The ACT government’s ground-breaking wind auction has elicited prices as low as $81.50 per megawatt hour, believed to be the lowest wind energy prices ever obtained in Australia.
As predicted by RenewEconomy a month ago, the three winners of the 200MW capacity of wind energy were the Hornsdale wind project in South Australia, and the Ararat and Coonooer Bridge wind projects in Victoria.
From our story on January 14 …..
The Coonooer Bridge Wind Farm, a 19.4MW facility to be developed west of Bendigo by Canberra-based Windlab, bid the cheapest rate of $81.50/MWh. Coonooer Bridge is also expected to have a ground-breaking community ownership component of the wind farm, as we discussed here.
The second cheapest was the Ararat Wind Farm, an 80.5MW facility to be built by RES Australia west of Ballarat. It will get a fixed feed-in tariff of $87/MWh.
The third winner was the Hornsdale wind farm, a 100MW facility to be built south-east of Port Augusta, by the French controlled Neoen and local group Megawatt Capital, who bought the project last year from Investec Bank. It will get a feed-in tariff price of $92/MWh.
The prices announced have stunned some observers, including rival bidders such as AGL Energy, which had hoped to kick-start it Silverton project. The prices are even lower than they appear, because the ACT tariff is fixed for 20 years, and it does not rise for inflation.
So to allow for the “discount rate” – or the time value of money – the tariff bid by Coonooer Bridge is equivalent to less than $70/MWh, possibly as low as $62/MWh. The Hornsdale tariff is equivalent to less than $80/MWh, according to Neoen’s Australia chief Franck Woitiez. The difference in prices, he said, could be due to suppliers, connection costs, and corporate structures.
Woitiez underlined the fact that the rest of the 270MW Hornsdale project would not go ahead without certainty in the renewable energy target.
The three projects outbid 15 other projects, totalling more than 1,000MW, that were bid into the auction. These include the Capital wind farm Bungendore, other wind projects near Collector, Yass and Crookwell, and the Silverton wind farm near Broken Hill.
(Wind auction prices in the US and Brazil are lower, around $US40/MWH) but that is due to lower labour costs, the absence of local manufacturers – the Howard government killed that off a decade ago – and the lower cost of finance).
Perhaps controversially, none of the winning projects will be located anywhere near Canberra.
However, ACT energy minister Simon Corbell said the ACT would still benefit, with $50 million in direct investment as Windlab grows its base, and runs operations for both Coonooer Bridge and Ararat from Canberra; and Neoen would establish its Asia-Pacific wind energy headquarters there.
There would also be a new national trades training centre, an innovation fund for small Canberra renewables businesses and a $7 million investment in new courses at the Canberra Institute of Technology and the ANU. He estimated the total economic benefit at $240 million.
The results will disappoint those companies who had hoped to build wind farms in the region around the ACT, but not those Conservative state and federal MPs who had campaigned vigorously against it, including NSW Planning Minister Pru Goward and Federal MP Angus Taylor, and other state MPs.
Corbell denied suggestions that the ACT had deliberately dodged a confrontation with local MPs. “That is not the case. I reject that,” he said, noting that the ACT had clearly set rules which would allow remote wind farms to bid, as long as there was an element of local content.
The wind energy capacity will add as much as $1.79 to consumer bills per household per week in 2020 before declining after, Corbell says. The estimated total cost of reaching 90 per cent renewables is expected to peak at $4.67 per household per week in 2020 before declining after. The ACT government argues that this cost will be offset by energy efficiency measures.
Corbell said the results of the auction would secure Canberra as the “renewable energy capital” of Australia.
Large-scale wind and solar projects in the rest of the country are at a standstill as a result of the Abbott government’s attempts to slash the renewable energy target. The 200MW of wind – which will be built by 2017 – will supply the equivalent of 33 per cent of Canberra’s electricity needs. It is on top of 40MW from the ACT’s first series of solar auctions, and another 44MW of rooftop solar installed in the ACT.
Roger Price, the head of Windlab, lamented the state of policy at the federal level. “Over the last four years despite significant local investment, we have generated very little revenue in Australia, thanks to Federal Government inaction and deliberate nobbling of the renewable energy industry.
“Our business has only survived due our ability to successfully generate export revenue. I find it frustrating to keep hearing phrases from the Federal Government like “supporting small business” and “creating sunrise industries” when their actions are clearly inconsistent. If they are genuine they need to support a substantial and ambitious renewable energy target.”
An auction for 50MW of “new generation” solar – possible solar tower plus storage or PV with storage – will be held later this year, before a waste-to-energy auction next year, and more wind energy auctions after that. The ACT aims to source 90 per cent of its electricity needs by 2020. It says it is already at 80 per cent of household needs.