Worm turns for wind: Arrival of biggest and lowest cost turbines stirs Australia’s moribund market

As the South Australia grid is desperate to prove as it nears its target of 100 per cent net renewables next year, technology can solve a lot of things, but competition is the best cure for high prices.

The same rule applies for the rest of Australia’s renewable energy economy. Solar and battery storage have benefited from intense competition that has sent prices down significantly in recent years.

But the wind industry has been stranded in a holding pattern, dominated by a handful of big turbine suppliers and beset by rising civil construction costs, along with planning and social licence issues. Few of the huge pipeline of projects have seen the light of day.

That could be about to change, at least for one part of the equation. The dispatch from a Chinese port this week of the biggest and most powerful turbines to be seen in Australia, and likely its lowest cost in the current market, could herald a sea-change for the industry.

The turbines are being delivered by China’s Envision Energy, which has landed contracts with two of the most influential players in the Australian market – Andrew Forrest’s iron ore mining giant Fortescue and the French-based renewable energy developer Neoen Australia.

Envision is supplying the turbines to Fortescue’s first wind farm – the 132 megawatt (MW) Nullagine project, that will also be the first in the Pilbara, a region that until recently boasted 98 per cent share fossil fuels.

Envision seems well placed to supply the turbines needed for the neighbouring Bonney Downs project that will boost capacity to around 800 MW, a key part of Forrest’s pledge to eliminate fossil fuels entirely from his iron ore mines by 2030.

This week, Envision also announced it had secured a supply deal for Neoen’s 179 MW Narrogin wind project south of Perth, located in the state’s main grid. It is one of number of wind projects that are being fast-tracked by offtake deals with the state government owned energy retailer Synergy.

We know the Envision turbines are the biggest, simply because of the specs. They each have a capacity of 7.8 MW, a hub height of 155 metres and a 182 metre rotor diameter.

In the Pilbara, the 17 turbines will be lifted atop a unique tower built by Fortescue’s newly acquired Nabrawind technology that offers more height (where the wind speeds are greater), and less concrete and quicker and less complex installation. In the Narrogin, the 23 turbines will use conventional towers and foundations.

We can also assume that they are likely the lowest cost turbines in Australia right now. A new player doesn’t gain market share by bidding higher than its established competitors, which in this case are Vestas, Goldwind, Siemens, GE Vernova and Nordex.

A new player gains ground by offering better deals, and the fact that Envision has secured contracts with Neoen, arguably the most successful wind developer in Australia over the past decade, and Fortescue, without doubt the most ambitious, is significant.

There is already talk that pencils are being sharpened for costs of wind turbines among the other key suppliers, and it is interesting to note that the likes of Goldwind and Vestas are building up portfolios of their own development projects, so they can have an argument with themselves over price.

“The energy transition is entering a new phase, where success depends not only on adding more renewable generation, but on building intelligent energy infrastructure,” Kane Xu, Senior Vice President and President of International Product Line at Envision Energy, said in a statement on Wednesday.

“Australia is a strategic market for Envision, and Neoen’s Narrogin Wind Farm marks another important milestone in our long-term commitment to the country.”

The link with Neoen should not be a complete surprise. Neoen’s owner Brookfield had previously tried to buy Australia’s biggest energy retailer, Origin Energy, and the $20 billion deal was agreed and ready to proceed before being shot down by a leading super fund with a deep attachment to its fossil fuel investments.

Brookfield in April, 2023, signed an MoU with Envision to set up manufacturing hubs in the Hunter and Latrobe Valleys to build renewable energy components, a move it said could create thousands of new manufacturing jobs in those coal hubs.

It is not known where that idea is now, given Brookfield now owns Neoen, and Neoen – like others – is largely dependent on energy utilities and corporate buyers for contracts for new renewable energy projects.

And apart from the Fortescue in the Pilbara, Rio Tinto in Gladstone, and some state owned utilities, there are not many of those about.

David Dixon, from Rystad Energy, notes that Narrogin is only the fourth wind farm – out of 31 wind projects to date – to reach start construction after obtaining an underwriting agreement under the federal government’s Capacity Investment Scheme.

The Narrogin wind farm has not actually reached financial close yet, but that appears a formality given that it has secured a crucial contract with Synergy, which has been told to act by the state government. Another three wind projects have also obtained PPAs with Synergy, including two with CIS deals – Kondonin and Parron Maam.

That underlines the benefits of having a government owned retailer – Victoria has been similarly proactive with its specially created SEC to get the Delburn wind farm over the line, and the Horsham solar-battery hybrid. When a government decided it wants to act, it has the means to do so.

Of course, you have to be careful what you wish for. The Queensland LNP illustrate what happens when a government hostile to renewables owns the major utilities in the state, and controls the planning rules.

Equity deals have been cancelled, and new investment has more or less stopped, apart from those wind, solar and battery projects deemed essential to to power Rio Tinto’s aluminium smelters after the privately owned Gladstone coal fired generator closes in 2029.

Still, Dixon says the deal for the Narrogin wind farm means that, for the first time, there is more than 1 gigawatt of PPAs signed in the WA market.

“By contrast, it has been a slow first 7 months of the year in the (much bigger) NEM, with less than 1 GW of PPAs signed, as it remains a challenging market for new development (low prices & capex challenges for wind),” Dixon wrote on LinkedIn this week.

It will be interesting to see if and how the arrival of Envision moves the needle for the wind energy market. The CSIRO’s latest GenCost report this week speaks of moderating capex prices for wind – so maybe it is already having an impact – and rising costs for solar. Civil construction costs are still a headache for all technologies.

“Global equipment cost reductions from learning are offset by local increases in land and installation costs,” the CSIRO notes, and then makes this important point:

“While equipment costs fall the most in stronger climate policy ambition scenarios, these scenarios also experience the strongest increase in installation costs due to greater construction activity.” The more you build, the cheaper it will be.

But according to Rystad’s Dixon, less than 5 GW of new wind and solar capacity is under construction in the NEM, well below requirements to meet the federal renewable target.

Dixon says South Australia – which is heading towards its own target of reaching 100 per cent net renewables by 2027 – currently has the most wind capacity under construction (540 MW).

But Dixon saysnew wind generation is desperately needed in New South Wales, Queensland, and Victoria as coal retirements loom over the next 3 years.

In NSW, just one wind farm – the Uungula project owned by Andrew Forrest’s Squadron Energy is under construction, and the state has now signalled a major tweak to its renewable tender to provide enough revenue certainty to get them to FiD without the need of power purchase deals.

Once again, the government has had to step where private investment either fears to tread. Or in the case of the major utilities, where major utilities don’t want to tread because they figure they can wring more support from governments for their ageing coal generators.

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