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SA wind farm delivers ‘cheapest wind energy ever procured’ in Australia

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The first successful project in the ACT government’s second large-scale wind reverse-auction – and South Australia’s first new-build wind project since the introduction of the new national renewable energy target – has achieved Australia’s lowest known contract price for renewables at $77/MWh.

The 100MW Hornsdale project, which is being developed by French renewables group Neoen in partnership with Australia’s Megawatt Capital Investments, will also deliver millions of dollars in local economic benefits to the ACT, hornsdaleaccording to environment minister Simon Corbell.

“This is the cheapest wind energy ever procured in Australia,” Corbell said in a statement on Monday. “And at the same time the developers of the Hornsdale wind farm will be investing over $10 million into our local economy, with research and development with our leading universities and with start up companies.”

The $10 million includes $1 million to help build the ACT’s training services for renewable energy and battery storage, and $6.5 million to help develop applied research facilities, programs and services.

It also includes $2.7 million for an “energy innovation precinct” fund, which would provide help such as accommodation support for businesses in the field looking to set up in Canberra.

Corbell said the company had also committed to spend at least $800,000 engaging local contractors for significant parts of the wind farm development.

The Hornsdale project – which will be built on “one of the best sites in Australia for a wind farm”, according to Neoen Australia managing director Franck Woitiez – will be managed from the company’s headquarters at CIT’s Bruce Campus in Canberra’s north.

Once completed, it is expected to power 56,000 Canberra houses, and provide 13 per cent of the ACT’s projected electricity demand by 2020.

“The local investment benefits secured through this deal will strengthen the ACT’s position as an internationally recognised centre for renewable energy innovation and investment. It will help establish a new energy innovation precinct to be established around City West and New Acton,” Corbell said.


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  • Rob

    Can anyone tell me what it currently costs for a coal fired power station in Australia to produce a MWh of electricity?

    • solarguy

      Yep, Around $30-50/MWh for current. If new were to be built and they won’t, it would not be competitive with wind or solar.

    • Nick Thiwerspoon

      New coal is much more expensive than wind and solar, but old power stations are fully depreciated so they are cheaper. My figures (from https://www.thesaturdaypaper.com.au/news/politics/2015/07/25/the-true-cost-green-energy/14377464002171, which they got from BNEF) show $74 per MWh for wind, which is lower than the $77 per MWh quoted in the article. I read somewhere that the the ancient brown coal power stations in Gippsland produce power at around $30 per MWh. Of course they are incredibly filthy. And the royalty charged by the Victorian government is just $1 per tonne!

      • Jens Stubbe

        Do you have any explanation as to why wind power in Australia is almost twice the average unsubsidized wind electricity price in USA?

        The quoted price is higher than the latest offshore auction in Denmark

        • Nick Thiwerspoon

          The US unsubsidised wind contracts are coming in at 4 US cents per kWh. The figures I quoted are in Australian dollars. At the current exchange rate, the 7.7 cents Australian is 5.4 US cents, closer but still higher. Partly that the “Australian Premium” (foreign companies overcharge us for everything), partly, I suspect, it’s a learning curve problem. We just don’t have the volume of wind farms which exist in Europe or the US.

          • Jens Stubbe

            Hi Nick

            The average US wind PPA for a 20 year period was in 2014 $0.023/kWh and the PTC was $0.023/kWh for the first ten years. Within the first 20 years this gives $0.035/kWh excluding the PTC. The best locations in USA was $0.015/kWh and the conversion rate difference between US dollars in 2014 and currently can be seen here. http://www.x-rates.com/graph/?from=USD&to=AUD&amount=1 In conclusion the best location SA wind farm record is close to been twice as expensive as the US average for 2014 and most certainly more than wife as expensive if you compare against a best site. You can see the range of PPA contracts that has gone into the statistics here. http://cleantechnica.com/2015/08/04/wind-could-replace-coal-as-us-primary-generation-source-new-nrel-data-suggests/

            Interesting they also link to a recent NREL report that suggest capacity factor approaching 65% which I believe is close to the double of the capacity factor for wind turbines in service currently.

            The premium thing has to go and it would probably go instantly if you catered for the needs of the wind industry but that would require that Australians votes differently.

        • Partly, salaries for maintaining them are much higher in Australia. About $18 USD per hr in the US for techs but these can earn over $100K annually in AUD (yeah, some translating – but definitely much better paid in Australia ) as I discovered a few years ago in interviewing O&M leaders: http://analysis.windenergyupdate.com/operations-maintenance/om-cost-cutting-considerations-imported-talent-currency-fluctuations-and

          • Jens Stubbe

            Thank you for the explanation and the reference to your well researched article. Denmark is also a country wind high labor cost with almost the same BNP per capita as Australia. For this reason the trend towards scaling to larger and larger turbines has been very persistent because the larger the turbines gets the less points of service is required for a given number of service visits. The IOT thinking is also getting big in wind turbines where remote reading of sensors gives the service crew early warning and avoids visiting perfectly operating wind turbines. Also troubled wind turbines are now curtailed more than more robust wind turbines in the same wind park to ensure that the wind turbines needs as little as possible service.

