Origin Energy, the country’s largest energy utility, has bad news for aspiring developers of wind farms and large-scale solar arrays: it has enough renewable energy certificates to last till 2017, and doesn’t expect to sign any new contracts for several years.
“Whilst we continue our planning work on projects such as Stockyard Hill,” CEO Grant King told reporters in a conference call, “we see no immediate need to build ourselves or cause to be built any renewable energy projects much this side of 2016/17, and certainty not much that side of when we expect to be spending a fair amount of money on APLNG (its multi-billion dollar Queensland LNG gas project).” Indeed, for Origin Energy right now, it’s all about gas.
The one exception is the 270MW Snowtown project that will be built in South Australia. Origin Energy’s position contrasts with that of AGL – which says it is covered till around 2015/16, and TRUenergy, which said earlier this year it was negotiating to sign power purchase agreements to meet its own commitments.
King on the RET Review
King maintained his enthusiasm for a review of the Renewable Energy Target, a position that puts him at odds with most of the electricity industry, and the clean energy sector in particular. He has argued that the changes in forecast demand warrant a review and has suggested a “floating target” that reflects actual demand, while others argue a fixed target is necessary for investment certainty. “Our position, and the terms of reference (of the Climate Change Authority review) support this, is that we should have a thorough review of all costs and implications of the policy in its current form,” King said. “We support a RET, but it should be supported by the facts, and the facts have changed.”
King also raised the issue of whether the RET could be physically met. The 41,000GWh target would require nearly 2,000MW of wind capacity to be built in each of a few years, when barely more than 600MW has ever been installed in a single year. This is mostly because of policy uncertainty and the glut of certificates caused by the rapid deployment of rooftop solar. Indeed, King said he could not remember “the last time we caused something to be built.”
King on solar PV
King noted that the electricity business was changing and becoming more challenging because of the changes in demand, driven mostly by energy efficiency and the deployment of rooftop solar. The company cited the high level of solar PV installations in 2010 and 2011 as one of the key factors in its decline of mass market sales volumes. (The other factor was a large loss of customers.) Origin Energy’s own sales of rooftop PV – some of the largest in the country – declined sharply in 2011/12, to 16,009 installations from 36,840. King said he thought that the rate of installations had peaked because of the changes to subsidies and feed-in tariffs. And although he said rooftop solar was now competitive with grid-connected electricity, he did not see another boom in solar PV demand until around 2016.
But while Australian Energy Regulator Andrew Reeves was quoted in the Australian Financial Review today (subscription required) saying that a trebling of deployment in south Australia could push midday demand from the NEM below that of midnight demand, King was more ambivalent about its impacts. “It will reduce NEM demand… at the end of the day the question that people have to puzzle over is the interruptibility of these forms of renewable energy in respect to periods of demand.” He said the reliability factors were low and “people have a low tolerance for not having energy when they want it.”
King on hot rocks and high-tech solar
Origin Energy has invested a large amount of money in two cutting edge technologies – hot rock geothermal and high-tech solar PV – but has grown impatient with progress and has cut its losses so it can focus its spending on its LNG investments. It wrote down its entire investment in the Cooper Basin joint ventures with Geodynamics as well as the Transform Solar joint venture that was formed to bring the Australian-born Sliver solar cell technology to market.
The geothermal write-off takes Origin’s total writedowns relating to the joint venture to more than $250 million. King says there is no prospect of the technology being ready to participate in the renewable energy target, and the company wants to focus its spending on the massive LNG projects in Queensland.
Ditto for Transform: King said there was no immediate prospect that the Sliver cells, developed at ANU, could compete with Chinese manufacturers, and no point trying to take them on at this stage. “It is great news that the cost of PV is coming down …but until it is clear where those costs are going to settle, it is not warranted to invest in new capacity at this stage.” He said that could change by 2016, and Origin will maintain an R&D program in case another opportunity arises.
King on international renewables
Instead, King is pushing Origin Energy towards more conventional renewable technologies in international markets, where he says the economics are more robust. This includes hydro and geothermal (conventional volcanic rather than hot rock) projects in Chile (where wholesale electricity prices are extremely high), the massive Porari hydro project in PNG (now rated as high as 2,500MW), and volcanic geothermal in Indonesia, where the company is pursuing several power purchase agreements and developments. “There is nothing wrong with renewable energy,” he said. “There are some fantastic opportunities globally.”