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Origin to add “a Hazelwood” of renewables by 2020, but says CET remains “critical”

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Origin Energy has reaffirmed its plans to boost the renewable energy component of its generation portfolio to 25 per cent by 2020, up from the current level of 10 per cent, by adding enough new installed wind and solar capacity to replace Victoria’s recently closed 1600MW Hazelwood coal-fired power plant.

stockyard hill

Speaking at the company’s full-year 2017 results presentation on Wednesday, Origin CEO Frank Calabria said the company aimed to take its share of renewables from its current level of 732MW, to around 1900MW by 2020, or one-quarter of the gen-tailer’s total generation mix.

“To put that into context, we are going to bring in a Hazelwood worth of renewables in the next three years,” Calabria told a media briefing on the company’s results.

As impressive as this sounds, this should be a lay-down misere for Origin – already Australia’s top contractor of large-scale solar. It has a total of 1200MW of committed renewable energy supply already locked in after flurry of highly successful solar and wind offtake deals this year, including the record low-price PPA secured for the output of the 530MW Stockyard Hill wind farm in May.

But Calabria was keen to convey that the Australian renewable energy market is not out of the woods yet, and that for investment to keep up its current momentum, policy stability remained at a premium, and the introduction of a Clean Energy Target was critical.

origin RE chart

“We will continue to advocate for policy certainty, particularly the adoption of a Clean Energy Target as the critical action needed to stimulate further investment in new supply and deliver a genuine reduction in prices for Australians,” Calabria said in a statement.

“We are supporters of the full package recommended by Dr Finkel, which we believe can help bring and unlock new investment, and that will have an impact on reducing power prices over time,” he told the media briefing, later.

“At the moment energy companies have to make decisions to invest in assets that last for tens of years,” he said. “We would like to know, and our shareholders would like to know, that when we make those investments, we make them with confidence that the rules won’t change.

So why the CET? “In a context where that’s the only (federal policy solution) on the table … (we think) it’s a workable solution,” Calabria said, in answer to a RE question. “And certainly better than no solution at all.

“If you keep making (the renewable energy investment market) a very uncertain future, then the investment decisions will be sub-optimal and too late,” he said.

“We have have deliberately left our generation supply short relative to the demand from our costumers,” Calabria added, waiting for the right time and the right cost to invest.

Indeed, you don’t have to look too far back in Australia’s renewable energy annals to be be reminded of the extended capital strike the market suffered due to “policy uncertainty” during the Abbott government era.

This investor drought has been broken – and deals like Origin’s May 2016 PPA with for the output of FRV’s 100MW Clare Solar Farm in North Queensland, “the first of its kind struck in Australia between a retailer and a private developer of a solar project”, were instrumental in breaking it. But clearly there remains concern, or the shadow of a threat, that the rollout of new renewables will not be fast enough to support the break-neck shift away from Australia’s ageing fossil fuel fleet.

That shift, as Calabria reminded us today, should be being driven by Australia’s commitment to the international agreement at Paris to cut emissions at a rate that will limit global warming to an absolute maximum of 2°C, and not just falling technology prices.

“It’s very important that we have a roadmap,” Calabria said. “I think everyone would agree that we want more supply to come into the market.”  

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  • Just_Chris

    Really happy that they are investing in RE but 25% of your installed capacity being renewable doesn’t mean that 25% of your power comes from renewable energy.

    • David Osmond

      It’s probably not too far off. A lot of their assets are OCGT with low capacity factors. According to the presentation, Origin has 6,011 MW of generating assets, generating 20,295 GWh last year, at an average CF of 39%. Their new renewable portfolio could potentially have a similar CF if it is biased to wind

      • Caffined

        “..Their new renewable portfolio could potentially have a similar CF if it is biased to wind…”
        Only if ALL their new renewables are Wind based, perfectly located, with nature providing favourable wind conditions.
        Thermal plant CF is pretty much dictated by human control/limitation.

        • RobS

          The dishonesty comes when you factor CF in for renewables but not for thermal plant and just pretend it has 100% reliability, needs no spinning reserve and runs at 100% output 100% of the time.

          • Caffined

            CF is an essential factor. In system design, but pretending “nameplate” power ratings of Solar or wind generators are equivalent to thermal plant capacity, is simply deception or ignorance.
            Anyone who cannot see the blatent stupidity of these missleading anouncements is fooling themselves.

    • RobS

      It can mean more than 25% of generation is renewable too, some coal and gas fired power station’s capacity factors are now falling below that of new wind and solar farms.

  • Vicki Stevens

    I’m not sure why investors are reluctant to jump on the renewables band wagon, government policy and energy targets should not be an influencing factor when locally and globally we all know clean energy is the future. Even fossil fuel advocates know that, and will fight their fight while ever governments favour them. It is up to forward thinkers in the energy sector to force the policy changes, if renewables are all that is on offer, governments will have to concede and inform policy to suit.
    Well done to Origin and others taking the initiative, future generations will thank you.

    • nakedChimp

      Investors want some certainty, that the capital they invest comes back + some healthy profit.
      If lobby/politics ‘decides’ that coal/gas is worth of support (couple billion here, no follow up on CO2 emissions, ..) and RE not viable/desired (wind turbine setback rules, generator backup rules regarding base-load, connection rules for generators, etc.pp.) it’s pretty easy still to tilt the economical table in favor of the incumbents.

      You seem to be under the impression you’re dealing with some sort of free market here – where the best offer wins, guided by the invisible hand – far from it.
      This field is highly guarded against competition and newcomers.

      • Vicki Stevens

        That’s my point, this sector is highly guarded, so much so, that our politicians are corrupted by their money, therefore are NOT making any positive future plans for clean energy, a reliable grid and lower costs. It is up to the investors to force that change by going ahead with projects irrespective of the ‘highly guarded field’ and our politicians inaction. Take a look at Jay Weatherill, he is doing his own thing and putting SA on the world stage for clean, reliable energy. Other countries are miles ahead, the market will rise to meet the challenge and the profit will follow.

        WE ALL know that is where we have to be heading for the sake of future generations and climate change mitigation and adaptation, anyone that thinks otherwise is a fool. Our own PM’s son has investments in wind farms – they know . . . . .

  • Joe

    Origin should have a word with Premier Jay….building a Solar Thermal Power Plant seems the go from now on!

  • Emma

    Ironic that Origin – and AGL – which fought tooth and nail to reduce the RET and contributed hugely to the uncertainty which prevailed in the Abbott period are now calling for a CET….