I am relatively new to Queensland, but I am married to a central Queenslander who has shown me areas of this state that many may not have seen. Some places stark and featureless and others full of surprising quirks and charms.
In 2015, during our nomadic adventure, we took a trip to Warwick. My husband had spent some of his childhood there. We visited in winter, and it was around the time when it started snowing in Stanthorpe and the whole of Southern Queensland decided that this must be witnessed. We were single minded however, and drove over the range, our attention focused on Warwick.
Warwick was lovely. We walked the town and found the house where he spent some happy years of his early childhood. We saw Thomas Byrnes rugged up, watching over the town, while they were clearly watching out for him.
And so how does this all link to an enormous wind farm. Well the MacIntyre Wind Farm will be built about 50km South West of Warwick. ACCIONA Australia has their eyes on a total precinct wind development of over 1GW.
CleanCo has partnered with ACCIONA for 500MW of this wind farm. CleanCo will build, own and operate a facility of 18 turbines, totalling nearly 103MW, and will then invest in a further 400MW through power purchase agreements.
ACCIONA’s plans for the region include a further ~500MW of capacity. The entire MacIntyre Wind Farm Precinct is proposed to include 180 wind turbines across 36,000 hectares of leased land. I won’t regurgitate the information that can very easily be found on the ACCIONA or CleanCo websites. Well not all of it.
My takeaway is this: the turbines are BIG – 5.7MW each and they will be distributed over a vast stretch of land. ACCIONA expects to create around 400 jobs over the construction phase. The wind farm will change the landscape and impact the local economy. Money for farmers, employment in the community. Construction works naturally result in an influx of project stakeholders. People and business offering accommodation in the region, who have no doubt been hit by the COVID shutdowns may see some reprieve. And on the flip side, maybe an increase in COVID cases for the region. It remains to be seen.
And more people will be driving the route we took over the range. Not for a sleepy meander, but to deliver enormous turbine blades. Maybe some of them will also stop on the top of the range and take a walk. Look at the view.
ACCIONA has created a video explaining a bit more about the overall precinct plans.
Originally posted in October 2019 on LinkedIn by Winodh Jayewardene. Winodh is the Technical Executive – Network Connections and Performance at WSP Australia and contributor for Energy Ramblings. Re-posted with permission.
It is interesting talking to people in the industry to get their view on the grid connection process and how it compares to say a couple of years ago. My initial thinking before talking to others was that there weren’t any more surprises and overall a much smoother process could be expected, however this does not seem to be the case (this article was started before the recent events in North West Victoria / South West NSW).
The industry has learnt a lot over the last three to four years but it seems that the grid connection process experience is far from smooth and each project has its particular set of challenges.
As an industry it is important to also acknowledge how far we have come and that we are viewed internationally as world leading (this was echoed in my observations during the CIGRE Paris session last year where we seem to have the answers to a lot of the problems others were facing).
Coming back to the challenges, it seems that this time around we are mostly aware of what the issues are, however the process to work through to overcome these issues seems to differ from project to project as well as across NEM regions.
Some initial thoughts on what causes these pains during the grid connection process are noted below.
Consistency of process and requirements
One of the biggest challenges is that of understanding the requirements as they apply within different NEM regions. These specific requirements are often unwritten and it is the reliance on experience that helps to smooth out the bumps along the way.
Some of the challenges that projects face include:
the requirement for Continuous Uninterrupted Operation or CUO. Despite it being something that plagued the industry circa 2015, the requirements for this are not yet captured in the recent Generator Technical Performance Standards rule change, even though it was raised by stakeholders
approach to technical assessment for projects connecting into weak networks (different NSP’s have different approaches to the FIA process)
How to deal with committed and proposed projects, both during the connection application as well as prior to the the registration phase of a project
Process for undertaking harmonic studies and the extent of information provided / available.
Experience provides a bit of forewarning about what to expect and how to plan for it, but what if you are new to the market and don’t have the benefit of experience? One way to address this would be to have the expectations set at the start (if you know the right questions to ask), the other way is for consistency through standardisation.
