Why $5bn energy giant turned its back on Abbott’s Australia | RenewEconomy

Why $5bn energy giant turned its back on Abbott’s Australia

Governments “come and go” but so does investment. The effective withdrawal of a $5 billion energy giant from Australia’s renewable energy industry highlights why it will remain in the doldrums as long as the Abbott government holds its fossil fuel prejudice.

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“Governments come and go and attitudes change.” Right now however, says Mark Binns, the CEO of Meridian Energy, a $5 billion renewable energy company, it is clear that Australia has a conservative government that just doesn’t like renewable energy. And Binns, who works in a country with a conservative government that does like renewable energy, will give Australia a wide berth until that changes.

Binns’ complaints last week about the changes in policy and the hostility of the Abbott government to wind energy are a perfect reminder of why the renewable energy industry remains at a standstill in Australia.

Even with the passage of legislation cutting the renewable energy target, the industry remains in the doldrums, with little or no activity – apart from a few projects funded by the agencies the Abbott government is still trying to repeal, some from the ACT government’s own renewable energy program, and the installation of rooftop solar by thousands of households and businesses looking to cut their energy costs and hedge their bets.

Binns cites the repeal of the carbon price and the review of the renewable energy target, and its subsequent cut to 33,000GWh from 41,000GWh, as two of the big issues changing the nature of the market.

But his complaints go further than that. It is clear, he says, that the current Australian government does not like renewable energy.

mark binns“We’ve been disappointed with the approach that has been taken by the Abbott Government to the review of the renewable energy target and its attitude to renewables overall – particularly Mr Abbott’s very clear personal antipathy to wind farms,” Binns said during a results briefing in New Zealand last week.

“A new target was agreed after 18 months of political posturing, which together with the delay, has done significant damage to investor confidence. And the government’s commitment to the longevity of the scheme was less than convincing.”

Binns does not believe that Australia’s antipathy to wind farms is tenable over the long-term – the Paris climate talks will increase pressure on it to change its stripes and, as mentioned at the top of the story, “governments come and go.”

But right now, Meridian Energy, with a market capitalisation of $5 billion and with the NZ government as its major shareholder, is not interested in the Australian large-scale renewable energy market.

Binns says the company has looked at more than 100 projects in the past year but “none of them were compelling” in the current policy and political environment.

He says there is no interest by any major retailers to write long-term power purchase agreements – a complaint echoed across the industry, and confirmed by AGL Energy earlier this month, when its CEO Andrew Vesey pointed out that there was no point in entering such contracts when the Abbott government was talking down the technology, and there was a risk that policy may be diluted or removed.

Indeed, the only wind farms to get the go-ahead since the RET was cut have been those receiving 20-year feed in tariffs from the ACT government, which now has a 100 per cent renewable energy target for 2025. In contrast, Abbott says Australia will have 23.5 per cent renewable energy by 2020 “and that is more than enough”.

The only other projects going ahead are solar projects such as the Broken Hill solar plant and Moree solar plant being co-funded by the Australian Renewable Energy Agency and the Clean Energy Finance Corp. Even rooftop solar is declining as regulators and network operators chop feed-in tariff and jack up fixed charges. Several states have promised higher renewable energy targets, but apart from the ACT’s reverse auction program, it has been all talk and no action, so far.

mt millarMeridian Energy, which co-developed Australia’s largest wind farm to date, the 420MW Macarthur wind farm in Victoria, has taken a $38 million charge on the value of its Mt Millar wind farm, due to those changing policies. It also operates the Mt Mercer wind farm.

It’s an ironic situation for Binns, because while Abott’s policies in Australia have caused a rebound in coal-fired generation, in Meridian’s home market, New Zealand, coal-fired generation is soon to become a thing of the past.

Binns notes that 1,000MW of thermal capacity had been slated for closure by Mighty Riverm, Contact Energy and Genesis, a situation that would leave New Zealand coal-free by 2019.

That, he says, would create opportunities for Meridian for either wind energy, geothermal or gas plants. “We are already looking at opportunities,” he said.

Binns also took a swing at the Australian retail energy market, where the Meridian subsidiary PowerShop is making inroads in the Victorian and NSW market, with customer numbers already jumping to more than 50,000.

Binns says the service from energy retailers in Australia was “woeful” and also criticised pricing systems, which reward customers who constantly move around looking for cheaper deals.

“We offer the same pricing to new customers and incumbent customers, but the large Australian players have differential regimes, which effectively penalise existing customers.

Binns said the PowerShop model was attracting interest overseas, and one large northern hemisphere retailer, which he did not identify, was looking to establish a franchise arrangement. A decision could be made this year.

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25 Comments
  1. Roslyn3077 5 years ago

    Very strange that Meridian is going back to NZ while NZ’s TrustPower is becoming expansive in Oz by both buying and developing renewable energy generation assets. Perhaps, on his way back to NZ, Mr Binns will sell his Mt Millar wind farm to TrustPower.

  2. Ken Dyer 5 years ago

    In the meantime, over the last 12 months, supply charges (poles and wires) have increased by about 7cents per day, whilst usage charges have declined by about 2 cents per day. At the same time, if you want to use renewable energy you still pay a premium to the electricity suppliers for that privilege.

    So in other words, the average consumer is paying more for electricity than when Labor’s so called carbon tax was in force. This is what happens when a government is corrupted by entrenched interests like the subsidised fossil fuel burners, the prices go up, the solar rebate (in Victoria) gets cut by 20%), and the average consumer gets hit in the back pocket. Do we live in the lucky country? I don’t think so.

