Two choices - Merchant or PPA (Power Purchase Agreement).
PPA is fixed price for a long term - say 7-10 years or more, hopefully enough to repay all of the construction debt. With a PPA, however, the associated LGCs also pass to the purchaser to sell or cancel.
The reason that merchant is attractive in the short term is that the price of LGCs is high - around $80 per MWh, on top of the $50-80 per MWh for the power itself. A PPA on the other hand will probably be in the $70 per MWh range.
In the longer term, however, the outlook for merchant is not so bright. The price of LGCs is expected to fall significantly by 2020 (it's really only high now because of the hiatus in building new renewable energy generation following Tony Abbott's election with a policy of getting rid of the Renewable Energy Target).
For some information on the current and future LGC market see the following link.
For the power itself, daytime market prices for are likely to fall as generation from both large-scale and rooftop solar installations increases. This is the so-called "Duck Curve" phenomenon. This will affect merchant generators without the protection of a PPA.
The solution for this is battery storage so that the power can be time-shifted into the evening peak. The bad news is that they no longer own a battery maker. The good news is that they will probably be able to buy a cheaper battery that will be delivered on time (if they can borrow enough money to buy it).
CCE Price at posting:
2.2¢ Sentiment: Hold Disclosure: Held