By standardising the process, it forces this process to be documented, and by documenting the process, it ensures expectations are clear. With clear expectations, all parties have a frame of reference and know what the other party wants. After all, how can you successfully negotiate an outcome if you do not know what the other party wants? Some say it is not possible to standardise on requirements, but I don’t believe we have a choice. If we even get half of the inverters on the CEC accredited inverter list connected to the NEM, we will need to standardise on their performance.
Model and design information – How ‘correct’ should it be?
Traditional generation constituted rotating machines where their performance was largely dictated by their electro-mechanical characteristics. However modern Power Electronics (PE) interfaced generation such as Type IV wind turbine generators, Solar PV inverters, HVDC links and battery energy storage are PE interfaced and effectively decouple the energy source from the electricity network.
Hence performance of the generating system is essentially dictated by the switching controls of the converters and the performance can be ‘whatever you want it to be’ (within some reason of course such as current limits of power electronics and DC bus voltage considerations). How the PE connected generator performs is then essentially determined by the control code that is in the converter, hence the importance of ensuring the models are an accurate reflection of the actual code in the converter. Given the high switching frequency of these converters (and the fact that they are asynchronous devices) means the type of instability that could occur is at shorter time-step than what we are used to with synchronous machines (one of the reasons to move to EMT modelling tools such as PSCAD).
Take for example the figure above which shows the comparison between an RMS assessment tool (PSS/E) and an EMT tool (PSCAD). The higher frequency oscillations are due to fast acting converter controls which would not be evident in an RMS tool (RMS tools were never designed to assess such phenomenon).
Getting access to information
The National Electricity Market (NEM) is one of the largest interconnected power systems in the world (constituting over 40,000 km of transmission lines/cables and 200 terawatt hours of electricity delivered to ~9 million customers). It could be argued that connecting a ‘small’ generator to a large power system may not have a material impact on either generator or network, hence some small inaccuracies in information may not have a significant impact on the outcome of any technical studies or the network in general. However ‘larger’ generator connections can present their own challenges. What is ‘small’ vs ‘large’ depends not just on the MW size of the generator, but also the network it is connecting into and there is not a simple formula you can apply to quantify ‘small’ versus ‘large’.
That said, to assess the impact of one generator (in particular a ‘large’ generator) connecting to the network, requires a lot of information about not just only the network, but also how the network is operated. Without this information, it is not possible to fully assess the impact of a generator connection (both in terms of impact of the network as well as determining the Generator Technical Performance Standards (GTPS) for the generator). With over 50 GW of new generation proposed to connect to the NEM, often connecting to parts of the network that were never design to accommodate generation, obtaining information required to undertake GTPS studies in a timely manner is often a challenge (both for the generator as well as the NSP).
However this information is crucial for both the generator and the NSP and the latter does have obligations under the NER to provide such information to proponents. Some of the information that is often difficult to obtain includes:
PSS/E and / or PSCAD models of network reactive plant (SVCs and STATCOMs) – these either never existed in the first place or are not robust enough to include in power system studies and can impact schedules
PSS/E and / or PSCAD models of nearby committed generators (PSS/E models are typically available as projects are committed and availability of PSCAD models has been somewhat addressed under the System Strength Impact Assessment Guidelines)
Network frequency dependent impedance for the purposes of undertaking harmonic studies (without this information it is not possible to undertake a harmonic study, some have tried by making ‘assumptions’ and suffered the repercussions come commissioning). The adage of ‘rubbish in’ / ‘rubbish out’ couldn’t be more relevant in this context.
Operational information related to the network (eg normally open lines, operating patterns of other generators that can have an impact on voltage control or system strength)
In some cases this information is not available to be provided by the NSP and the only options are to either wait until such time that this information is available, or develop this information yourself (the connecting party in the case of a new generator). This is likely the reason some projects make assumptions on inputs to keep things moving (careful what you assume!). Eventually the risk that a lack of or incorrect information this presents will catch up to the project, hence requires careful management (this is where experience and sound engineering judgement comes into play to understand the extent of missing information and the risk it presents).
Resources and skills
We have an unprecedented amount of new generation connecting and a fundamental transformation of our power system. We don’t know exactly what the generation mix will look like, however one thing is for certain, and that is that there will be a major impact on how we plan, operate and maintain the power system as a whole.
