Nothing shows the building momentum in the Australian utility solar sector better than the avalanche of announcements in late April and early May. The unprecedented burst of activity includes decisions on financing, construction contracts and asset sales, demonstrating beyond all doubt that large scale solar will be smashing records this year, next year, and probably the year after that.
Here, we use four key charts to explain recent developments and assess the impact the past few weeks have had on the sector.
We have been keeping regular readers updated with the progress of projects towards the all important milestone of financial close, and it has been getting busy out there. Since the beginning of May, six projects have secured financing, accounting for 312 MWac of generating capacity, and well over A$0.5 billion of investment by our estimates.
The projects are Oakey and Longreach (Canadian Solar), Ross River Solar (ESCO Pacific), Collinsville (RATCH), Darling Downs (APA Group), and White Rock (Goldwind)
This month is the high point of an already active year: so far in 2017, 14 projects have been financed, amounting to 805 MWac. It appears that 1 GW could easily be surpassed by the end of the year, a remarkable thought even just a year ago.
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Hand in hand with financial close come engineering, procurement and construction (EPC) contracts. Given the scale of financing activity, it is no surprise that the EPC sector has also been subject to a series of key announcements.
Since mid-April, seven projects have confirmed a construction partner, covering 442 MWac of capacity. This has caused a reshuffle of our solar EPC rankings based on confirmed contracts, bumping UGL into the fourth spot and Elecnor into fifth. UGL has secured contracts for Colinsville and White Rock; RCR Tomlinson landed Oakey and Longreach, and converted Darling Downs from preferred status; Elecnor has been engaged on the first stage of Bungala, and Downer has locked in Ross River Solar.
The inclusion of preferred contractor volumes continues to tell a different story: Downer have a strong pipeline of projects that are yet to reach financial close. And we expect at least 1 GW of capacity is subject to preferred EPC arrangements that are not yet public,
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We have stuck firmly to our view that 2017 will be a big year for asset M&A deals, and we are slowly being rewarded for our faith. Three large transactions have taken place so far this year, with two falling in the last three weeks.
The most recent deal is APA Group's purchase of the Darling Downs solar project from Origin Energy at the beginning of May. And around 10 days earlier, ENEL Green Power and DIF purchased stage one of the Bungala project from Reach Solar. Both projects have a capacity of 110MWac, and while sale prices have not been disclosed, we estimate a price tag of between A$10 and A$20 million for each.
When combined with the sale of the Barcaldine operation in February, 2017 has seen 240 MWac of capacity change hands in the first 5 months. This exceeds the level of activity in the whole of 2016, and there is likely to be far more to come. The value of deals - we estimate a combined deal value of around A$60 million so far this year - remains lower than in 2016, largely because the traded assets this year are dominated by projects yet to be built, and have considerably lower levels of grant funding.
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What does this mean for the bigger solar picture in Australia? Our tracker shows almost 1 GW of capacity is currently under constuction. This is a slightly fluid concept: projects which have reached financial close but are yet to actually get underway remain in our Detailed Design category for the time being, but expect the 'Construction' stage to swell over the coming weeks.
As for the total pipeline, yes that really is 9 GW of potential capacity.
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