How will the solar farm connect to the grid?

The Warwick Solar Farm will actually comprise two distinct but identical and immediately adjacent plants to be known as Warwick Solar Farm 1 (WSF1) and Warwick Solar Farm 2 (WSF2). Subject to final connection agreement with Ergon Energy, each solar farm will have a power transfer capability of 32.1MWac. Both solar farms will connect to Ergon’s 33kV network at the Warwick Bulk Supply point (BSP) substation. WSF1 will feed energy into the 33kV Allora feeder, whilst WSF2 will feed energy into the 33kV Killarney feeder. This energy will be sold into the National Electricity Market (NEM), helping to put downwards pressure on wholesale energy prices for all consumers. More information on how an off-site solar farm provides benefit to UQ is provided below.

Connecting at 33kV enables the solar farm to avoid the need for a step-up transformer which minimises project costs and energy losses. Switching station and network extension works will be undertaken by the EPC contractor selected for the project, whilst Ergon Energy will be engaged to undertake the required network augmentation works.

What technology will be used?

The Warwick Solar farm will be built with single-axis tracking (SAT) technology. Experience from the Gatton Solar Research Facility and industry trends have confirmed that this technology offers the best balance between maximising energy generation and minimising the land area required for panels, whilst also still being cost-effective and durable enough for a 25-year project life.

What is the expected energy yield of the project?

Subject to detailed design, the solar farm is forecast to have a yield of around 1,970 kWh per kWp in Year 1. This translates to total generation of around 153,700 MWh per annum – enough to power about 27,000 average homes. Due to the use of single-axis tracking technology, the project will also produce a relatively ‘square’ power generation curve which maximises energy output in the morning and evening shoulders. This is well matched to UQ’s load shape, where the majority of activity occurs between 7am and 6pm each day.

Will the project include battery storage?

The project is being designed to be ‘battery storage’ ready, however this will not be included in the initial design. Instead, UQ is first pursuing opportunities for energy storage ‘behind the meter’ at its sites in order to load shift and compliment generation at the Warwick Solar Farm. This includes plans for 1MW/2MWh of new lithium storage to be commissioned at the St Lucia campus in early 2019, as well as the existing 600kW/760kWh of lithium storage already in use at the Gatton campus. UQ is also implementing innovative alternatives to batteries such as thermal energy storage. This includes the Gatton Central Energy Plant (CEP) initiative that is currently under construction and include a 3 million litre chilled water storage tank. This will enable UQ to use surplus energy during daylight hours to produce and store cooling energy equivalent to around 5 MWhe for use overnight.

How will UQ become ‘100% renewable’?

The Warwick Solar Farm will generate 154,000 MWh of clean energy in its first year of operation. This compares to UQ’s forecast electricity usage in 2020 of around 140,000 MWh per annum. This means that that from a net accounting perspective, UQ will send more energy to the grid than it buys back. This ‘energy neutral’ position is forecast to continue for the life of the asset, despite the degradation of PV output over time and changes to UQ’s annual energy usage. 

How will an off-site solar farm deliver benefits to UQ’s sites?

The Warwick Solar Farm will not be directly connected to UQ’s sites. Instead, it will act as a physical and financial ‘hedge’ against the energy being used at these sites. The ‘physical hedge’ is achieved by selling energy from the solar farm into the National Electricity Market (NEM) at the same wholesale ‘spot price’ as UQ’s sites are buying it for each 30 minute interval. The ‘financial hedge’ is achieved by selling any energy that is generated beyond UQ’s instantaneous needs to the market at this same spot price and using this revenue to offset the cost of the energy that is purchased outside of solar generation periods. This revenue will also be supplemented by the revenue from the sale of renewable energy certificates (LGCs) beyond those surrendered for UQ’s own compliance purposes.

A worked example of these concepts is provided as follows:

Example 1 – full physical hedge (net export)

  • 12pm – 12.30pm trading interval
  • UQ’s combined site load = 20 MW (energy = power divided by 2 = 10 MWh)
  • Solar farm generation = 46 MW (energy = power divided by 2 = 23 MWh)
  • Solar farm bids into market at $0/MWh to ensure dispatch
  • Spot price set by coal generator LRMC
  • Trading interval spot price (settled) = $65/MWh
  • UQ pays $650 for energy imported by sites (10 MWh x $65/MWh)
  • UQ receives $1,495 for energy sold to pool (23 MWh x $65/MWh)
  • Net outcome to UQ is $845 revenue
  • UQ also pays costs to administer this arrangement plus hedging costs to manage risk of spot exposure
  • Net revenue is used to cover the cost of energy imported during non-solar generation periods (e.g. overnight) as well as administration costs

Example 2 – partial physical hedge (net import)

  • 3.30pm – 4pm trading interval
  • UQ’s combined site load = 18 MW (energy = 9 MWh)
  • Solar farm generation (low due to cloud) = 14 MW (energy = 7 MWh)
  • Solar farm bids into market at $0/MWh to ensure dispatch
  • Spot price set by open cycle gas generator SRMC
  • Trading interval spot price (settled) = $110/MWh
  • UQ pays $990 for energy imported by sites (9 MWh x $110/MWh)
  • UQ receives $770 for energy sold to pool (7 MWh x $110/MWh)
  • Net outcome to UQ is $220 cost
  • Back-testing has shown that these periods of partially hedged spot exposure during daylight hours occur for around 5% of UQ’s total energy usage
  • The majority of these costs are covered by revenue earned during periods of surplus solar generation
  • UQ is protected from extreme price spikes (e.g. more than $300/MWh) by hedging products such as caps
  • Demand side management can be used to help further mitigate costs to UQ during periods outside of being fully physically hedged

How is this initiative different than a corporate PPA?

