industrial energy users such as Telstra, data centre operator Equinix and confectioner Mars Australia in signing direct deals with renewables developers to purchase electricity and renewable energy certificates, and so reduce energy costs. Some sources put cost savings for corporate customers through such deals, known as power purchase agreements or PPAs, at between 20 and 50 per cent, depending on location and power usage.
“For any serious corporate off-taker or energy user a solar PPA is a good part of the energy mix,” said ESCO Pacific managing director Steve Rademaker.
“It’s not the only solution but it goes a long way to helping manage costs.”
The deal, arranged through energy management adviser Schneider Electric, is thought to involve the sale of about 200 gigawatt-hours of electricity a year. It will enable ESCO to proceed with the first, 88-megawatt stage of its 133MW Finley solar farm west of Albury. Construction is due to start at the end of September, with production starting by mid-2019.
Under the agreement BlueScope will get a fixed price for power over the life of the contract, reducing its electricity price immediately and providing a long-term buffer against volatile market prices, said Schneider, which matched up the steelmaker with the solar project.
Neither ESCO nor BlueScope would comment on the pricing or on likely cost savings.
Gareth O’Reilly, Schneider managing director, noted that with the price of both wholesale electricity and large-scale renewable energy certificates doubling between 2015 and 2018, companies had been struggling with “inflated” energy bills.
NSW Energy Minister Don Harwin, who will attend the signing ceremony at Port Kembla on Friday, said the deal is “one of many great opportunities for NSW industries to harness the power of our state’s abundant natural resources”.
The agreement acts as partial hedge for BlueScope against future increases in power prices, complementing its existing supply. It requires no up-front investment by BlueScope, with ESCO responsible for financing and constructing the solar farm.
Mr Rademaker said he saw plenty of scope for more such deals.
“We are seeing a lot of corporates getting up the curve on understanding the value that a solar corporate PPA can bring, so we think this is the tip of the iceberg really,” he said.