This is a lightly edited transcript of the recent Energy Insiders podcast, featuring the Westwind CEO Tobias Geiger.
David Leitch 00:00
Toby, it’s a pleasure to have you on the podcast today.
Tobias Geiger 00:07
Good afternoon, Dave. It’s a pleasure to be with you this afternoon.
David Leitch 00:12
Westwind’s developed about three wind farms, as far as I can see so far in Victoria. Lal Lal, Moorabool and Mt Mercer with a capacity of about over 600 megawatts and on sold them to three different developers, which I think’s pretty good track record. Could you tell me a little bit about the outlook for wind development at the moment compared to how it’s been in the past few years?
Tobias Geiger 00:38
Yeah, so the the outlook for wind development is actually a lot more rosy now than it was a couple of years ago, when we were trying to find investors for Lal Lal and Moorabool some five, six years ago. It was really, really tough to find investors in this space. And now we’re in a situation where there’s actually more interest from investors than there are good quality projects in the market.
David Leitch 01:08
I guess also, though, there’s kind of like technical issues about getting connected to the grid. And we’ve seen, you know, pretty ridiculous delays in the case of say Stockyard Hill and quite slow commissioning of Moorabool as well. How’s that side of looking?
Tobias Geiger 01:25
Yeah, we’re looking at the developments there at Moorabool and Stockyard Hill, but also to a degree Dundonnell and Mortlake South, with quite a bit of worry. But also, we’ve tried to take our learnings from that. So we’re working very closely with AEMO and we’re spending a lot more money on engineering upfront and doing a lot more design work upfront in order to then make the actual connection application process and modeling more smoothly. And hopefully, that strategy works out.
David Leitch 02:00
I’ll come back to that a little bit further. Let’s talk a bit about the Golden Plains project, which I think was originally going to be around about 800 megawatts to a gigawatt. Can you tell me a little bit about the history of the project and how it’s looking at the moment?
Tobias Geiger 02:19
Yep. Well, the history started many years ago in probably 2005 when I had the first glass of wine with one of the landholders there, and it’s developed from there. So for many years, we didn’t further the project, because it was just cost prohibitive to break into the 500 kV line. And we developed the other projects, you know, Mt Mercer, Lal Lal, Moorabool, during that period of time then. In earnest we’re focusing on on Golden Plains really since 2016.
And the project has since grown also from that 800 to about 1000 megawatts to about 1300 megawatts. And we’re planning to deliver that project in two stages, stage one with about 730 megawatts and stage two with the rest and probably with the addition of a big battery storage as well.
David Leitch 03:15
Yeah, wow, that’s that’s certainly a significant project because I think even at 1000 megawatts it’s like 2% of the whole electricity supply in the NEM. Let’s talk about what you need to make a project succeed, which is, I guess, someone to pay for the development, someone with the skills to operate and develop it and someone the take the off take. The traditional models being to find a buyer first and get that to lower the cost. But how are you thinking about it?
Tobias Geiger 03:57
Yeah, well, that was one of the key features of the Golden Plains Wind Farm in our search for the right investors for Golden Plains. Now, really at the time, I have scoured the globe to find the right investors and the right investor for a project like a Golden Plains is someone who is prepared to invest in the project on a largely merchant basis. Not only are the days of of the PPAs gone, it’s also that a lot of the value is actually given away to whoever the off taker is.
So we’ve looked at many companies across the globe, over 40 parties that we talked to and it came down to a handful roughly that were prepared to invest on a merchant basis in the Golden Plains Wind Farm. And you might have seen a recent announcement in Bloomberg New Energy Finance around the investor coming in at Golden Plains being Tag Energy and they are prepared to invest in the project on a merchant basis. And then as we’re going into construction, and have more clarity around our dispatch dates we will then of course look for offtake.
But in this case, we put finance and construction first and then off take thereafter. And dare I say many years ago people always perceived the biggest risk to a project being getting a PPA. I would say that has clearly shifted the biggest risk nowadays getting connected in the timeframe that you’re planning to connect into.
David Leitch 05:27
Yeah. And so I mean, all going well, I think you had a recent newsletter out suggesting that you might start construction in the first half of calendar 2022. If you are able to do that, when do you think the project would energize and maybe be fully commissioned?
