The ACT government’s wind energy auction has thrown up some surprising winners, and none of the planned 200MW of wind turbines will be built within a bull’s roar of the nation’s capital, if market intelligence is correct.
The winners have not been publicly announced, and will be kept confidential. But through a process of elimination – i.e. by crossing out those among the 18 project tenders who concede they didn’t make it, there are three likely winners.
They are the Hornsdale wind project in South Australia – regarded as the country’s most prospective wind project because of its excellent wind resources. Industry estimates suggest that the project could be a go-er with a tariff of around $80/MWh.
The project rights to Hornsdale were recently sold by Investec Bank to a consortium including its former head of energy projects, Marc Scneider, and the French group Neoen. The project has a potential size of around 270MW, but its bid into the ACT auction is likely to be for less than half that capacity, or around 100MW.
The second winner is thought to the small Coonooer Bridge wind project in Victoria. This is owned by Windlab, a spinoff of CSIRO which is based in Canberra. Coonoer is likely to be just 18MW, but will also likely have a level of community ownership through an innovative structure that we discussed here.
The third project is less certain but is thought to be the Ararat project owned by RES, also based in Victoria. It is also bidding for less than half of its nominated capacity of more than 220MW.
The ACT wind energy auction is important to the wind industry in Australia because the sector has been at a standstill for nearly two years. According to Bloomberg New Energy Finance, no new wind projects were financed in Australia in 2014 because of the Federal government’s attempts to nobble the renewable energy target.
That helped cause an 88 per cent slump in large scale clean energy investment, and pushed Australia down from 11th position to 39th in the world, below Myanmar and Honduras. For some international investors, the ACT auction was considered to be the last hope in Australia, given the uncertainty that continues around the RET.
Contrary to the federal government, which sees its future in coal, the ACT government hopes to source 90 per cent of its electricity needs from renewable energy sources by 2020. It will do this through a series of auctions – 40MW of large scale solar already completed, an initial run of 200MW of wind, and around 50MW of other large scale solar projects including storage, and 23MW of waste-to-energy projects.
The ACT government raised the prospect of winning tenders going to other states if the price was cheaper, although it did profess to have a strong “local content” component of the tender.
Industry observers says the results show the ACT government went on price. The fact that none of these projects will be in the immediate vicinity of the ACT will please conservative opponents to wind farms, such as Federal MP Angus Taylor, NSW planning minister Pru Goward, and state MPs John Barilaro (Monaro), and Katrina Hodgkinson (Burrinjuck), and it will likely please Federal Treasurer Joe Hockey, who has complained that the Capital wind farm near Lake George which he drives past on his way to Canberra is “utterly offensive”.
But the results also represent a blow to hopes by the NSW government to grab a larger share of the wind energy sector. It helped finance the South East Region for Renewable Energy Excellence Industry Cluster, which is looking to develop renewables in southern NSW and the ACT region. NSW has some 8,391MW of large‐scale renewable energy projects in the NSW planning system, worth around $13 billion. But none of these projects will progress without either a contract from the ACT auction, or certainty about a robust national renewable energy target.
Several local wind farms bid into the ACT wind auction, including an extension to Infigen Energy’s Capital wind farm, Ratch Australia’s proposed wind farm in Collector, and Union Fenosa’s proposed wind project near Crookwell.
Although Hornsdale is considered profitable at around $80MWh, that is unlikely to be its bid, because the ACT government tender offers only a fixed price. That means that – unless of course the developer has an optimistic view of the wholesale market price 10-20 years hence – the bid will likely be higher than $80/MWh to take account of the lack of indexing.