rss
16

Is this the end for big wind and big solar in Australia?

Print Friendly

RET.

This table above might have caused developers of large-scale wind and solar farms in Australia to reflect on their position.

Released by the Clean Energy Regulator on Friday, it shows that the renewable energy target, which aims for 33,000GWh of large-scale renewable energy by 2020, is nearly complete.

According to its data, the CER reckons there is room left for only about 846MW of large-scale projects, not yet committed, for the scheme to be met.

Considering that the owners of the Whyalla steelworks announced plans for 700MW of large-scale solar last Monday, and that the CER data does not include some projects others would view as well advanced, we could consider the scheme all but met.

Indeed, federal energy minister Josh Frydenberg might have been closer to the mark when he suggested, before the Whyalla announcement, that the scheme was 95 per cent achieved.

Apart from making a nonsense of the claims by the conga-line of naysayers who said it could never be done, and the deliberate misinformation echoed by the Coalition government about the supposed $60 billion cost of the scheme, it does leave the renewable energy industry pondering the future.

The Australian Energy Market Operator estimates that there are more than 20GW of wind and solar projects in the pipeline. And those are just the ones that have approached it to canvass connection approvals.

But the future is blurred. The Energy Security Board – supposedly a COAG body – is busy marketing a new policy proposal, the National Energy Guarantee, that it has yet to present to COAG, let alone get its approval.

The NEG is being presented as an “elegant” solution to the failure to get bipartisan agreement on any climate policy over the last decade. But it looks like a nightmare for renewables.

According to its own initial modelling, there will be no room for any new large-scale wind and solar projects in the decade from 2020 to 2030.

It will conduct further modelling to present to COAG later this month, but the assumptions this will be based on look absurd – it ascribes technology costs to wind and solar so ridiculous they do not match existing costs until 2030 or 2040.

Furthermore, it ascribes a crippling cost of capital to those wind and solar projects, and then somehow removes it on the basis that a NEG would eliminate policy uncertainty in one fell swoop.

Professor Ross Garnaut highlighted the failure of that thinking in an important speech last Friday. He said policy certainty would not be removed, so long as climate targets were not addressed seriously.

“It is unrealistic to get consensus on anything that does not face up to the reality of our international responsibility on reduction of carbon emissions,” he said.

The ESB modelling will assume a meagre 26 per cent reduction in emissions by 2030, and none thereafter.

Garnaut noted that even a federal Treasury analysis had pointed to the need to slash emissions in electricity by 50 per cent by 2030. It beggars belief that serious people can argue that the targets to be modelled by the ESB constitute a serious policy.

The market reaction has been decisive. As ITK analyst David Leitch notes, the share price of the incumbent utilities have jumped sharply since the NEG was first unveiled.

Share prices and valuations of listed renewable energy companies, on the other hand, have fallen dramatically. The assumed value of significant portfolios of wind and solar projects have been wiped from the board.

The remaining hope for renewable energy developments lie in two quarters: state-based targets; and the emerging corporate sector.

Queensland has a 50 per cent renewable energy target, and a 400MW tender on hold, but is now in the middle of an election campaign that Labor premier Annastacia Palaszczuk seems to be doing her level best to stuff up.

It is quite likely that One Nation will hold the balance of power, supporting a state government that appears to equate renewables to the devil and Islamic terrorists.

The NSW and WA governments are staring at renewables like rabbits in the headlights and seem incapable of taking any action of note. South Australia is already at its 2025 target of 50 per cent renewables, but has an interesting fund that could promote some pilot projects.

That leaves Victoria to take up the reigns. Its target of 40 per cent renewables by 2025 is actually legislated, and it has promised to unveil a tender for 650MW of large-scale wind and solar very soon.

The talk is that it could be unveiled in the next week or two, once they recover from the Melbourne spring racing carnival. It will be the best piece of news that Victoria project developers can expect to get for some time.

But we can never be sure. Bidders are still waiting to hear the outcome of the large-scale battery storage tender, which was supposed to be complete at the end of August. We are now told it will be “before the end of the year.”

That leaves the corporate market. UK billionaire Sanjeev Gupta is leading the way, with his plan to build 520MW of solar, pumped hydro, battery storage and demand management to power the Whyalla assets and slash costs by 40 per cent.

