Some of Melbourne’s most recognisable sights will be powered by a new 39-turbine windfarm after 14 organisations agree to buy half its power output

This article is more than 2 years old

This article is more than 2 years old

Three Melbourne councils, two universities, Zoos Victoria, and half a dozen corporations have banded together to underwrite a windfarm in western Victoria that will power some of the city’s most recognisable buildings.

The group of 14 organisations, led by the City of Melbourne, has agreed to purchase half the power produced by a new 39-turbine, 80MW windfarm near Ararat, about 200km west of Melbourne.

It is the first time a group long-term power purchase arrangement has been used to fund a renewable energy development in Australia, and the City of Melbourne’s deputy mayor, Arron Wood, said he hoped other local governments would adopt the model.

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“This is the first group procurement of its kind in Australia and we think one of the first globally,” Wood told Guardian Australia. “We have really ground-truthed a new way of buying renewable energy. The true win is if this model is then replicated again and again.”

The group, which includes Australia Post, the National Australia Bank, Federation Square, Melbourne University, RMIT, and the Yarra, Port Phillip, and Moreland councils, put the idea to the energy market last year during the review of the national renewable energy target.

The winning tenderer was Pacific Hydro, which is currently finalising construction contracts for its Crowlands windfarm and aims to have it online by June 2019.

The project is in addition to the 650MW of large-scale renewable energy developments to be funded through the Victorian government’s reverse auction process.

Under the Melbourne renewable energy project agreement, announced on Thursday, the group will purchase 88 gigawatt hours of power a year, the amount needed powering 17,000 homes.

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It will set a fixed price for 40% of the power, with the price for the remaining 60% to be reviewed every two years, to hedge against a dramatic change in power prices.

Buy-in differed between organisations but the agreement will see the City of Melbourne, City of Yarra, and Healesville Sanctuary switch to 100% renewable power.

Wood said the growth of long-term power purchase agreements as a means to fund renewable energy in Australia was the product of a “policy vacuum” on a national transition away from carbon-based electricity generation.

“The transition is where people could experience pain or not, so we can either take on the challenge and see this as a huge opportunity, or we can keep on reviewing things and sort of keep on bumbling along and we’ll have more and more projects which will essentially find their own way to get this done, but without that oversight and integration that’s critical for a smart grid,” Wood said.

The Andrews government, which has set a 25% renewable energy target by 2020 and a 40% target by 2025, welcomed the announcement.

“It’s clear the community backs our vision to diversify the state’s energy supply,” a spokesman for the environment minister, Lily D’Ambrosio, said. “This kind of forward-thinking will create jobs of the future, bring more renewable energy online and put downward pressure on prices for Victorian households and businesses.”

The Ararat windfarm is just 50km from the 530MW, 149-turbine Stockyard Hill windfarm, which was underwritten in May by a 100% long-term power purchase agreement from Origin Energy.

In June, Telstra announced it would enter into a long-term power purchase agreement to develop a solar farm at Emerald in Queensland.

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The Climate Council’s Greg Bourne said market-based solutions to increasing renewable energy production were a positive step but Australia also needed to do “some form of planning.”

“If the commonwealth were to step away from it, the market will deliver but it will deliver jerky outcomes with some surprises,” Bourne told Guardian Australia.

The Turnbull government will push the states to adopt its new energy policy, the national energy guarantee, at the Coag energy council meeting in Hobart on Friday.