          • Nick Thiwerspoon

            Interesting article. You’ve expanded my knowledge of wind farm costings.

          • Yes, it did mine too. There’s often illuminating surprises in talking to people.

      • Jens Stubbe

        In USA old coal power plants cannot match wind power as the cost per kWh for just the coal is on average $0.022/kWh according to EIA that update weekly. And there will be absolutely no way that coal plants could enter into binding PPA contracts at the average price point for wind electricity. I really see no reason why should not be able to get the same prices in Australia. In Brazil get wind electricity at auctions that match the US numbers.

        For farmers wind is much more attractive because it uses no water and pays well for the landowner that even enjoy a rise in farmland productivity because the wind is mixed above ground which keeps the night temperature at ground level higher.

        For rural Australia the wind industry will provide steady high paying jobs that along with the unbuttered situation for the farmers will lead to more economic activity.

        For Australia as a whole cheaper electricity will be a huge economic benefit and contributing to a cleaner future for the entire globe is also attractive.

        • neroden

          Jens: I found the pricing situation with coal curious, so I did some deeper research.

          I figured out that for a typical power plant, well over half the cost of coal — as much as 75% in some cases — is *transportation*.

          If the old coal plant could magically teleport the coal to its location, the coal plant would still be cheaper than wind. But they can’t. And the costs of transporting the coal by rail or barge or ship are going UP every year.

          So this is how you can have a complete market crash in coal, with coal miners selling coal at a loss… and coal is still too expensive for the coal power plants to be competitive. Transportation costs.

          It’s expensive to move rocks across the country.

          • Jens Stubbe

            Not true according to EIA numbers that are ab mine excluding transport. They found that you need 2,2 US cent to buy coal to produce one kWh. If you pay for the transport and for the running cost you will soon be way over the total unsubsidized cost of new wind energy capacity in USA.

            The most efficient coal plants are approximately 50% more efficient than the average coal power plant but the mine owners were fast asleep and did not recognize the opportunity to buy patents and build reference power plants and make all the key technologies public domain. Instead they chose the ostrich strategy without ever realizing that they would be pushed over by cheaper renewables after having spent money for nonsensical campaigning against renewables.

          • neroden

            2.2 US cents is significantly less than the cost of wind (which is 4 to 5 cents).

            The cost of operating the coal plant is basically the same as the cost of coal; there’s very little maintenance and they employ essentially nobody (1 or 2 people maybe).

            You are, however, correct that as soon as you add the transportation costs, coal costs way more than the cost of wind.

            Also, if you add capital costs to build a new coal plant (for instance, next door to the mine to avoid transportation costs), you find that new coal plants cost more than the cost of wind or solar.

          • Jens Stubbe

            In 2014 the average 20 year US wind PPA contract was $0.023/kWh. Including PTC for the first 10 years that average to $0.035/kWh during the 20 year PPA contract period and less in the 25 year design life.

            When you quote 4-5 cents per kWh I think you calculate it for the total installed wind capacity in USA.

            In USA 40% of the income for railroads are from transporting coal and the subsidy to the railroads are also approximately 40% and yet the US coal transportation cost has constantly been just below $50/ton, which means that coal to produce one kWh is almost twice as costly as the average delivered kWh from new wind power. http://www.eia.gov/coal/transportationrates/

            The numbers ad up to a US coal transport subsidy just under $20/ton (if you accept that the intent of the subsidy to rail roads are equal for all goods and people transported – higher of course if you subsidize rail roads for people and costlier goods than coal), which adds up to at the very least $0.01/kWh.

            According to this article Australians too foolishly subsidize coal. http://www.theguardian.com/environment/2015/sep/16/us-australian-taxpayers-pay-billions-fund-coal

            The cost of providing coal power plants free right to use cuprous amounts of water and all the other external cost adds up.

            Only strong forged political contacts enables utilities to keep using coal.

            As a side remark wind turbines Denmark produced 52% of the 2015 domestic electricity production with the most stable grid on earth and the cheapest electricity spot market anywhere on earth. The fossil lobbies and the utilities hold much too strong positions in Denmark too.

          • Rikaishi Rikashi

            So there are two competitive advantages that many of our coal plants have over the american ones. The dirtiest of those plants like Hazelwood’s mine the coal they burn on-site, thus avoiding transport costs. There’s also the fact that American coal plants must go to extra expense to contain their toxic fly ash in holding ponds, whereas we just toss ours on farmland. Never mind the mercury and heavy-metal content.

            All we have to do to shut down our coal burners is to make them pay for the the external costs of the pollution they produce. Just adding the healthcare costs of PM 2.5 that are not incurred by competing technologies could be enough to bury coal for good.

          • neroden

            Rikaishi: thanks for pointing out those specific differences between the US and Australian coal plants.

            I think forcing the coal plants to contain the fly ash as toxic waste — rather than poisoning the farms and poisoning people’s food — would be sufficient to get them to shut down. The upgrade costs would be high enough to make the plants unprofitable.

  • Rob

    Thanks Nick and solarguy for answering my question.