Progressive Melbourne councils and businesses including Mirvac, bankmecu and Federation Square are seeking to pool their collective might of 100 gigawatt-hour a year purchasing power and source their own electricity from renewables, bypassing Victoria’s dirty grid.
The group of large energy users, led by the City of Melbourne, have today (Wednesday) launched a request for information process in order to test the market and hopefully secure long-term electricity supply from renewables. And not just any renewables. It has to be from new developments – “shovel ready” projects that have not commenced development or secured off-take agreements.
“The City of Melbourne has united other like-minded local governments and businesses to challenge the market to supply us with the right energy at the right price,” Lord Mayor Robert Doyle said.
“We have launched a Request for Information Process to combine our purchasing power and signal our interest in securing a competitive price for a long term electricity supply from renewable sources.
The Lord Mayor said he hoped the scale of demand would stimulate investment in new renewable energy projects in Victoria, something that has been stymied by uncertainty over federal support for the Renewable Energy Target and draconian state planning regulations around wind.
- See our article Report: state policies affecting renewables investment
Other councils involved are City of Yarra and Maribyrnong, with businesses including Mirvac, Federation Square, NEXTDC and bankmecu.
A long process of gathering partners
City of Melbourne Councillor Arron Wood told The Fifth Estate it had been a very long and sustained process of gathering partners to get to this current stage.
“Everyone says, ‘Yes, we love the idea of renewables,’ but everyone has a finance department, or board or treasury to answer to,” Mr Wood said.
The partners currently involved, however, have history with City of Melbourne on other sustainability programs, Mr Wood said, including green building and recycling initiatives, and this renewable energy initiative can be seen an extension of this previous collaboration.
“What we are proposing is a new model for securing renewable energy.”
The best way to think of the agreement, he said, was as “a non-binding tender process”. As of today the partners have advertised the tender for renewable developments that can supply the 100GWh of electricity needed.
When the market comes back with details of contracts, including price per kilowatt-hour and the renewables mix (they haven’t stipulated what type of renewables are needed or where they need to be located), partners will be then able to weigh up if the deal is in their interests.
“No one is in any position that they have to sign,” Mr Wood said.
He is hopeful, though, there will be economically attractive options available. When that happens is when things will start to get really interesting.
In 2015, after the tenders come back (if attractive), the City of Melbourne will invite a range of other potential partners to sign onto the project for a full tender process. What will be needed is a consortium, including a generator, retailer and financier, that sees the value in the project.
“This [current] stage is a proving ground for the viability [of the idea],” Mr Wood said. “The order of magnitude in the initial offering shouldn’t underwhelm [its potential].
“We’ve got heaps of others that are interested and watching with interest as to viability.”
How many is heaps? Well there are around 20-30 potential partners on the list who have indicated they will move if the financials stack up.
Mr Wood said these are “some of the biggest brands in Melbourne”. They include tertiary institutions and some of the largest sporting arenas in the state. One potential partner alone has an energy requirement 10 times the 100GWh of electricity that’s being tendered for now, he said.
The program can move on a national scale, too. It’s not limited to Victoria, so come next year councils who have big sustainability agendas, like the City of Sydney, might even jump aboard. And with businesses like Mirvac having strong presences in other capital cities, the potential is huge. Mr Wood expects “a real domino effect once we prove the viability in terms of economics”. And the larger the aggregation the more cost comes down.
Even if the price turns out to be a little higher than it is to get from traditional sources, some companies may be willing to pay a premium to meet their own internal sustainability goals or improve their reputation.
“It’s going to be up to partners as to what their motivation is,” Mr Wood said.
The move will be instrumental in the City of Melbourne reaching its target of sourcing 25 per cent of its electricity from renewable resources by 2018 and to have the municipality net zero by 2020. City of Yarra, a One Planet council, is also looking to be net zero by 2020. For Mirvac it will be helpful for its 2030 goal of being net positive.
Leading where government is failing
It is yet another example of councils and business leading state and federal government on environmental policy.
“It used to be nation states that led the way, then the constituents, then big business begrudgingly followed,” Mr Wood said. “Now it seems to be the reverse.”
The request for information will be open from Wednesday 19 November 2014 to Thursday 29 January 2015, and is non-binding.
To register your interest and access the RFI form email email@example.com