Reach for the Mars – how one company flicked the switch on solar-powered chocolate

The power purchase agreement (PPA) between confectionary powerhouse Mars Australia and French renewables giant, Total Eren, is still one of the biggest wholesale renewable energy contracts brokered for a corporate buyer.

In May 2018, Mars Australia announced it was going 100 per cent renewable by 2020, powering all six Australian factories and two offices via the new 256.5MW Kiamal solar farm, just outside Ouyen in the State’s North-West. It’s a groundbreaking 20-year agreement, which includes the construction of a second renewable project in NSW.

For Renewable Energy Hub, it was a big step. And not just because we helped broker the deal itself. When a corporate giant like Mars (who also own Masterfoods, EXTRA and Pedigree dog food) commits to a wholesale PPA, it sends a message to the entire market that renewables aren’t just good marketing – they’re good business.

“Mars is thrilled to be flicking the switch to solar energy,” said Barry O’Sullivan, GM Mars Australia. “We acted quickly, because the price volatility of energy in Australia made renewables the best option for our business, in addition to getting us closer to our commitment to eliminate greenhouse gasses from our operations by 2040.”

The Mars-Total Eren PPA deal made headlines in the AFR and Renew Economy, but the press coverage really only tells part of the story. In some ways the financial instruments that lead to the deal are even more interesting than the deal itself, and not just for finance geeks (like us) who get a kick out of variable renewable energy firming options.

 

How Mars flicked the switch

 

Mars worked with Total Eren to develop a virtual PPA. Instead of buying renewable energy through a retailer, or taking energy directly from solar installed on their factory roof, they agreed to underwrite part of the Kiamal solar farm’s output.

This underwriting, via a PPA, fixes the revenue Total Eren will earn for the electricity it generates, and fixes the electricity price Mars pays for the output. This gave Total Eren security to expand to a planned Stage 1 capacity of 200 MW.

In addition, Mars gets the Renewable Energy Certificates created by Kiamal Solar, which can be transferred to cover all of Mars’ energy use in Australia. In energy terms, it’s a win/win.

 

A new kind of firming

 

What made this corporate PPA possible was a bespoke firming structure that allows Mars to manage its risk during periods when the solar farm output is lower. This smooths out the risk for Mars by allowing them to maximise utilization of the output of the solar farm against their consumption.

Renewable Energy Hub’s Manager, Renewable Energy and Environmental Markets, Chris Halliwell says that an evolving energy market needs more innovative tools like this, rather than stock-standard PPA agreements. In some ways, he says, the market is catching up with the technology.

“The future of the renewable energy market will require firming solutions for intermittent generators, if they’re going to transact advantageously,” he says. “Our firming marketplace drives liquidity in these new products, which is good news for the entire renewable sector.”

 

To market, to market

 

This is where the Renewable Energy Hub comes in. As part of TFS Green, Australia’s most experienced wholesale and renewable energy team, we’ve got 15 years’ experience as a renewable energy service provider. We’re essentially the bridge between big corporate buyers and renewable energy projects.

But now we’re looking to take things one step further. Not just broker large-scale corporate PPA agreements, but shape a new marketplace for energy buyers. One that alleviates corporate risk, but also supports wholesale providers – keeping electricity costs down, facilitating new projects, and driving corporate interest in renewables.

The Mars-Total Eren PPA has been a groundbreaking development in Australian energy markets. But the way we see it, this is just the beginning.

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