Melbourne’s renewable energy project may provide model for world’s cities

Melbourne’s new renewable energy project could provide the world’s first model of a group of purchasers joining together to buy large-scale renewable power. Under the scheme, a consortium, including National Australia Bank, the University of Melbourne, RMIT and Bank Australia, has agreed to purchase a major proportion of its electricity from the new project. If successful, the scheme will lead to a 138,000 tonne cut in Melbourne’s annual carbon emissions. The initiative guarantees a buyer for the electricity and also enables the 13 members of the consortium to become part of a significant enough group to sign a large-scale energy agreement, something they would be unable to achieve individually.  

It’s an unmistakably Melbourne setting: councillor Arron Wood is the city’s environment portfolio chairman, standing in a rooftop courtyard as the faint sound of trams rises up from Swanston Street down below and the surrounding skyline reaches into a cool autumn sky.

Against this backdrop, not to mention the solar thermal panels on the next level, Wood does not hold back when discussing how cities can lead from the front in tackling climate change.

He evokes the philosophy of Michael Bloomberg, the billionaire and former New York mayor who has been a major driver of climate change action by the world’s cities.

“[Bloomberg] says, ‘Nations talk and cities act’, and cities can do a lot of the heavy lifting in terms of what is required for the Paris agreement [on climate action].”

Now a large project by the city of Melbourne could prove Bloomberg’s theory correct. More importantly, major cities around the world are watching closely to see if Melbourne’s strategy could become a blueprint for them to follow.

The Melbourne renewable energy project, conceived and managed by the city council, has been two years in the making. Thirteen major institutions operating in the city have formed a consortium that will sign an agreement to purchase a large chunk of their electricity from a new large-scale renewable energy project.

The consortium members are the city of Melbourne, Australia Post, National Australia Bank, the University of Melbourne, RMIT, data centre operator NEXTDC, Zoos Victoria, the city of Port Phillip, Moreland city council, the city of Yarra, Citywide, Melbourne convention and exhibition centre and Bank Australia. If the project goes ahead, it will reduce Melbourne’s carbon emissions by 138,000 tonnes per year.

The strategy will give a would-be project the chance to secure a buyer for the electricity it would produce but it also overcomes the reality that none of those 13 organisations would be big enough on their own to sign such a large-scale energy agreement.

A tender process is underway to find a proponent to provide 110GWh of renewable energy each year, enough to power 28,000 homes. The tender deadline is 20 June and, as the process is confidential, the council has not revealed which energy companies have submitted proposals.

Hypothetically a proponent might already have an advanced plan to build a large-scale solar or wind energy plant somewhere outside Melbourne but still need to secure a long-term buyer of the electricity before an investor will come on board with money for construction. If the Melbourne consortium were to sign a 10-year purchase agreement with that proponent, the proponent would have the certainty required to go ahead with its project.

The strategy is revolutionary, as it is the first time in Australia that a group of buyers has joined forces to purchase large-scale renewable energy. In fact, the council says it is not aware of a similar model anywhere in the world, especially under the leadership of a city council.

“We don’t often talk about government being the innovators but this is a really innovative project driven by the city of Melbourne,” Wood says.

Councillor Arron Wood, the City of Melbourne environment portfolio chairman, is working on the Melbourne Renewable Energy project.

Global interest in the Melbourne project mainly comes from C40 Cities Climate Leadership group, an international group of 75 “megacities” from six continents, including London, Paris, Beijing, Shanghai and New York, which exchange knowledge and ideas to combat climate change.

C40’s interest was underlined by a visit to Melbourne from the group’s London-based executive director, Mark Watts, in March to examine the council’s strategies to become a low-carbon city.

Watts described the consortium model as “a fantastic initiative” that reflected the need for innovative solutions.

“By partnering with other major energy users in the [city] from the University of Melbourne to Bank of Australia to the city zoo, they have created a guaranteed market for renewable energy that makes a renewable plant look like a great investment for energy companies,” Watts says.

“It is this kind of innovation and collaboration that is making cities and mayors such exciting leaders in the climate change field.”

Watts believes the Melbourne model could be exactly what other cites around the world need, particularly as most cities, including Melbourne, have no direct control over electricity generation.

“[This project] provides a model for how cities and other organisations can come together to leverage their combined purchasing power into the market,” he says.

“This is a model that has the potential to be copied, adapted and built upon all around the world and that’s what makes it so exciting.”

It is the kind of international attention that leads Wood to believe the city has struck upon a successful model, even if it is in its early stages.

“My belief is that the biggest impact of this project will be in its replication,” Wood says. “Our officers have already started work on a model which can be effectively grabbed off the shelf and used by anyone.”

The council has set itself a target to source 25% of the municipality’s energy from renewables by 2018. Right now, that figure sits at 12% and Wood says, even with the 110GWh project, a lot more will need to be done to reach the target. The project is the biggest step so far in the city of Melbourne’s overall wide-ranging efforts to mitigate climate change, including partnering with businesses to make buildings more sustainable and working to replace the city’s streetlights with LED lighting.

Bringing together an group of completely unrelated businesses and institutions to purchase 110GWh of renewable electricity might seem like a maverick idea but the City of Melbourne’s chief executive, Ben Rimmer, says the council has studied the economics closely.

“We have done a lot of very careful homework, including the request for information process,” Rimmer says. “This is not something that we have dreamed up in a couple of weeks. It’s something that we’ve been doing for some time with professional advisors. We are very confident that it is going to be a good financial deal.”