To assess this requires sound power systems knowledge and experience. Power systems are a bit like large jigsaw puzzles where each piece has a role to play. Unfortunately those without good power systems knowledge get too focused on the one piece and expect that one piece to solve all the problems of the ‘puzzle’.
This presents some challenges such as:
Resourcing the sheer volume of projects – the growth in new connection volumes has taken place quite rapidly over the last three to four years. We are still playing catchup in terms of having experienced power systems engineers who are able to separate the ‘little detail’ from the detail that matters. There are some young clever minds coming into the industry, but we have a long way to go still to fill the gap in good overall power systems knowledge. This is crucial to ensure we efficiently plan for and integrate new generation into the network.
Technology change – this presents a challenge in terms of new problems to solve, but also an opportunity in terms of the speed of implementation for new technologies. The challenge is to not only keep up with technological changes but also embrace it with a careful eye.
Responsibility and Risk allocation
Grid connection risk is a big topic at the moment, probably because this presents the single largest risk which could delay first generation. Who takes on this responsibility depends on the contracting method but under EPC wrap arrangements, this has traditionally been taken on by the EPC contractor. Like any risk, not fully understanding the nature of the risk and its consequences can result in some pretty dire consequences (as was the case for RCR). However we are seeing a re-allocation of grid risk and this shifting from the EPC back to the owner in the context of fully wrapped EPC contracts. Under multi-contract or supply only contracts it is a different story of course and hence further care required as to roles and responsibilities around grid connection risk.
A typical fully wrapped EPC contract may look like this:
If you have not already picked it, the NSP/Operator and EPC interface is a crucial aspect in order to get projects connected, however there are no contractual obligations between the NSP/Operator and the EPC (these are typically discharged from the Owner (via a project and/or connection agreement to the EPC). The consequence of delays would then sit with either the EPC or owner but not with the NSP/Operator (noting that the NSP/Operator and project both have obligations under the NER to ensure a secure, stable, reliable and safe power system). This is probably another topic on its own, however system security and stability take precedence above all else and there is a relatively large imbalance of ‘power’ between NSPs and proponents which can further complicate the grid connection process.
It seems as though the grid connection process is still a major challenge and although we are moving in the right direction, there is a lot more to do until we can get to a position where the grid connection process isn’t one of the biggest challenges for connecting new generation.
Addressing this challenge and is extremely important in order to ensure we have sufficient supply coming online to meet demand and do so in the most efficient way such that we have a reliable, secure and stable power system.
The Last Mile problem (not to be confused with the Three-Body Problem, but possibly as hard to solve) is the struggle that transport planners have in getting commuters to use public transport if they have to walk the first or last stretch. Transport infrastructure may be fantastic for the most part, but if a passenger needs to walk for twenty minutes after hopping off their train, they may look to take a car instead.
Bicycles make a lot of sense, as they can chew up the distance from the station to home or the office, but they are mostly cumbersome to have on the train, especially during rush hour. In Melbourne, I’d often get passed by people on skateboards while walking from Flinders Street station to the South Bank. This is not a bad option, as skateboards can be popped onto the back of a backpack and carry pretty well, but they’re not for everyone. The few times in my life that I’ve been on a skateboard I’ve feared for my knees, elbows and life.
So this weekend, my little family tried out the Lime scooters which are being rolled out (pun intended) in Brisbane. These surprisingly tall and heavy electric scooters are found scattered around the CBD, and along the side of the river.
They cost AUD1 to unlock, then AUD0.30 per minute to ride. We had a fun time up and down the river’s edge, dropping a smooth AUD11 for our little half hour adventure. You download the app, locate a nearby scooter and scan its QR code. Then it’s unlocked and you can take it for a ride. The app will show how much distance is left in the scooter’s battery.
It’s hard to say how many scooters are dotted around Brisbane, but the app shows that they are fairly ubiquitous in the CBD. And people are using them. Everywhere you walk people pass you on them. They are quiet, very quick and easily accessible.
One of the problems with bike rentals is finding a drop off point, which can make them inconvenient. When you’re finished with the scooters you just tap out, and leave them on the side of the road. Ready for the next eager scooterer to hop on.
And when they start getting low on juice?
