Leading wind farm developer Tilt Renewables has warned that investment in large-scale renewable energy projects in Australia is at risk unless there is more clarity around the country’s growing Australia’s grid connection issues.
Grid connection problems have been a growing and costly issue in Australia’s main grid over the last two years, and Tilt – to its surprise – found itself at the centre of this when it was informed last month that its 336MW Dundonnel wind farm – completed on time and budget – would be delayed because of unspecified connection issues.
The company has warned of a sizeable hit to its profits in the current fiscal year because of the delay, and although it says full commissioning should be completed by the end of this year, more clarity is needed from transmission companies and the Australian Energy Market Operator about connection requirements.
“Last year I commented that ‘The Australian market requires a good deal of detailed technical and institutional knowledge to avoid foreseeable risks.’ I think there was some understatement in those words,” chairman Bruce Harker told the company’s annual general meeting on Wednesday.
“Foreseeable risks have expanded somewhat and now require an even higher level of diligence on actual AEMO performance requirements before an investment commitment.
“We expect that new project investment decisions will be challenging until clarity is provided to participants, prior to their project commitment, as to what performance is required for grid access, and for progress through hold points to full operational status,” Harker said.
His comments came one day after the Clean Energy Council revealed another sharp slump in large scale renewable energy projects in the June quarter – with just three projects (all solar and no wind) – reaching financial close, and the lowest number in terms of capacity and investment dollars since its investment confidence index was launched nearly four years ago.
The prime reason for this new investment drought, the CEC said, was the growing concern over grid connection issues, and ongoing and new constraints on already operating projects, and the lack of federal energy policy.
Tilt says it was surprised by the Dundonnell delay because it had followed the grid connections rules outlined in its GPS (generator performance standard), and achieved full registration as a market participant in March of this year. As RenewEconomy reported here last month, at the eleventh hour AEMO restricted its output at a 113MW hold point until it could iron out its concerns.
“Just to remind everyone, this was a $A560 million dollar project for Tilt Renewables, with another $90-or-so million dollar connection project,” said Tilt CEO Deion Campbell during the online presentation.
“Both projects were constructed on time, forming what was a 600-day project schedule. These machines are the largest turbines ever erected in Australia, [with] 150 metre rotors.
“We did follow the prescribed process for connection of a generating asset in Victoria. This included negotiating existing generator performance standards prior to financial close and then achieving full registration as a market participant in March 2020 following nearly two years of extensive due diligence by (AEMO).
“AEMO has subsequently and unexpectedly raised concerns associated with the wider electricity network and have been further exploring certain aspects of Dundonnell Wind Farm’s approved technical performance in light of these concerns.”
Campbell said that having limited the project’s output to 113MW, the market operator had since approved two additional interim hold points to progress wind production levels, with the project recently moving to 130MW, allowing energy production of around 50%.
Campbell said a third hold point of 150MW would increase energy production levels to around 66% of expectations, and Tilt was targeting implementation of this adjustment by the end of 2020, to pave the way to full output, including further hold points of 226MW and 300MW.
“We’re working very closely with AEMO and they are giving us a high level of attention,” Campbell told investors.
“We’re hoping to finalise potential adjustments to our plant performance to further address the concerns talked about earlier. And we hope to update the market in the coming days in terms of our progress, our expectations of timing with these adjustments. At a high level we are hoping to implement those adjustments by the end of 2020.”
Exacerbating the whole slow and painful process for Tilt is the fact that 93 per cent of the project’s energy yield is contracted – to the Australian arm of international grocery chain, Aldi, via a power purchase agreement sealed in April of this year, and to the Victoria government and Snowy Hydro.
“The Australian journey is what we describe as complex,” added Campbell. “They’re facing a rapid transition away from a centralised coal-based energy system to a decentralised, renewables-based one.
“Developers are almost universally having significant challenges commissioning new renewables, even stronger parts of the network, such as where Dundonnell connects.
“Addressing the increased commissioning risk will be key to achieving the levels of investment required in Australia.”
The company told investors that the Dundonnell commissioning challenges did not change Tilt’s long-term financial outlook, but FY2021 earnings would vary with short-term progress.