If the way ahead is not blocked by policies as deliberately protective of incumbents as the NEG, it will push ahead with another 480MW of large-scale solar to meet the needs of other big industrial users. And they have shows an interest in a bulk-buy deal already.

Then Gupta plans to do the same thing all over again in Melbourne and Sydney, where his company has even bigger energy demand from the electric arc furnaces in and around those cities.

Gupta is not alone. Nectar Farms will rely on wind and battery storage for a $750 million development in an old gold mine near Stawell to build the country’s biggest glasshouse.

Zinc refiner Sun Metals and Telstra are both building large-scale solar farms, and now the Department of Defence is jumping in, calling for tenders for solar farms for a WA communications base, and its barracks and RAAF base near Darwin.

For Defence, this is just the start of its plan to turn to renewables to cut costs, boost energy security and reduce emissions.

As Garnaut pointed out in his speech on Friday, it seems just about everybody in Australia – with the apparent exception of the Coalition parties and the Energy Security Board – understands that bringing in more renewable energy and encouraging more competition is the best way to reduce prices.

So, while the RET can be considered to be met, the large-scale wind and solar sector will rely on the Labor states and the corporate sector to keep development going, and keep wholesale prices and the power of the big incumbent utilities a little bit in check.  

Share this:

  • David Creevey

    I don’t think it will be the end, maybe a pause. The fossil fuel plants will need to be shut down and replaced, and the cost curve for Large-Scale solar and wind will continue to fall. If the NEG does become policy (a big IF) and prices obviously rise, then rooftop solar installation (plus storage) becomes even more attractive financially. Other business models will develop to serve those markets currently locked out of rooftop solar (apartments, renters), and other services such as microgrids and virtual power plants will come online. This is not to say that there should be no push back on the NEG, but I think ultimately it will be fruitless in its effort to stifle renewable development.

    • I agree. Technology and the market will decide what happens and with wind and solar being more cost effective than new coal, or even existing old coal plus existing power station coal supply contracts coming to an end, it is inevitable that RE will take over.

  • Ken Dyer

    I really do not see a problem. The COALition will be tossed out on its ear in 18 months, and Labor has a policy that will increase the RET, using the current 33000 GWh as a baseline.

    • Joe

      With their MP ‘citizenship fiasco’ I can see The COALition being gone a lot sooner. By elections for COALition ‘illegals’ will surely see The COALItion without a majority in The Reps and so onto an election and auf wiedersehen COALition.

    • Tom

      I hope so, but Labor has been pretty un-committed in the last few weeks. Lots of “No, No, No … Bad, Bad, Bad”, but not a lot of “This is what we’re going to do if elected.”

      • solarguy

        But Labor doesn’t have do anything, do they, as these LNP morons are in self destruct mode.

  • John Saint-Smith

    The Australian renewable revolution is so logical and unstoppable it will stagger onwards, no matter what spiteful obstacles the LNP/IPA Coal troglodytes invent to slow its growth. Who knew, least of all John Howard, that the quixotic gesture of half a dozen solar panels on the roof would morph into a multi-gigawatt national solar power network?
    We will get there eventually, late and apologising for our tardiness, by the time the rest of the world has achieved zero net emissions and a 2.5 degree ceiling on global warming without our help. We could have been leaders, we could have built a strong, clean, green sustainable and equitable economy that would have been a beacon to the world. But instead, like the handling of the refugee crisis, we have taken the coward’s way towards pettiness, stupidity, cruelty, selfishness and irrelevance.

    But what I don’t understand is why it was it really necessary for Turnbull, Abbott and co. to destroy the old economy, the progressive social contract, and our unique natural heritage at the same time? Do they really hate Australia that much?

    • solarguy

      You have to ask if they do hate Australia, don’t you. The fact they have behaved this way, really can be thought of as treason. Money corrupts and the other factor is stupidity. Mix that with control freaks, the likes of ABBOTT and we have the current result.

  • Jon

    Looks like the Bungala projects in SA are counted twice and so is the Lilyvale project in QLD. So that’s an extra 320MW to be delivered; so more than 1100MW which is still fairly compelling. The future closure of ageing power stations will provide extra headroom also.

