ASX-listed wind energy developer Tilt Renewables has warned of a hit to company earnings, with its newly constructed Dundonnell wind farm in Victoria facing an “unanticipated” and indefinite delay to reaching full production.
Tilt said in a project update issued late last week that construction of all 80 of the Vestas turbines at the massive 336MW wind farm had been successfully completed, and that the focus of works at the site north-east Mortlake had turned to completing commissioning and grid connection.
But the task of taking the project to full capacity from its current level of around 113MW was being frustrated by “unanticipated concerns” from the Australian Energy Market Operator.
“Turbine commissioning has progressed such that 113MW is now fully operating, however, there is now expected to be a delay in increasing above this output due to concerns raised by AEMO,” the statement said.
“(Tilt) continues to work with AEMO and turbine supplier, Vestas, to mitigate AEMO’s unanticipated concerns and allow an increase in the output of (Dundonnell) to its full 336MW capacity.”
Delays to the commissioning of completed wind farms, and constraints to the output of already operational projects, have been a common theme for large-scale wind and solar industry across the National Electricity Market due to grid congestion and also to voltage “oscillation” issues in certain areas.
In Victoria, AEMO has regularly warned that the network had key areas that were not strong enough to support the state’s planned renewable investment, with roughly 2,600MW of solar and wind under construction or – like Dundonnell – being commissioned.
Some wind and solar farms operating in the affected areas – one of which has been dubbed the “rhombus of regret” for the shape of the network and its limitations, and the other in the West Murray region – have had their outputs curtailed, while others have been required to add new machinery known as synchronous condensers to ensure “system strength” is maintained.
Dundonnell, which sits well clear of the southern tip of the problem areas, had been progressing well and in April was declared to be “on track” to reach its full 336MW capacity well before the end of 2020, having started sending power to the grid in March.
But despite delivering all 80 of the largest wind turbines ever installed in the southern hemisphere safely and on time – “a superb result,” says Tilt CEO Deion Campbell – full generation looks to remain out of reach, at least for now.
And it seems that this outcome was not expected by the renewables developer and not foreshadowed by AEMO. Tilt said the project’s connection to the Victorian 500kV network had been following an agreed commissioning plan in line with Generator Performance Standards negotiated with AEMO in 2018, prior to financial close.
Tilt also said that it was not confident to forecast the length of the delay to a production ram up at Dundonnell, due to “insufficient clarity” of the process required by AEMO.
To this end, Tilt said it expected the delay and uncertainty around it to hit the group’s EBITDAF for FY21, and bring it in below the guidance range provided to the market in May 2020, somewhere in the range of $A65 million to $A80 million.
“The delay to reaching full production at (Dundonnell) is unfortunate given Tilt has followed the prescribed connection process,” Campbell said in a statement on Friday.
“However it should be remembered that this is a long term infrastructure asset which will eventually move to full production and produce strong cashflows for more than 30 years.”
The delay will be a blow to the project’s offtake partners, too, which include retailing giant Aldi Foods, the Victorian state government and Snowy Hydro – all up, 93 per cent of Dundonnell’s output is contracted through power purchase agreements.