“Our Lime-S electric scooters are monitored remotely by both local staff and an independent team of Lime Juicers. When a scooter is running low on power, our Juicers will pick it up, charge the battery and then redeploy the Lime-S out in the community.” – Lime
Many of the scooters have helmets hanging off of them, but there are many people cruising around without one. My conscientious husband asked a passing policeman if they were mandatory (apparently they are). It was also pointed out that only one person was allowed on at a time. Pictures below reflect compliance…
Our son enjoyed it and I was surprised at the oomph provided by the little motor. A great overall experience.
It feels like just yesterday, but five months ago I moved from Melbourne to the Sunshine Coast. On the way up decided we’d take a leisurely drive up through central New South Wales. The main aim was to visit the Parkes radio telescope and Dubbo zoo. But at the back of my mind I knew that there were a few solar farms in the region, and while it was a bit of a whistle stop tour, we did manage to swing past Parkes Solar Farm.
Parkes is a lovely town – bigger than we expected. We had spent the evening before watching The Dish so we were ready for the telescope itself. It’s really impressive. An incredible piece of engineering, a significant part of astronomical history and just a generally interesting place to visit.
I have a bit of background knowledge on the Parkes facility, having been aware of some of the comings and goings during construction, through work, and it was good to see it in person. The developer of the project is a French owned company called Neoen. Some takeaway stats from the project’s site:
Installed capacity: 66MW
Expected annual generation: 138,000MWh
Land size: 210 Hectares
Commencement of full operation reached March 2018
All of these nuggets of info are out there in the public domain, so the main point of this post is to show off pics from a drone that was sent up outside the site. Behold, Parkes Solar Farm.
Neoen has a few other projects in NSW, and I have worked briefly on some of these in various capacities. I’d done a site visit to Griffith Solar Farm before at the end of construction, and had a hand in Coleambally Solar Farm in the lead up to Financial Close and during construction (the project reached commercial operation recently, which was impressive, given the short construction timeframe and the ambitious size of the project). Neoen also have Dubbo Solar Hub in NSW, made up of Dubbo and Narromine Solar Farms. I was within spitting distance of the Narromine farm, but we just didn’t have time to get there.
While Neoen has extensive experience in NSW, they have also been making inroads into other states. I had been involved on Numurkah Solar Farm prior to Financial Close – this VRET project is currently under construction in Victoria. They also have development approvals in Queensland, and I know that they are actively pursuing various other options.
I am coming up for air after a crazy and intense year of maternity leave. Thanks to all who have kept in touch and apologies to those who were expecting the newsletters to continue.
My big news is that four months ago I started working for an engineering firm in Melbourne, in their renewable energy team. I am back in the world of consulting, working as technical advisor on a number of solar projects around Australia. It’s very similar to the work I was doing back in South Africa so it’s familiar ground.
This market is booming at the moment, and there are a lot of little interesting topics floating around that could use a bit of discussion. What’s of clear interest to me is the number of South Africans moving over here with experience in renewables. The slow down of the REIPPP programme in SA has had many people looking further afield for work. Not including myself I can think of five people who were consulting in Cape Town while I was there, who are now based in Australia. And that’s just within consulting. There will be a whole heap more working for the other project players.
I’m slowly getting my head around the grid connection space. It’s complicated, with uncertainties that seem to be driving developers around the bend. Marginal and Distributed Loss Factors deserve their own youtube channel, and the Generator Performance Standards are tying people in knots.
Each state has its own planning rules. The country is enormous with long tentacled electrical infrastructure. The politics is political and the leaders love to leave.
It’s a big mish mash and a bit wishy washy. And it’s a lot to get your head around.
So watch this space. Perhaps all that I can promise is that you learn along the way with me.
A few weekends ago I took a drive along the coast to the south east of Melbourne, towards Wilsons Promontory. It is such beautiful country out there, with rolling green hills and dramatic coastlines. There are two wind farms out that way, and I saw the first from across the bay, and the other up close and personal.
From Duck Point (just north of Wilsons Prom), you can see Toora Wind Farm across the bay. This is a 21MW facility, made up of 12 x 1.75MW turbines.
But from there it was back towards Melbourne, where the journey took me right past the foot of the Bald Hills turbines.
