Mixed Greens: AGL buys rights to 1000MW wind farm

Leading utility AGL Energy has bought the development rights to what could be the largest wind farm in the southern hemisphere, the Silverton wind farm near Broken Hill, and says it could start the first stage of development in 2013. AGL bought the rights from wind developer Epuron and Macquarie Capital. They had plans for a 1000MW facility, which would have cost $2.5 billion, although any such development would likely require an upgrade of the network links to the area.

AGL said in a statement on Friday that it had acquired the development rights for Silverton through the acquisition of 100 percent of the shares in Silverton Wind Farm Holdings Pty Ltd. It said the wind farm has development approval for 282 wind turbines in Stage 1 and concept approval for a further 316 wind turbines in subsequent stages.

The sale is not surprising, as constructing any wind project of this size would rely on a power purchase agreement from one of the three big energy retailers, of which AGL is one, and AGL has shown that it is most interested of the three in developing its own projects. The purchase price for the rights was not revealed, but probably in the tens of millions, given the work in permitting and securing grid connections.

AGL said that “subject to electricity network capacity” AGL would develop up to 300 MW in Stage 1, with the option for subsequent stages to bring the site capacity up to 1,000 MW. It said that subject to market conditions, construction of the first stage could commence in 2013. The outlook for demand has been  improved in the area with several mining projects on the drawing board for Broken Hill. It is thought that the first stage could be built without the need for an upgrade of the transmission network.

CEO Michael Fraser said the transaction demonstrates “AGL’s ongoing commitment to developing Australia’s leading privately owned portfolio of renewable energy assets, in which we have invested $3 billion over the past five years.” The company is currently building the 400MW Macarthur wind farm in Victoria, which is set to be the largest in the country when completed, in conjunction with New Zealand’s Meridian Energy. AGL Energy also announced last month the $3 billion purchase of the Loy Yang A brown coal fired generator.

Update: AGL says in an emailed statement (post deadline) that the first stage may only be 200MW in size, and the transmission network can currently accept less than 300MW. It still analysing if it worth upgrading network to allow for 300MW development.  It likely to go for fewer, larger turbines, as it did with Macarthur, where it is installing 3MW turbines. A decision will be made in late 2012 at the earliest.

Meanwhile, Deutsche Bank analyst John Hirjee says he sees Silverton as a valuable in-house option for AGL when oversupply of RECs eases. The company has previously indicated its REC obligation is covered to 2015, around the time Silverton could commence production.  He estimated Silverton offered value upside of about $0.15/share to AGL Energy.

New pastures

Epuron has another of other wind projects in the pipeline, including the large Liverpool Range project in the upper Hunter Valley, the Whit Rock wind project near Glenn Innes, some smaller projects near Yass, as well as a 7-turbine facility near Eden and another 7-turbine facility which could be constructed next to the Port Kembla coal loader, which someone must find ironic.

Epuron, however, has been railing against planning fees in NSW, saying they could total more than $1 million in the state,compared to $15,000 in Victoria. The company said in its submission to a NSW inquiry into wind farm guidelines that up to $10 billion in regional jobs, infrastructure and investment are at risk from the guidelines. It said they would create significant uncertainty, described the proposed 2km “gateway” process as flawed in principle and at law, and raise issues such as low frequency noise and health impacts with no scientific validity.

Meanwhile, The Australian reports that Portland-based Keppel Prince, the largest manufacturer of wind turbine towers in te country, is seeking redundancies from 100 of its 450 staff because of a drop in demand for wind farms, and a loss in maintenance business from the nearby Alcoa aluminium smelter. General manager Steve Garner told The Australian that wind farm work would dry up in the next two months as production finished for the 140-turbine Macarthur wind farm and a smaller 13-turbine project. “There are just so many projects that are still in a state of limbo waiting to try and secure funding,” he said.

Airbus likes mallee

Airline manufacturing giant Airbus says it joined a group including Virgin Australia that’s studying the use of eucalyptus mallee trees grown in Western Australia’s wheat belt as a potential alternative fuel for airplanes, according to Bloomberg. Mallee is seen as a suitable crop because it helps return salt-affected land to a productive state and can be planted on farms alongside crops, Frederic Eychenne, new energies program manager for Airbus, said in an interview at a conference in Geneva. “This will facilitate developing agriculture in dry areas, as the mallee trees will help keep water in the ground,” Eychenne said. Mallee plants would help develop the cultivation of wheat as well, he said.

The move comes as the  European Union pushes airlines toward cleaner fuels by forcing them to cap emissions or buy permits for the excess beginning this year. Virgin’s interest in mallee was announced last year, when it joined a consortium of renewable fuel technology and agriculture interests to develop a sustainable aviation biofuel project using pyrolysis technology developed by Canadian company Dynamotive Energy Systems.  A demonstration unit is scheduled to be completed this year, followed by a commercial-scale plant that could be operational as early as 2014. A CSIRO report last year suggested he Australian aviation sector could achieve a 5% biofuel share in their total fuel use by 2020, expanding to 40% by 2050.