Tobias Geiger 05:49
Yeah, so we’re looking at financial close towards the end of this year, then commence construction early in 2022. Energization we would expect sort of mid 2023. And then that is when we would start to commission turbines and starting dispatch, and then the the full completion of the project and commercial operations, we would expect that in the second half of 2024.
David Leitch 06:15
And so there’s been a lot of focus in Australia on the falling cost of solar, I guess, because households see that for themselves. And because we’ve got people like Professor Martin Green who can explain it all very well. And also, we’ve got lots of sun. We don’t hear as much about what’s happening with the cost of wind. How are you thinking about that and winds competitiveness and place in the market?
Tobias Geiger 06:43
Well, it’s certainly true that the cost decline in solar has been much faster and continues to be much faster than in wind. And we’re now at the point where solar has got lower LC in good locations than wind. We see the cost decline in wind to be pretty modest. There’s probably not that terribly much coming anymore. But it also has become increasingly a question of value rather than cost of electricity.
And where we see the strength of wind is really that it is more diverse in terms of the time of generation than solar which pretty much all produces at the same time. And we see that it is not only about LCOE, it’s about finding the right location to have the best value of your electricity, and then play a value game rather than just a low cost game.
David Leitch 07:39
Yeah, and I guess on that, I mean, it is fair I think to say that there’s a lot of wind in South Australia and Victoria, or really, I mean, it’s the biggest share. And then there’s also the prospect of offshore wind, we recently did an interview on the Bass Straight project, the Star of the South. That’s very high cost. But one of the reasons that offset that might be that, you know, it was better correlated with demand and less correlated with other wind. I mean, do you think that we overemphasize in Victoria or….
Tobias Geiger 08:21
No, I don’t think we’re over emphasizing Victoria at all. If you look at Victorias electricity or energy supply in general, it’s still very much reliant on coal generation and on gas. And so there is certainly plenty of room left for wind and solar in the market. And I do agree that the Star of the South projects main attraction is the disconnect between when it is generating from the other wind projects that we do have in the State.
I had a very interesting conversation the other day with Damien Sanford from AusNet, who said, you know, if you think about the amount of gas that is used in Victoria, for heating, particularly in the winter months, that gas peak that will need an awful lot of gigawatts of wind and solar to replace that if you really want to go net zero emissions in sort of by 2050.
David Leitch 09:16
And how do you think, it’s not really necessarily your job to think about the firming side of things, but I mean, a lot of projects these days want to offer it. I mean, if you look at the New South Wales model, they’re probably going to give sort of contracts out that sort of semi firmed at least. How are you approaching the question of the need for firming? And is it something that you should be doing at Golden Plains, or is it someone else’s job?
Tobias Geiger 09:50
It is our job, David, and I think a renewal developer who just goes back to the old business model where it’s all about building a project and that’s it and then let it run and set and forget, those days are long gone. You need to actively manage your generation output for the life of the project and that includes firming. And at the end of the day, you know, a wind farm produces when the wind blows, the solar farm produces when the sun shines. And those times do not necessarily correlate with when the electricity user wants to use the electricity. So you need firming. I don’t think there’s any doubt about that.
And wind and solar projects, they will increasingly need to operate like a power station with a with a firming option attached to it. And that could either be at the project site itself with physical firming there, with battery storage, or pumped hydro in some locations, or with a contractual arrangement with somebody that provides that firming. But it’s certainly very clearly on our radar, and we feel that’s also responsability and need to do something in that space and add further value to what we’re doing.
David Leitch 10:55
I guess you can add value potentially. I mean, the way I’ve seen companies like NextEra approach it in the United States is they want to add a four hour firmer onto a project rather than firming every megawatt hour, which seems to make sense to me. Because when you look at an aggregate, you don’t really need to firm the whole thing. You only need to firm the parts where there might be a shortfall.
Tobias Geiger 11:20
I couldn’t agree more. Yeah, I couldn’t agree more.
David Leitch 11:26
I better say something a bit more controversial otherwise this will be a short phone call. Now you’ve done something also that I think is the right thing to do. But it’s difficult. And that is you’ve specialized pretty much in Victoria and in wind and developed some expertise in one arguably narrow area. I mean, how do you see Westwind? Is there a limit to what you can do in Victoria? Or can you just stay there and keep developing wind farms and stuff like that for a good while yet?
