Spotlight on Neoen

The Adelaide advertiser reported today on a giant hybrid wind/solar/battery project at Goyder in SA’s mid north. The proponent is French renewables developer Neoen. This is far from Neoen’s first Australian project and today we take a closer look at these Gallic go-getters.

Like many of the renewable developers that are elbowing aside incumbents, Neoen is a relatively young company – it was founded in 2008 and built its first project in 2009, A French  solar plant. Now it has solar, wind and battery projects in 14 countries across 4 continents with over 3GW operational or under construction at the end of 2019. Unlike some renewable developers who prefer to keep their balance sheet light by offloading assets once complete, Neoen’s business model is based on continuing ownership of the assets once built. While there should be room in the market for a variety of business models, it’s important that some project proponents have skin in the game post-completion as it makes them more attuned to whether the market is working well or not.

Neoen’s Australian portfolio is a big part of its success story. They already have over 1GW of projects – making it Neoen’s largest region. These assets delivered an operating income of 65 per cent in 2019, considerably above the 49 per cent of their Europe and Africa assets and consistent with their much smaller Americas portfolio. As a result, nearly 2/3 of their 2019 EBITDA was from Australia. Their Australian assets are listed below:

Table 1: Neoen assets in Australia (* = under construction)

Source: Neoen website, AEMO, ARENA, sundry news articles

As the table shows, Neoen have been highly successful at capturing government support for renewable projects. All three stages of their Hornsdale wind farm were successful in the ACT’s tender for renewable energy, meaning they are guaranteed a fixed price for the output for 20 years. More recently, the Bulgana energy hub is being built off the back of Victorian government support and Numurkah has sold part of its output to Victoria too, to cover the electricity use of the tram network.

Neoen has had even more success in pitching to ARENA, finding the sweet spot of configuring its projects as the kind of novel demonstration plants that merit research and development funding (ARENA’s ostensible remit). Three of its NSW solar farms were among the twelve projects awarded funding in ARENA’s large scale solar round. Its off grid solar/storage project at Degrussa copper and gold mine in WA was supported as a “world first”, as was its original Hornsdale Power Reserve (HPR) battery, the famous “100 day” battery. Remarkably, they managed to convince ARENA to support an extension of this project by trialling an inverter configured to provide inertial support.

Perhaps conscious that this success might make them appear too heavily dependent on government largesse, Neoen commissioned a report purporting to show that HPR had more than paid back its subsidy in consumer savings. While it has undoubtedly played a valuable part in reducing South Australian frequency control costs, the report’ logic that if HPR hadn’t been built, nothing else would have is pretty dubious.

This leaves Colleambally solar in NSW as its only fully commercially funded project – large retailer Energy Australia is the offtaker. The experience of financing this project will stand Neoen in good stead in getting the Goyder project up. It seems unlikely that it will be able to tap governments up for much money here: ARENA is almost out of money, the ACT has all the renewables it needs and the SA government doesn’t have an obvious support programme that it can access. The ‘Tiser’s editorial on the project recognises that this means that completion of the project is far from assured and strikes a cautiously optimistic note on whether it will provide the 1,000 plus construction jobs trumpeted.