Dexus has agreed terms for one of Australia’s first supply-linked renewable Energy Supply Agreements (ESA), which will purchase renewable energy offsite to power the base building services of more than 40 buildings in its New South Wales property portfolio.
This will be achieved through the procurement of renewable energy generation and presents a new lever for Dexus and the property industry to achieve net zero emissions.
Dexus, Australia’s largest office landlord, and Red Energy, which is 100 per cent owned by Snowy Hydro, have signed a Memorandum of Understanding for a seven-year renewable ESA, to commence from January 2020.
The ESA is a key pillar in Dexus’s New Energy, New Opportunities strategy, which aims to eliminate emissions from its portfolio and create value for Dexus’s customers and investors.
“This is a first for an Australian real estate investment trust and supports our ambition to achieve net zero emissions by 2030,” said David Yates, Executive General Manager for Sustainability at Dexus.
“We have worked collaboratively with Red Energy to establish a new energy supply model which will deliver renewable energy sourced off-site. Importantly, it provides long-term price certainty to insulate our customers from electricity market volatility, while driving down energy costs and supporting our collective carbon reduction goals,” Mr Yates said.
He added, “The ESA satisfies the demand from customers and investors for more reliable, environmentally responsible energy.
“Over seven years, we expect to source more than 300 gigawatt hours (GWh) of renewable energy via this ESA, which is equivalent to the energy consumed by 38,000 households for a year.”
Paul Wall, Head of Group Sustainability and Energy at Dexus, said, “This agreement allows us to hedge a portion of our power price, providing a buffer against energy market uncertainty. The deal has been struck at below current market rates and leverages the large-scale generation certificates subsidies, resulting in a fixed price for 50 per cent of our energy load over the next seven years.
“This means we can pass the savings directly to our customers, while operating our buildings using a responsible, emission-free source of energy.
“This new deal is expected to reduce the retail energy rate which we pass onto our customers through outgoings by more than 10 per cent compared to existing contracted rates.”
Mr Wall added, “We are looking to create more value for our customers through new energy opportunities.
This ESA will help Dexus achieve net zero by 2030 – 20 years ahead of the targets established under the
Paris Agreement, built into our electricity procurement in preference to purchasing carbon offsets.”
The ESA will cover 50 per cent of the energy load with the option to extend that to 100 per cent, enabling Dexus to accelerate its pathway to zero emissions and respond to price volatility in the electricity market with a
larger hedge should the price of black energy continue to rise, creating further cost savings.
The deal will also support new renewable energy projects in Australia.
Paul Broad, Chief Executive Officer of Snowy Hydro, said, “Red Energy’s ‘firmed’ renewable energy is
backed by Snowy Hydro’s integrated renewables portfolio, which includes the recent addition of 888MW
from offtake agreements with eight new wind and solar projects.
“This landmark ESA with Dexus represents one of the first direct off-takes for ‘firmed’ renewable electricity
of this type. On-demand hydro from the mighty Snowy Scheme will underpin our contracted wind and
solar generation, meaning Red Energy can supply Dexus with reliable renewable energy,” Mr Broad added.
Mr Yates concluded: “We see that the next decade will present many commercial opportunities to achieve
net zero emissions, and this ESA presents a new pathway to get there – one which we think is replicable
and can move Australia’s entire property market.”