The Bald Hills Wind Farm [consists] of 52 wind turbines, each with an electricity generating capacity of 2.05 megawatts (MW) giving the project a total capacity of 106.6MW.
The Victorian government recently announced a policy to decisively increase the amount of renewable generation in Victoria. The rationale for this policy is that existing federal policies are failing to provide investment certainty in the expansion of renewable production capacity.
The government estimates that meeting its policy will require up to 5,400 MW of new renewable generation to be built over the next nine years. This is equivalent to about 60 per cent of Victoria’s peak demand on the power grid.
Assuming an all-in capital outlay per MW of $2.5 million, meeting this policy could require $13.5 billion of new money. Some significant investment in transmission infrastructure is also likely to be needed. After residential rooftop solar, this will be, by far, the largest investment in new generation capacity in Australia since the creation of the National Electricity Market.
Last month a consultation paper from the Department of Environment, Land, Water and Planning sought responses on various issues (identity of the counter-party, specification of the payment instrument, technology selection, treatment of other subsidies, contract duration and auction design). The Department is currently focusing on the preparation of enabling legislation with a view to conducting its first tender next year.
South Africa’s Renewable Energy IPP Procurement Program (REIPPPP) is an interesting point of reference, of comparable scale, to the Victorian policy. Though there are many differences, many of the important issues are similar and much can be learned from the South African experience. At the least, a quick look at their program we might give a sense of what lies in store for Victoria.
Under the REIPPPP program 6,327MW (of which 3,357 MW of wind in 34 projects, 2,292 of PV in 45 projects, 600 MW of concentrated solar in 7 projects and several much smaller biomass and small hydro projects) have been awarded PPAs. Total capital outlays of around $19bn are expected, to complete these projects. As a result of this, since 2012, South Africa has ranked among the top ten countries globally in terms of renewable energy independent power producer investment.
In the first tender in November 2011, 28 projects offering 1,416 MW in total were selected. In the second round in May 2013, 19 projects offering 1,040 MW were selected. A third round in August 2013 selected 15 projects for 1,321 MW. A fourth round in August 2014 selected 26 projects for 2,207 MW. A fifth round is expected to commence shortly.
The bidders offer prices for 20 year Power Purchase Agreements with Eskom, the government owned national power monopoly. Two additional agreements with the Government underwrite Eskom default risks, provided step-in rights to lenders in the case of default and ensure contractual obligations for delivery of up to 17 economic and social development obligations. Community ownership (at not less than 2.5% of the total project cost) is mandatory and the developer have to come up with ways, such as community trusts, to comply with this. Contract evaluation is based 70% on price and 30% on socio-economic factors.
The contracts are not negotiable and bidders are required to submit bank letters to the effect that financing is locked-in. This effectively outsources due diligence to the lenders. The lenders in turned passed this on to developers but in a way that ensured the duty of care was to lenders.
The 64 successful projects in the first three rounds involved over a 100 different shareholder entities, 46 of these in more than one project. Banks, insurers, development banks, international utilities and direct foreign investors have all participated in the program. The most common financing structure has been project finance, although about a third of the projects in the third round used corporate finance.
The majority of debt funding has been from commercial banks with the balance from development banks, pension and insurance funds. Eighty-six percent of debt has been raised from within South Africa on 15-17 year loans (from Commercial Date of Operation). Debt risk premia in bank loans have been around 450 basis points on top of the South African equivalent to Australia’s 90 day bank bill swap rate.
Forty-nine Engineering, Procurement and Construction (EPC) contractors have been involved in the 64 projects during the first three rounds, the majority in more than one project either as the primary or secondary contractor.
Prominent EPC contractors with three or more projects include Vestas (Danish), Acciona (Spanish), Consolidated Power Projects (South African), Group Five Construction (South African), Juwi Renewable Energies (German), Murray and Roberts (South African), Abengoa (Spanish), ACS Cobra (Spanish), Iberdrola Engineering and Construction (Spanish), Nordex Energy (Germany), Scatec (Norwegian), Suzlon (India), and Temi Energia (Italian). Many of these EPC contractors have set up subsidiary companies in South Africa.
The main suppliers of wind turbines and PV equipment include Vestas, Siemens, Nordex, ABB, Guodian, Suzlon, Siemens, SMA Solar Tech, BYD Shanghai, Hanwha Solar, 3 Sun, AEG and ABB. A local wind tower manufacturing facility and at least five PV panel assembly plants have been established in South Africa.