Tobias Geiger 12:01
Look, there is a limit in Victoria. That’s certainly the case. But there’s still an awful lot to go before we reach that limit if we want to replace the last brown coal fired power stations with renewables. So we see that there continues to be a lot of work to be done in Victoria. We were questioning ourselves for some time, whether we are too narrow with wind, but what we’re finding out is probably in the time between 2014 and 2017 solar was all the hype. And we were sort of a bit of the stepchild in the industry and that has swung around. And the expertise that we’ve accumulated over many years in specialising in wind is now really paying off. Because it appears that quite a few developers that have moved into solar, they’ve lost a bit of touch in developing wind projects, and particularly what has happened in the planning space and in the community expectation in that period of time. Whereas we’ve continued to grow and specialize in that area.We see that that specialization has actually become one of our major strengths. And we don’t see too much of a constraint in that market for the foreseeable future.
David Leitch 13:14
Yeah, I as I said, I’m a great fan of specialization and getting, I think it’s very hard to be good at more than one or two things. That’s always been, even one thing in my case. It’s interesting to me to come back to this prospect of development and then selling it. I mean, you need a certain confidence as a developer that the off take will be there. Even for stage one of this project, which is 750 megawatts. I mean, it’s bigger than the entire three projects you’ve done so far. It’s not going to be a single off taker is it? I mean, you know, you have to have some idea about the off take, don’t you?
Tobias Geiger 14:00
Absolutely. And that is really where we see the strength of Tag Energy coming in, because that is their business model, is being essentially a Gentailer model, where you actively manage your generation portfolio and, and a customer base. And it is, I would say any project even with a PPA in place, it just means you’re moving the problem of when you have to deal with your electricity and multiple customers from at the beginning of the project to 10 or 15 years down the track. But you still have to do it. Whereas we want to do that right from the beginning. And that’s where we see actually an advantage in the market because you’re prepared for what’s going on and you develop the right products and services for the market. If you provide the right products and services in the market, then there certainly is a market for your electricity.
David Leitch 14:53
Yeah, and again, I think that the market will develop so that we’ll have traditional gentailers, it’s just that they’ll have renewable energy rather than thermal energy. But you’re still in the end be developing with a long term supply and selling essentially shorter term contracts, which is what I see as one of…, yeah, yeah. And indeed, what about in terms of operations, do you, I mean, it’s one thing to be a financial investor and just own a wind farm, but it’s another thing to operate it to its very best and to be able to develop it and sort of eke out another 10 basis points of return every year and make it add up and develop a real skill. Can you see people, you know, the market consolidating and the sort of good operators emerging?
Tobias Geiger 15:46
Definitely. Yeah, definitely see that. I mean, our brothers and sisters overseas in Germany, they’ve been managing the operations of their project since 1999 and they’ve gained an awful lot of operational experience and optimize, you know, the value creation in your assets. And so we can build on what they’ve developed and learned there over time. But we can also see increasingly in the market is an integration of your actual physical asset management, and your trading off of electricity, that you harmonize those two work streams. And it’s also increasingly important to think like an operator when you’re still developing a project. You want to develop a project with an operators hat on, so that, you know what you’re doing there will not potentially cause you shortfalls in your operation later, or make your operation extremely difficult, or you have too much, you know, wakeloading on your turbines, or whatever it might be.
David Leitch 16:54
Absolutely. I presume the capacity factor that we’re talking about with Golden Plains, I mean, wind farm capacity factors always look better in the spreadsheet than in reality I find, but I mean, are we talking about the sort of 40, 42%? mark, is that realistic do you think?
Tobias Geiger 17:17
No, it’d be nice, but we won’t quite get there? Well, we would get there if we had smaller generators for the rotor sizes that we’re looking at. We’re looking in the high 30s, to be honest with you, Dave, and that really is a trade off. We could get to higher capacity factors, but then we would have less turbines and have to share the grid connection cost over less turbines, or we sacrifice a little bit of capacity factor and having high weight losses, but then the grid connection cost per turbine is lower. And there’s an optimization process that you go through. And in this case, we really came to the conclusion that it’s better for this project to have more turbines and sacrifice a bit of capacity factor. Because the cost to connecting 500 kilovolt network is quite significant. And you want to make sure that you use that connection asset wisely then.
