The fact that wind farms are hard to get built is no secret – planning issues, grid congestion, social licence, misinformation, policy flip-flops, rising costs, the lack of corporate customers, financing difficulties, and the averted gaze of Australia’s wealthy super sector can make it seem a near impossible task at times.
It is why only a handful of wind projects have reached financial close and begun construction in the past year. And yet the latest and the biggest to reach that milestone might have had the biggest challenge of all.
Gawara Baya, in the far north of Queensland, has faced a court case, a name change, the loss of its biggest buyer, a 50 per cent cut in the project’s footprint, a reshaping of its layout, a landmark addition of grid forming inverters, and the election of a state government seemingly hostile to renewables.
And yet late last month, the 408 megawatt (MW) wind project, with its 104 MW, 208 MWh battery equipped with grid-forming inverters, still reached financial close, found a new owner, and promptly began construction.
And in doing so it set several key milestones – the first new wind start in Queensland this year, the biggest project from the Capacity Investment Scheme to reach this stage, and with the biggest financing package yet seen for a wind farm with this configuration.
John Martin, the CEO of Windlab, which brought the Gawara Baya project to this stage and still has an ongoing role, even after the sale to the deep-pocketed Copenhagen Infrastructure Partners, is satisfied, exhausted and immensely proud of the efforts of his team.
“The best analogy I can come up with is a plate spinning act, where someone has a stick and starts spinning a plate, and then they spin another one. And the way I add it up, we had forty-two plates we had to spin – all at the same time,” Martin tells Renew Economy in the latest episode of the weekly Energy Insiders podcast (now newly remixed).
“You have a team that has to keep spinning all those plates, because if any one of those plates fall, the whole thing stops, and you’ve got to start the whole spinning process again. There are different plates, different sizes, some of them are wobblier than others, and you’ve got to keep those spinning all the way through to (project delivery) as well.
The answer is 42
“For the nerds amongst us, 42 is a magic number. If you think of the Hitchhiker’s Guide to the Galaxy, it was the answer to life, the universe, and everything. We just didn’t have a super comp-computer that could think for seven million yearsabout the topic.”
Martin says that the biggest issue for projects of this scale is now the cost of capital, even more so than the cost of equipment, which appears to have stabilised after sharp price jumps that followed the supply chain crisis that gripped global markets after Russia’s invasion of Ukraine.
“Cost of capital is one of the things I hardly hear anyone talk about, but it is the most dramatic impact we’ve seen over the last five years,” Martin says, adding that it is the biggest component of the doubling in the asking price of power purchase agreements for wind projects over that period.
“We talk about increasing construction costs, which have definitely had an impact. But the way I see it, more than half of the increase comes just through cost of capital, so a higher cost of debt.
“And also it’s reset equity investors. They need a higher return because bond rates are higher. And so we’re going through an environment where we have the highest bond rates in 20 years, it really has an impact on … renewables, because they are so capital intensive.”
That, of course, is not helped by the impact of court challenges, like those experienced by Gawara Baya from the now disbanded Rainforest Reserves group, which Martin estimates added a year or two to the whole process. That, in turn, adds to perceived risk, which in turn impacts the appetite for and cost of debt and equity.
Much was made at the time of the decision by Apple to withdraw its agreed PPA for the project, but Martin says the deal had a sunset date and was not renewed when it expired. Windlab quickly found new buyers in the state-owned Stanwell group and Smartest Energy.
Martin is relieved that the threat of capital gains tax on renewable investments has been kicked down the road, because international investors – critical to big renewable projects given the lack of interest from Australian super funds – were directly impacted by it.
“We know that to have the transition happen, we need these large international investors to support the transition,” he says.
The project is also notable for being the first of its size with a behind-the-metre big battery equipped with grid forming inverters that negates the need for big, expensive machines like synchronous inverters that are normally required for weak parts of the grid.
Better than a syncon
“You need to be able to support the grid. The traditional answer is a syncon, but they are big bits of spinning metal that suck a lot of power, and often have a single point of failure. If they go down, the whole site goes down and, which is a frustrating thing.
The Gawara Baya project will feature Goldwind turbines, but Martin says the batteries will have a conventional layout as opposed to co-locating a battery module with individual turbines, as Goldwind is planning to do with some of the other projects it is developing on its own behalf.
Windlab’s next project – at Bungaban – is considerably bigger, a 1.4 gigawatt wind farm that could be the biggest in the country, and which has a long term agreement to help supply the hungry aluminium smelters and alumina refineries owned by Rio Tinto in Gladstone.
A solar and battery hybrid are likely to be added too, creating a $4 billion renewable energy hub that Windlab is now developing this in conjunction with its former majority shareholder Squadron Energy, controlled by iron ore billionaire Andrew Forrest.
The wind component is still going through the final stages of the EPBC process and Martin says they are “well advanced” in turbine selection.
It hopes to reach financial close in 2027, which means it is unlikely to be complete in time for the planned shut down of the Gladstone coal fired power generator in 2029. It is believed Rio Tinto has been organising short term contracts to bridge the gap.
“We like working in Queensland”
After that, Martin has his eyes on north-west Queensland, and the development of the Copperstring 2.0 transmission line, which is likely to unlock a significant number of gigawatt-scale renewable projects, and new mining provinces.
Some of the projects will combine wind, solar and battery storage, as Windlab did at the world-leading Kennedy project near Hughenden. It saves on grid connections and delivers capacity factors well into the 60 per cent level.
“We might be unusual, but we like working in Queensland, and … certainly in terms of resource and opportunity, we still see Queensland as a great state,” he says.
“We see great opportunities up in Central Queensland, around that Hughenden region, around Copperstring … I say to everyone that it is the best place to have integrated solar, wind, battery, because you have fantastic wind, great sun, and the average capacity factor is up in the sixties. It really stands out.”
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