  • Steven Gannon

    This NEG thing isn’t good, we all know that. What I hope will be a “saviour” of sorts in a worst-case scenario is that manufacturers will be as successful at dictating to the govt as miners have been in recent times. Mr Gupta and Ross Garnaut may be remembered as the main catalysts, though there are several other mentionables already. We are talking about processing iron ore, refining zinc, producing cheap, quality and “affordable” vegetables (healthy “green” food, even the city markets are big on solar!).

    You can’t stop progress, you can slow it down, but it’ll win anyway. No amount of political cunning will make a big difference from here, I hope.

  • Chris Drongers

    When is the COAG meeting that will consider the NEG?
    Presumably that first COAG meeting will have to be sooner rather than later if the LNP is to avoid charges of stalling a decision yet again.
    Key issues out of the meeting would include, apart from the technical ones of how much storage for what period for what purpose,
    -justification for the prices/outputs used in modelling,
    -how different state renewable targets will be melded into a functioning east coast market,
    -how NEG fits with whatever comes out of COP in Bonn.

  • Mark Roest

    It would seem that some policy wonks in Australia could get together and use a conservative methodology, built on the recent offered prices for solar, wind, and capital, to rewrite the NEG report with the correct inputs, make it very clear in sound-bite language that the original was corrupt and in denial of today’s market, and have every activist and letter-writer on our side push the result in all the local newspapers and radio stations, to swamp the right-wing media unexpectedly and overwhelmingly, to make this a sudden issue for the nation.
    Also, is it legally possible for solar and wind farms to find a way to get electricity to consumers, against the wishes of the incumbents? Or do they need to build manufacturing business parks for sustainable technologies, to purchase the electricity they make?
    Or if not possible to do an end-run, show who the customers would be, and how much it could reduce their bills, and get testimonials from them about how much they could (and would) lower their prices on goods and services if their electrical bill goes down that much. Deliver the message in videos made well enough to go viral. Use that to kill the NEG report and steamroll the coal lobby.

  • Peter Fagan

    I don’t understand why Giles and others assume that the NEG is a done deal. The NEG at present is an IDEA, expressed in four pages of a letter.

    For the NEG idea to become a reality, all the states participating in the Australian Energy Market have to agree to it in principle and then in minute detail (operating principles, operating manual, rules, trading mechanisms, definition of terms such as dispatchability etc etc).

    Why would South Australia and Victoria agree to the NEG, in principle OR in detail, when it is clearly contrary to the direction they want to take their energy policies?

    Recognise the pattern here: People are saying “The government must DO SOMETHING”. Snowy 2.0 gets the Turnbull government through a couple of weeks. “Eyeballing” the gas exporters gets them through a couple of other weeks. Then it is the war with AGL over Liddell. Now it is the NEG. None of these “stories” are material.

    • riley222

      Thats kinda the way I’m thinking too.
      But, there’s something about the LNP that makes you feel like a chump for even thinking some sort of reasonable compromise is possible.
      I

      • solarguy

        And that’s how they want you to think and feel. I would no longer trust this mob of bastards, then I would trust a pedo in a kindergarten.

  • Peter F

    The coalition and the coal miners would definitely like it to be. Unfortunately for them the unreliability and cost of old coal plants will come back to bite them as SA continues to not only have lower power prices than Victoria and NSW but is propping up their systems through net exports. Within 12-18 months when the SA batteries are better understood and further wind and solar is online, exports will increase further and SA will probably approach 60% renewables and still have the lowest mainland power prices. Even now when SA is only generating 208MW from wind it is still exporting 430MW to Victoria

    Then the AGL reciprocating gas plant replacing TIPS A will lower marginal costs because it will use 30-40% less gas per MWhr. the batteries and then the various storage projects and solar thermal will reduce “must run” gas and reduce wind curtailment so one can see a further 10-15% fall in average wholesale prices in SA by the next federal election

    If, in my pessimistic moments I believe that the NEG as proposed would be put into action I think you may be right and the investment boom will end in 12-18 months. However the weight of the states, industry and basic economics probably means it will go the way of Liddell, the Emissions Intensity Scheme and so many other Malcolm thought bubbles.