    • nakedChimp 5 years ago

      the lucky country for a ‘few’ for sure 😉

    • Jacob 5 years ago

      But the Tories said that power prices would go down.

      Not that I voted for the corrupt Tories.

      AUS has a federal government that rules by instinct rather than evidence.

      • Con Mastoropoulos 5 years ago

        Instinct? I think they refer to that as ‘truthiness’.

        • Jacob 5 years ago

          Abbott said in his book “instinct is as important/good as intellect”.

          We truly have governance by instinct.

      • MaxG 5 years ago

        They don’t rule by instinct: they are plain stupid.

    • coralie 5 years ago

      You’re spot on, recent bill had me paying more for the supply than actual usage. To be honest that started happening when O’Farrell couldn’t stop the contract of all who got their solar under Kennealy government. Our supply charge almost doubled overnight. Went from 69 to 123 per day and has crept up to 137.
      This is obvious pay back.

  3. mick 5 years ago

    any one listened to march of the clowns

  4. john 5 years ago

    It is called sovereign risk and this is the result.
    A company will not risk spending money in a country that may cause risk of that investment being of no value.
    A pretty poor outlook for a country like Australia that usually likes to see it self as some kind of safe investment area.

  5. George Michaelson 5 years ago

    Rooftop solar is not ‘declining’ -the rate of INCREASE is declining. Are people de-installing? No.

  6. Tim Buckley 5 years ago

    Great to see a leading Australasian CEO stand up and speak his mind when he sees something fundamentally wrong. Binns should be applauded. It would be great to see other likeminded corporate leaders also have the courage to speak up and be counted. Sustainable economic growth for the long term is the only viable outcome.

    • shindig 5 years ago

      yeah but Tim, here in NZ we see something fundamentally wrong with the fact that Meridian has slashed its buyback rate for solar – twice – it doesn’t like the competition. (cindy)

  7. shindig 5 years ago

    Meanwhile, Meridian has absolutely slashed its buyback rate for solar in New Zealand. Twice. By 50 percent. Not too different to what Abbott is doing. http://www.radionz.co.nz/news/national/267359/meridian-again-cuts-solar-buyback-rate

    • Jacob 5 years ago

      NZ has banned new coal power stations.

      • shindig 5 years ago

        Sorry Jacob but that’s complete rubbish. NZ’s last two coal-fired turbines, at Huntly power station, were ageing and inefficient, to the extent that the company, Genesis Energy, decided to close them. Here’s a link to their announcement. http://www.scoop.co.nz/stories/BU1508/S00177/genesis-energy-announces-end-to-coal-fired-generation-in-nz.htm

        The vast majority of NZ’s electricity comes from the big hydro power schemes in the South Island, and more from wind, geothermal. Genesis will continue operating its gas-fired power station at Otahuhu. Meanwhile another utility, Contact Energy, is closing its gas-fired power station as it turns to geothermal. New Zealand simply doesn’t need any coal-fired power. Energy demand has also levelled out.

        None of this has anything to do with the Government, nor Govt policies, nor any climate policies that might have provided a disincentive for coal.
        Repeat: there is no ban: conversely, the NZ Govt has been terribly keen on coal, especially mines, but the plummetting prices have led to our only state-owned coal company, Solid Energy, being put into administration (again, something the Govt could have seen but refused to admit).

        • Jacob 5 years ago

          Does NZ have a price on CO2.

          • shindig 5 years ago

            well yes – and no. It has an ETS but, very strangely, with no cap, and most of the large emitters are 70% subsidised by the Government. See link below for an analysis of NZ’s climate policy. I think the most telling quote in that release is this:

            “[New Zealand] has taken little or no action on climate change since 2008 – except for watering down its ETS, and we can find no evidence of any policies that would change this.”

            http://climateactiontracker.org/news/215/New-Zealand-deploys-creative-accounting-to-allow-emissions-to-rise-.html

          • Jacob 5 years ago

            What do you mean by large emitters.

            In AUS the aluminium smelters were given carbon credits so they could keep exporting aluminium.

          • shindig 5 years ago

            Some of our largest industrial emitters are liable for just 5 per cent of their emissions, once they have exercise their right to claim credits for 90 per cent of their emissions and surrendered one carbon credit for every two tonnes of the remaining emissions, as they are required to do another “transitional” measure, known as the one-for-two.
            Yes, Tiwai Point, our aluminium smelter is one of these. Here’s the full list https://www.climatechange.govt.nz/emissions-trading-scheme/participating/industry/allocation/decisions/2014.html

          • Jacob 5 years ago

            So what are the large emitters.

            I guess a shipping firm and trucking firm. Perhaps a large milk processing plant.

            They did used to make tyres in NZ. But I think there is not much industry in NZ now.

    • JonathanMaddox 5 years ago

      No. Reducing subsidies is not at all the same as reducing a quota or as undermining investment by eliminating confidence in the market’s arrangements.

      • shindig 5 years ago

        it’s not a subsidy, it’s what the company pays for people to feed energy into the grid.

  8. James Ray 5 years ago

    The lack of government support for sustainable energy also limits job opportunities in the industry. As someone who finished studying renewable energy engineering at UNSW last November, I have found the job prospects to be limited, and competition to be intense. Finding work overseas isn’t easy either with limited relevant work experience, since for long-term work a visa sponsorship is usually needed. Another option is just to go overseas and try looking for jobs, but that’s risky too.

    • JeffJL 5 years ago

      Come on now James. People go overseas due to the high personal tax rate here in Australia. Have you not been listening to Joe?

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