Our plans for boosting the amount of renewable energy generation in the Territory can be implemented with low capital investment and limited financial risk. Here's how:
The NT Government could offer developers Power Purchase Agreements (PPAs) through a reverse auction process.
A power purchase agreement is a contract for the purchase of electricity between a developer and a customer. In this agreement:
- The developer arranges the installation of a solar energy system on a customer’s property at little to no cost
- That developer then sells the power generated to the host customer at a fixed rate, that is typically lower than the local utility’s retail rate
- This lower electricity price basically offsets the customer’s purchase of electricity from the grid, while the developer receives the income from these sales of electricity
PPAs might range from 10 to 25 years and the developer remains responsible for the operation and maintenance of the system for the duration of the agreement. What happens to the solar energy system at the end of the PPA's term is also laid out in the contract.
A reverse auction turns the concept of an auction on its head – that is, the typical role of the buyer and seller at an auction are swapped around. Instead of buyers bidding high enough to win, sellers bid low enough to win the chance to supply what the buyer wants.
In this case the buyer is a state or federal government and what it wants is megawatt hours of on-demand clean electricity supply.
Power purchase agreements and reverse auctions were most recently proven successful in the Australian Capital Territory’s move to 100 per cent renewable energy electricity consumption. Not only would this policy create greater investment certainty, it would generate greater competition in the market and put downward pressure on wholesale electricity prices.