New energy contracts designed to assist clean energy technologies and energy market participants navigate the rapid market transition underway will be the centrepiece of a new digital marketplace, after the project won backing from the Federal Government, through the Australian Renewable Energy Agency (ARENA).
Renewable Energy Hub, part of Tradition, a wholesale energy and environmental markets team, will receive funding from ARENA to establish the innovative firming market platform where for the first time clean energy projects, large energy users and wholesale energy market participants, will have access to innovative technology-specific contracts.
The online market platform supporting these new solutions will provide data and tools to facilitate price discovery, support the evaluation of PPAs and contracting options, and recognise the unique requirements of contracting and procuring variable renewable energy.
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The market for financial products that manage the risk in the Australian energy system is estimated to be worth $26 billion, almost $10 billion more than the actual energy market itself. Products such as swaps, caps and options are key tools in helping energy buyers and sellers manage their risk and provide a stable price to customers. Yet this market has not evolved to embrace the new requirements of clean generation and emerging technologies in Australia.
Renewable Energy Hub’s Head of Markets Chris Halliwell said the traditional market used by generators and retailers to hedge against huge fluctuations in wholesale electricity prices effectively shuts out new technologies because it presumes an ability to provide continuous, flat generation.
“This new marketplace will facilitate trade in contracts that reflect the ‘profile’ of renewable generation, filling a gap in risk solutions and creating price efficiency to unlock more clean energy technology,” Mr Halliwell said.
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“Importantly, this new marketplace will ‘firm up’ Australia’s rapidly-growing fleet of renewables by enabling generators, retailers and large energy users managing their PPAs to trade fixed volumes of clean energy out into the future.”
The growth in these new kinds of financial products will provide new incentives for market players to seek out assets – such as batteries and other ‘balancing’ resources that can firm up the intermittency of renewables.
“This effectively turns a financial firming solution into a physical firming solution, hastening the arrival of those storage and other balancing resources required to help the energy system make the required transition to 100 per cent renewables,” Halliwell said.