Over the period of the four bidding rounds, offered prices per MWh halved for wind and concentrated solar and declined by 75% for solar PV. Global technology development, local economies of scale, improving investor confidence and lower transaction costs explain this stunning progress.
As the volume of renewable capacity has increased, transmission connection has been become an increasing concern. Bidders are responsible for connection to the nearest major substation, but augmentation of the shared network is lagging behind and this has become a particular issue for the most recently awarded projects.
The World Bank suggests the most important lesson to transfer from the REIPPPP is the benefits of a well-designed and transparent procurement process. They say that the Department of Energy recognised that it had little capacity to run a sophisticated multibillion-dollar competitive bidding process for renewable energy.
As a consequence, it sought the assistance of the National Treasury’s Public-Private Partnership (PPP) Unit to manage the process. A small team of technical staff from DOE and the PPP Unit established a project office which functioned effectively outside of the formal departmental structure of national government. It was led by a senior manager from the National Treasury PPP Unit and other legal and technical experts were brought on board to form a tightknit team.
This was viewed favorably by both the public and private sector as a professional unit with considerable expertise in closing PPP contracts and a reputation as problem solvers and facilitators rather than regulators. The credibility of this team with the bankers, lawyers, and consultants involved in such projects in South Africa generated enthusiastic participation by private sector players.
The World Bank reports that high standards were set and maintained throughout the bidding process, including security arrangements and transparent procurement procedures. Documentation was extensive, high quality, and readily available. Domestic and international advisers were extensively involved in the design and management of the program, in reviewing bids, and in incorporating lessons learned into the program as it progressed through the bid rounds.
To fund the procurement process, in 2011 the National Treasury provided R100 million (around $10m). The World Bank provided a further US$6m and various bi-lateral donor agencies from Denmark, Germany, Spain and the UK contributed funding for technical assistance. This funding saw the program through the first round and part of the second. Subsequent to that, the program relied on bidder registration fees and fees paid by successful IPP project companies.
Successful project companies must pay a project development fee of one percent of total project costs to a Project Development Fund for Renewable Energy projects managed by the Department of Energy. The fund covers current and future costs associated with procurement of renewable energy and oversight of the program. These funding arrangements have helped the program remain off the formal government budget in subsequent bidding rounds.
Coming back home again, the Victorian Government’s policy marks a major departure in the state’s energy policy. Since privatising the industry a little under twenty years ago, the Government has had a watching brief with some intervention around the edges – most significantly in smart meters. The Government is now getting back into the business of electricity production.
Even if it does not intend to own or operate generators, it is the Victorian Government that will under-write what will be a massive investment program. Surely every large new renewable generator developed in Victoria for the next nine years will be part of its program. If the Government legislates its policy as expected, the Victorian Government will become the most important player in the Victoria’s electricity generation sector.
We all, including the Government, have yet to discover how its policy will unfold in practice.
The South African experience can provide some feeling for what goes into the competitive procurement and development of 6,000 MW of renewable capacity. Their apparent success in this endeavor is encouraging. It would be good to learn from this what we can.
Bruce Mountain is an energy economist and Director of consultancy, CME. Vivienne Roberts is an engineer and accountant and was a technical advisor on a number of projects in South Africa.
Last weekend a friend took me to CERES, a community- based sustainability centre, located in Brunswick, Melbourne. It’s located next to the Merri Creek, and was a place of cultural significance for thousands of years to the Wurundjeri people. Then this little piece of paradise became a quarry, and then a dumping site (*insert slow clap here*). CERES was established in 1982 to try to rehabilitate the site, and it’s now a beautiful and productive community project that was lovely to visit.
“We are a not-for-loss community business. We run extensive environmental education programs, urban agriculture projects, green technology demonstrations and a number of social enterprises including a market, grocery, café, community kitchen, organic online supermarket and a permaculture and bushfood nursery.” – ceres.org.au
There is a lot to it. Most of the land that I saw was dedicated to urban farming initiatives and they run various farming, gardening, cooking and sustainability courses (including a permaculture training course that is supposed to be among the leading courses in Australia). It’s beautifully done. The vegetables are grown on site, and sold in the grocery store, also onsite. There is a nursery, a restaurant, various play areas, a pavilion, a place where they host festivals and parties and a dam. There is also a bike shed where people donate bicycles and you can go and help yourself to parts and get some advice and assistance from people in the know on bike mechanics.
