Another promising renewable energy project has fallen victim to the chronic uncertainty surrounding Australia’s Renewable Energy Target, with Meridian Energy announcing on Friday it would not be going ahead with its proposed 37MW Burdekin Hydro project in Northern Queensland.
“The federal government’s protracted efforts to reduce the Renewable Energy Target have made long term capital investments in energy assets in this country nearly impossible,” said Meridian Energy Australia CEO Ben Burge in statement explaining the company’s decision.
Meridian bought the rights to develop the project from the Queensland government in 2013, and had planned to harness the power of the Burdekin Falls dam – the largest untapped hydro resource in Australia.
The New Zealand-based gentailer has since worked with surrounding local communities, the local water authority (SunWater) and the state government to develop the project, for which feasibility studies had already been conducted – by SunWater and electricity generator Stanwell Corporation.
According to reports at the time of the sale, the deal included engineering and design, geotechnical investigation, energy generation modelling, and fully developed tender pricing for civil works, mechanical and electrical works and the power line.
Meridian said the 37MW hydro scheme was expected to deliver significant benefits to the wider Northern Queensland region, with the capability of supplying enough energy to meet the electricity needs of 9500 households via around 125,000 megawatt hours of power annually.
In a submission to the RET Review panel, Meridian outlined the value of the Burdekin project and warned of the threat of regulatory uncertainty.
“The construction of a power station at this facility would increase and diversify the supply of energy for peak demand and enhance energy security in this important region,” the submission said.
Should this project be able to proceed, it said, “it would involve $200 million of investment, and create over 200
direct jobs in the local community during the construction of the project. It would also create a constant flow of new work into the local community to maintain the facility over its projected life span of more than 60 years.
Not to mention the “meaningful savings” Meridian and Powershop – Meridian’s 100 per cent owned online retail electricity outlet – had planned to deliver in Queensland, using the Burdekin project as a foundation investment.
Burge noted on Friday that by investing approximately $1 billion in renewable energy over the past five years – “under the explicit invitation to long term capital embedded in the RET” – and rolling out a new model of electricity retailing, Meridian and Powershop had enabled some Victorian customers to save over 40 per cent on the costs of their electricity bills.
“Sadly, the decision to undermine the long term investment signals of the Renewable Energy Target (RET) makes it more difficult to realise these benefits for Queensland businesses and households,” he said.
“This is especially disappointing given the role that the Burdekin project stood to play in enhancing energy security in Northern Queensland, which is expected to emerge as a threat in the medium term.”
This energy security threat Burge mentions refers to Queensland’s particular vulnerability to fluctuating electricity prices, due to its exposure to the domestic price of gas.
As Windlab Limited Australia general manager Garth Heron noted at this year’s All Energy Australia conference, “over the next few years Queensland will move from an over-supply of gas into the domestic market to become a major gas exporter with increasing amounts of shortfall in gas supply.
“Given that gas powered generation in Queensland sets the electricity price at least 40 per cent of the time – this will have a direct impact on wholesale electricity prices.”
Some analysts have estimated the future jump in electricity costs in the state at $68 a year. AGL chief economist Paul Simshauser recently warned that, in a worst-case scenario, we could see gas prices moving from the $4-$5 a gigajoule range to potentially $10 or $11 a gigajoule – a virtual doubling in price at the wholesale level.
Increasing the amount of renewables in the mix, however, would help to stabilise and lower wholesale electricity prices into the future.
Hence the renewable energy target. And hence the “bafflement” of renewables executives like Burge, over why the RET is not rock solid bipartisan Australian policy.
“We’re always looking at other opportunities to invest, but things like this result on Burdekin are symptomatic of the protracted destabilisation of a policy that should have bipartisan support,” Burge told RenewEconomy in a telephone interview on Friday.
Even the federal government’s own Warburton Review of the RET revealed that the policy does not increase the net costs of electricity for Australian consumers, he said.
“It baffles us that there is this uncertainty, when energy companies that support the RET are 20-30 per cent cheaper for the consumer than those companies who don’t support the RET.”
The federal government, meanwhile, is attempting to shift the blame for renewables uncertainty over to the Opposition, with environment minister Greg Hunt releasing a statement today linking Labor’s decision to walk away from RET negotiations to Meridian’s decision on Burdekin.
Labor abandoned negotiations with the Coalition and has said it will not return to the table unless the government shifts on its “cut of 40 per cent to the RET”.
“Despite numerous calls from the renewable energy sector and large energy users to return to the negotiating table, Labor continues to play politics,” Hunt said.
“The latest ASX announcement from Meridian Energy that it will not proceed with their proposed Burdekin hydro project in North Queensland is another blow to investment in renewable energy.
In an extraordinary feat of hypocrisy, Hunt said blamed “Labor’s strike on the Renewable Energy Target” for affecting future investments in the sector.
Labor, he said, was “treating the renewable energy sector like mugs.”
In the absence of progress with Labor, Hunt has turned his focus to crossbench senators, including newly independent Senator Jacqui Lambie, who will drive from Burnie to Hobart to meet Mr Hunt, after being “encouraged” to do so in a letter from Hunt.
The letter, reports The Australian, says Hunt appreciates “the pressures faced by businesses around the country, including in Tasmania” and looks “forward to constructive discussions with the opposition”.