A corporate Power Purchase Agreement (PPA) usually involves an energy user entering into a contract - typically for around 10 years - to purchase energy and renewable energy certificates at a fixed price from a renewable energy generator that is owned and operated by another entity. The Warwick Solar Farm initiative will see UQ take on the role of both energy user as well as builder, owner, and operator of the renewable energy generator for the full 25 year economic life of the asset. This enables UQ to have a far greater degree of control over the design, construction and operation of the plant, which in turn will best enable the desired teaching, research and engagement objectives. This model also allows UQ to leverage some of the unique commercial advantages available to it to deliver a project with a below-market levelised cost of energy LCOE.

What will happen to surplus energy generated during the day?

Initially, any surplus power generated beyond UQ’s demand will be sold into the NEM pool, displacing the need for generation from other sources such as coal and gas. Over time, UQ is excited about the potential opportunities to demonstrate or partner with emerging energy storage technologies to enable this surplus daytime energy to be stored for use after the sun sets. This may include batteries, pumped hydro, or hydrogen technologies, and is expected to be a key area of research focus. UQ is also looking to partner with suitable organisations who may be interested in sharing the benefit of the surplus energy generated from the project that exceeds the total consumption of UQ’s sites.

How will UQ manage market volatility and the generation intermittency?

In order to best deliver this initiative, UQ is required to become exposed to the 30 minute wholesale energy market ‘spot price’. With this comes a risk of market volatility, especially at times when the solar farm is not generating enough power to physically hedge the usage of UQ’s sites (eg. overnight or during a fault). Foremost, this risk will be managed through specialist financial hedging instruments such as ‘cap’ contracts. A market sounding process will be undertaken to select an appropriate partner to help UQ finalise these arrangements and to manage the market structures required to operate this initiative. It is important to note that exposure to this market volatility will also present UQ with significant new opportunities for innovation.

How does UQ plan to integrate ‘demand response’ opportunities?

Following this initiative, UQ will be in the unique position of being both a large energy consumer as well as a large energy generator. This presents significant opportunities for developing and deploying innovative ‘demand response’ solutions. Demand response (DR) refers to making rapid, often brief, changes to the energy demand of a site (eg. the St Lucia campus) in response to market price or other signals. A successful DR strategy will help UQ to manage spot market volatility and compliment any variability of output from the Warwick Solar Farm. The on-campus energy storage initiatives discussed above will form a key element of this strategy. In addition to these, a further 1MW of fast DR (within 10 seconds) and 3MW of slower DR (within 10 minutes) has already been identified and is in the process of being implemented. This includes using Building Management System (BMS) software to make almost instant changes to air conditioning settings, the load shed of non-essential pumping, and the use of emergency back-up diesel generators. The continued roll out and demonstration of rapid, automated DR is expected to be an area of significant future focus for UQ.

How was the financial viability of this initiative assessed?

Comprehensive financial modelling was undertaken as part of developing the business case for this initiative. The benefit to UQ was estimated by calculating the net present value (NPV) of a ‘business-as-usual’ (BAU) scenario and comparing it to the NPV of a scenario where UQ built, owned, and operated an off-site solar farm. This financial modelling drew on the expertise of a diverse consultant team and was independently reviewed, as well as being stress tested through techniques such as Monte-Carlo simulation.

Will the project receive government subsidies?

The Warwick Solar Farm  will be eligible for renewable energy certificates under the Australian Government’s Renewable Energy Target (RET). The value of these certificates is set by the market based on supply and demand, with most analysts expecting these certificates to have only limited value once the RET target is met. Importantly, the business case for the project stacks up regardless of any revenue from the sale of these certificates.

More information on the RET scheme is available from the Department of Environment and Energy website.

What is the project’s Levelised Cost of Energy (LCOE)?

The LCOE of the Warwick Solar Farm will be able to be confirmed the following completion of detailed design, but is expected to be in the range of low to mid $60s/MWh. Simplistically, a project’s LCOE is determined by dividing the present value of all costs over the project’s life by the present value of all forecast energy generation over the same period. Although LCOE provides a useful metric to compare the cost-competiveness of similar projects, the primary financial indicator for UQ is the NPV benefit of the solar scenario compared to the BAU scenario.

Enquiries

For additional questions related to the project, please contact Andrew Wilson, Manager Energy & Sustainability: a.wilson@pf.uq.edu.au