Reaching financial close on proposed wind energy projects in Australia has never been harder, according to industry insiders, despite a huge international investor appetite and a major push by most state governments to meet renewable energy targets.
Speaking at the Clean Energy Council’s 2021 Wind Industry Forum on Tuesday, the head of Australia and New Zealand markets for global wind giant Vestas, Peter Cowling, said there is “deep underlying demand” for new wind projects.
“I don’t think we’ve ever been quite as busy and there’s a few dynamics behind that… but ironically, it’s also harder than ever before, I think, to close those projects,” Cowling said.
“We had a customer forum recently where… everyone in the room was flat out, everyone had lots of opportunity, [but] everyone was absolutely in excruciating pain trying to get there.”
That pain, according to Cowling and fellow panel members – Catherine Way from DP Energy and Geoff Dutaillis from Powering Australian Renewables – was largely coming from the complex and drawn out grid connection process facing new projects; an issue that was being further exacerbated by the lack of a coordinated national grid transformation strategy and confused signalling from the federal government, particularly around the exit of coal plant.
Cowling said that while the investor market is “definitely hot,” long delays in both the planning and connection processes could see major changes in market dynamics along the supply chain that could quite drastically alter a project’s cost and/or revenue outlook.
“It’s the vicissitudes of the market that while you’re waiting to try and get through grid process, we can see 20-30-40% increases in steel prices in that timeframe. So you can imagine the amount of rework that that requires to get a project over the line,” he said.
“I think we’re in a stall mode, wind and solar,” said Dutaillis, who worked at Infigen and then CleanCo in Queensland before becoming the CEO of Powering Australian Renewables.
“All of those interventions or challenges we’ve got with the transmission network or the market design; all of those things coming at us are creating an uncertain investment environment for the capital to sit on the sidelines and hesitate,” he told the Forum.
“I see that as much bigger challenge to wrestle through, alongside, you know, the challenges of getting a connection and delivering it on time and all the supply chain issues.
“The education pathway for a corporate buyer is torturous,” Dutaillis added. “They also look at those forward prices and … they will see the forward prices and go, well maybe I’ll just hold back a bit, because I’m kind of on buying into a falling market.”
Another major concern – and looming potential barrier for the connection of new projects – was the lack of investment and policy support for the sort of wholesale grid transformation required to accommodate and distribute gigawatts worth of new renewable energy capacity.
“[It’s] not just the individual project grid connection process but that bigger piece around grid Investment that really makes me nervous,” said Cowling.
“I just fear that we will hit a brick wall in a couple of years’ time where, if the grid ain’t ready – and I’m talking new, large-scale grid investments – then we will actually run out of opportunities to connect in sensible places.
“So, you wind that back to today, we’re not building much yet, and that makes me very nervous,” he said.