What really drew my attention, naturally, was all the onsite renewables. There’s a lot of solar PV installed. They have an EV or electric bike charging station, what looks like a (massive) solar cooker, and a range of different types of micro-wind turbines dotted around the place.
In the bottom picture, you can see a series of boards with posters on them. Visitors are invited to walk through this exercise which challenges them to consider the impact that their lifestyle choices have on Australia’s future. It’s an empowering exercise, because it links consumer habits, transport habits and opinions on family size and migration policy (amongst other things) directly with various future scenarios. Consumer habits are cross referenced with population impact values, and your future is determined on a small matrix.
Here are some (poorly taken) photos to show how the exercise works.
Excuse the quality of the photos – I was in a bit of a rush. The exercise has clearly been there for a while, and is showing signs of ageing. But it’s an interest concept, and it is valuable to link individual decisions to a greater future vision.
It’s a lovely place to visit, and if you’re in the area I do recommend popping by.
At the Solar expo and conference held in May, I attended a very interesting talk by Jackson Moore, from DNV-GL. This looked at the securitisation of a portfolio of solar energy projects, and some of the key items to consider when conducting the technical due diligence on bundles of hundreds, if not thousands, of small scale projects.
Now my experience of technical DD work has been on large scale projects (>5MW) where a lot of focus and energy has been given to reviewing the individual project’s merits and risks, to advise interested parties (often the lenders) on the associated risks and opportunities. The project details and aspects are interrogated and weighed up individually. It takes time, and thus has a consulting cost associated with it. For smaller projects, where the budget or project financial model may not allow for extensive transaction or consulting fees, it doesn’t make sense to drill down into each project’s finer details, and the bundling of projects into a larger portfolio of similar projects makes sense.
For me, and possibly for anyone else who has followed, to any extent, the mortgage-based crash in the US that led to the implosion of the financial system in 2008, the securitisation of debt products triggers a warning bell. Bundling of small debt packages without conducting adequate inspection of the individual projects increases the risk to the lender, as there is not as much scrutiny on the risk profile of each project.
The aim though is to mitigate this risk through having a broad portfolio of projects. This portfolio will have projects with varying technologies, geographies, installers, owners and other project make-up that help to prevent an overexposure to any one type of project risk.
The lack of inspections worsens the overall risk profile, but the broad range of projects, and the size of the portfolio, aims to address this.
Mitigating against technical risks
While it isn’t possible, or rather feasible, to inspect all individual projects, there are due diligence tools and techniques that can be used to further improve the portfolio’s risk profile. The main action to be taken is to scrutinise the individual processes used by project developers in the design, installation, commissioning and operation of these smaller facilities. Processes to be reviewed include:
performance guarantee methodology;
supplier selection criteria and qualification processes;
vendor list management;
design and construction quality assurance procedures; and
contract development and review.
Let’s look at some of these in more detail.
The methodology used in modelling facilities’ performance and anticipated energy output should be a well thought out process. The methodology should clearly outline how, for example, shading losses will be calculated (using satellite imaging/visual assessment/onsite monitoring etc). The methodology for determining other technical inputs and assumptions (such as uncertainty values) will also need to be defined and, importantly, the developer should also indicate how they will ensure that their employees are adhering to these processes. Do they have an internal quality assurance procedure and is this being implemented.
The technical due diligence team would review the procedures and methodologies to comment on their appropriateness, but it is also recommended that a statistically sample of projects is audit and analysed to determine if the methodologies are being followed correctly and if the internal QA procedures are being implemented.
Each project will have aspects of it that are unique, and designed according to the relevant local conditions. However, it is recommended that factors that are likely to be consistent across projects are reviewed for their suitability. For instance, it would be possible to agree on a short list of Tier 1 module suppliers that may be appointed. Or an approved list of competent installers, each with an appropriate and demonstrable track record.
This allows for a single review of technical project issues to be applied to a wide range of projects.