David Leitch 18:08
Absolutely, absolutely. I can get that completely. And we’ve probably covered most of the stuff I wanted to cover, and covered it very succinctly which I think’s great. Just coming back to the connection issues again, you’ve done a lot of modeling. We’ve also got new rules about the one generator at a time kind of thing, which I don’t really understand.
I don’t quite understand what the issue has been with the other wind farms exactly. I mean, in the sense that they would have done their modeling beforehand as well. Is it the case that the rules have changed afterwards? Or, I mean, what’s what’s to stop those guys speeding up a little bit now that are already in the commissioning queue?
Tobias Geiger 18:53
Yeah. Well, firstly, nobody actually tells you. So it’s all rumor and scuttlebutt that’s going around, because there’s obviously confidentiality between what’s going on between AEMO and those various projects. What I’m hearing is that there is not one consistent problem. The problems are typically project specific. Except perhaps for the West Murray region problem that cut across a whole raft of projects, but otherwise, I think it’s more a project specific problem in each case. And as to the one project at a time rule. I’m not quite sure whether that is a wise move.
On one hand, yet on the other hand, I can also have some sympathy that you know, if you do two or three projects at a time, and then one project develops the problem, or in the modeling, somebody discovers there is a problem, then we get another West Murray snowball effect. So it’s a bit of a double edged sword. I think in first place, it’d be really helpful if we had the best technical resources in this space, which is really scarce, sitting in working at AEMO, and then the AEMO have more capacity to process and connect more projects at the same time.
David Leitch 20:21
Yeah, so I guess Australia must be developing, must be a great place to work whether you want to look at the role of inverters in controlling the system, or the problems of managing these complex grid interactions. Are there enough skills sitting around the place? And are they sitting in the right seats?
Tobias Geiger 20:43
Yeah, that’s a it’s a very good question. I’m sure we could have a beer over that. What we’re seeing is that a lot of the good talent actually leaves the AEMO and then works for turbine suppliers or consultants. And it’d be really great if some of that good talent was sitting at AEMO because it is more helpful when two parties with a very similar skill set and understanding and experience in connection processes would be sitting on either side of the table.
We would see a lot more efficient processes there. And it’s also fair to say that there’s also sometimes a lack of understanding on the generator side, you know, with all the complexity that AEMO and the the network, service providers have to deal with. It’s a matter of probably better communication and making sure that we have the right skill sets, and they are scarce, they’ve been scarce before COVID. And I think with COVID it’s even more difficult, because the influx of good talent from overseas is not there anymore.
David Leitch 21:49
So just before we finish up, I don’t actually get a sense that this is really improving. I mean, people throw terms at me like PSCAD where you have to build this complete model of how things should work. And then when you actually do build it and show that your system works, and that it turns out, that wasn’t actually how it does work anyway. You know, is this going to actually improve in your opinion? Or are we sort of going to sort of sit here in this you know, ……?
Tobias Geiger 22:23
I fear that we will feel more pain for a little bit longer. There is a good argument for actually undertaking more measurements what’s going on in the network. And measure at more points, so that we’re better able to correlate what people are modeling and what is happening in the actual network.
Once we start doing that we’ll probably see improvements there in terms of reducing the fear factor a little bit from the people that do the modeling and are quite sure what that’s going to do in a network. Nobody wants to then connect a generator to the network that at the end of the day might cause a blackout.
So we need to find the right balance there between the the PSCAD modeling that happens beforehand, and then afterwards, measuring what the impact really is, and then have the models learn from from what you measure later.
David Leitch 23:18
From what I hear it’s even worse with batteries because they can change what they’re doing so quickly that even the model can’t keep up. That’s a joke. Toby, it’s been great talking to you. I really appreciate hearing from such an experienced operator and someone who has been around the traps a few times. And so I wish you and Westwind every success with the development of Golden Plains ,that seems like it could be a great project.
Tobias Geiger 23:49
Thank you very much, David. And it’s been a great pleasure to be on the podcast with you and I hope our listeners enjoyed this and didn’t didn’t just switch off.
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