The subsidy-free wind farms that returned money to ACT consumers in 2017

How’s this for an idea. Go green energy, and build a wind farm. Or two. And pay nothing extra for them. No subsidy, no extra payments.

That’s what the ACT government managed to achieve in calendar 2017, with the first two wind farms built towards its goal of matching 100 per cent of its electricity needs with renewable energy by 2020.

In fact, the ACT did better than that. The Ararat wind farm actually delivered a dividend to ACT energy consumers of nearly $90,000 from its opening early in 2017 to the end of December.

The smaller, but lower cost, 19.8MW Coonooer Bridge wind farm delivered an even bigger dividend of $480,000 over the calendar year.

How did this happen? Because the ACT government, when holding auctions for renewable energy capacity, got quite smart.

They delivered guaranteed prices for the wind farm developers – $81.50/MWh in the case of Coonooer Bridge – which has set records in terms of capacity factors – and $87/MWh in the case of the 240MW Ararat wind farm, of which 80MW is contracted to the ACT.

That meant that if wholesale electricity prices at the time of generation were lower than this, then the ACT would make up the difference.

But because this was a specially structured “contract for difference” it meant that if the prices were higher than this – as they were for most of 2017 – then the excess is returned by the wind farm owners, and given back to the ACT and to energy consumers.

It looks something like this example graph above, taken from the ACT government website. When prices are low, overnight in this case, the ACT consumers would pay extra for that period.

But when prices were high during the rest of the day, then the wind farm owners would pay the excess back to the SACT.

That means that the ACT has effectively constructed a financial hedge against any future price rises in the wholesale market – although, to be fair, if wholesale prices actually plunge over the coming decade (not many people think that will happen), then they will miss out.

Still, the benefits are likely to have been extended into 2018, with the average wholesale price in Victoria so far this year at $93/MWh, according to AEMO – although the payments to and from the ACT are judged on the 30 minute intervals when the wind farms actually generate.

The wind farms are also subsidy-free. As part of its plan to go 100 per cent renewable, and because of its determination to ensure that this was over and above the federal renewable energy target of 33,000GWh by 2020, the ACT will surrender the certificates that are generated by the wind farms.

This is one reason why the ACT is insisting that the proposed National Energy Guarantee makes state and territory targets additional to the weak federal target. Otherwise, the ACT’s additional efforts will simply mean that other states, like NSW, can get away with doing less.

Not all the ACT renewable energy contracts will deliver dividends, it should be noted. The four solar farms totalling around 40MW were among the first to be built in Australia, so had relatively high costs, some around $180/MWh.

But most of capacity will be delivered through wind energy – about 600MW in all – with two of the biggest, coming from the Hornsdale wind farm stages 2 and 3 in South Australia, expecting a price of around $73/MWh. Again, the LGCs will be surrendered, so again they will be subsidy free.

Other projects, such as Crookwell and Sapphire in NSW, are priced around $86-$87/MWh. Sapphire has just started delivering on its ACT contract after completing the first 100MW of its project.

The ACT expected that the maximum cost of the program would peak at around $5.50 a household a week, but now expects this to be a maximum of $4.90 a week, and most likely  lower.

“The ACT Government remains confident that the cost of achieving 100% renewables will peak at less than $4.90 per household per week in 2020, and decline over time as wholesale market prices rise,” climate change minister Shane Rattenbury said in an emailed statement.

“The fact we can reduce the pass-through costs reinforces that the ACT’s 100%-by-2020 renewable electricity target is being achieved at the lowest possible cost to ACT electricity consumers.

“Not only does this mean the ACT has some of the cheapest electricity in Australia, it means our previous renewable energy contracts are helping insulate the Territory from future wholesale market price spikes.”