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Victoria Proposes Hybrid Solar and Wind Farms


A new proposal has been put forward by the Victoria government to introduce a hybrid payment scheme for its large-scale 650MW renewable energy plan.

Although the Victorian Renewable Energy Auction Scheme is in its very early stages, with the winning bids of the reverse auction not being revealed for at least another year, details of this payment proposal were announced earlier last week in a document offering a broad outline of the suggested hybrid payment and the benefits of the system.

If the proposal goes ahead, winners of the auction could receive a quarterly payment for 15 years to ensure a guaranteed revenue. This means that if wholesale prices of the energy average less than the bid amount put forward by the winning investor, the Victoria government will make up the difference in price in fixed monthly payments. If the wholesale prices are higher than the bid price, the owner of the wind or solar farm must pay the government the surplus.

The reasoning behind this payment scheme is to offer guaranteed revenue to potential investors that will make solar and wind farms more popular in Victoria, and there is also potential revenue to be netted for the government if the wholesale prices are higher than the proposed bid. The money could be reinvested back into Victoria to construct more renewable energy sources.

Historically, solar farms have not been as popular in Victoria as they are in other states. Victoria receives substantially less solar radiance than other parts of Australia so investors haven’t been confident in the revenue-making potential. Leading Melbourne based solar company, Essential Solar believe Victoria is more than adequate for solar power to be used more broadly. It is hoped that this new hybrid payment will set investors’ minds at ease and encourage more solar farms to be operated out of Victoria.

Victoria are aiming to to house more than the average amount of wind and solar farms that are to be built throughout Australia to reach the federal target of 33,000GWh of large-scale renewables by 2020. In fact, the Victorian government is hoping to surpass its own target of 25 per cent renewable energy by 2025 and are instead reaching for as much as 30 per cent renewable energy by 2020, as predicted by Green Energy Markets analysts.

Full details of the scheme won’t be released until mid-October, at which time any potential investors will have 3 months to submit their bids. Beyond that point, the government will take another 3 months to review the bids before making their final selections and entering negotiations with the successful applicants.

Project developers will be asked that their projects are under way before the last quarter of 2020 and to submit two different offers that comprise renewable energy certificates. One bid should include the bundled transfers of all LGCs from projects to the Victorian government, which will then be re-sold, and one bid that doesn’t transfer LGCs to the Victorian government. In the latter offer, the LGCs would be traded by successful proponents.

While the renewable energy plants will not be up and operating for a few years yet, the renewable energy investment into Victoria could drastically change the economic landscape of the state.

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