Design and construction quality considerations
The main word here is documentation. As with the energy modelling procedures used, all design, installation, commissioning and operating procedures should have rigorous quality assurance processes in place, to ensure that project activities are carried out according to a suitable standard. The procedures themselves should be reviewed, but it is very important that the developer is able to provide evidence that the implementation of the procedures has been checked thoroughly. Documentation such as inspection notes, sign off sheets, certificates or punch lists should be available on each project, and it should be clear that the developer has interrogated these, and is in control of the overall project quality, for each individual project.
This allows the technical DD team to review a sample of the projects, identifying if there appears to be any issue with the developer’s internal quality assurance procedures and processes, or the implementation thereof.
There are any number of potential pitfalls when it comes to contracts in energy facilities. Off-take contracts outline the rights and responsibilities of both the solar facility provider and the customer. What is most important if projects are to be bundled together, is that these contracts are standardised. This could either be through standardised Power Purchase Agreements (PPAs) or leasing agreements. Either way, the terms should be the same across all the projects. Contracts can therefore be reviewed once, and all projects should have the same type of contract risk associated with them.
In addition, the performance guarantee outlined in the off-take agreements should be relatively low (based, for instance, on a P90 yield assessment or better). This makes it easier to assess the risk of underperformance, and mitigate against payouts across the project portfolio.
Recommendations for the various parties
In summary, below are some of the recommendations for key stakeholders to improve the overall feasibility and risk profile of their portfolio of projects:
energy modelling procedures are incredibly important and should be followed carefully
all processes and activities are to be documented accurately and thoroughly
only projects which are known to have followed the approved processes and procedures should be submitted as part of a portfolio
only approved suppliers and vendors should be used
quality of installation is of paramount importance and should be put above anything else
the project documentation should be in place and captured accurately
if the quality is found to be sub-standard it is likely that the installer will not be included as an approved contractor in subsequent funding rounds
the emphasis should be on process based review, as opposed to individual project reviews
a statistical sample of projects should be reviewed to ensure that the processes are being followed and implemented appropriately
the increase in risk associated with not carrying out a review of each project should be tempered by the overall portfolio of projects
Note: I have referred to project developers in this post, but this is interchangeable with project owner or sponsor. Jackson referred to project sponsors in his talk, but I lean towards the term developers.
In May I attended a solar and storage conference. This was put on, jointly, by the Australian Solar Council and the Energy Storage Council, and the two conference streams ran in parallel. I only attended the talks at the solar stream, but one of the main things I took away from the conference was that most of the discussion in the solar conference focused on storage technologies and options. While I think this may be a symptom of solar tech having been talked to death in some ways (how many different ways can you talk about irradiation and price predictions), battery and storage technologies, and how they can interact with solar installations are clearly hot topics in Australia at the moment.
The Energy Storage Council announced that they had recently released an Australian Battery Guide, which is a Guide for the sale, design, installation and stewardship of Energy Storage Systems (ESS):
“This guide specifies general requirements for design and installation of all ESS, including those connected, and not connected, to a power distribution system and those that are not connected to a power distribution system.”
It’s a 16 step guide, which looks at key terminologies and concepts, configuration considerations, associated risks and hazards, housing and enclosure considerations, installation and labelling recommendations, and commissioning and maintenance recommendations. It also highlights the absence of applicable Australian standards relating to storage, and the importance of addressing this going forward.
It also looks at the various functions that storage plays and the benefits that can be realised by the consumer. Some installation types listed include:
Grid connected systems
In addition, it lists the following as benefits associated with battery storage:
Load Support or Demand Reduction
Renewable Export Mitigation
Going forward, the Energy Storage Council indicated that they will be putting together a location database of storage systems, to provide information that is important for policy makers, decision makers, utilities and emergency services (such as fire response teams, who may need to know about the location and nature of battery installations). They mentioned that they have a working prototype, but it seems clear that there is quite a lot of work (and data aggregation) to be done before this becomes a useful and functioning tool.
In addition, they indicated that they will be putting together a battery product white list. This will look at international testing processes, to ensure that batteries installed in Australia are tested rigorously. This is important in the absence of local standards governing the type of batteries installed, and the nature of the installation.