Security debate dampens Australian investment

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Richard Heap
August 26, 2016
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This content is from our archive. Some formatting or links may be broken.
Security debate dampens Australian investment

Once bitten, twice shy. When damaging policies bite investors on their bottom lines, it can take years for those companies to feel confident about doing business again.

We have seen it in Spain, where the wind market is still paralysed after retrospective cuts. And we are now seeing it in Australia, where ex-leader Tony Abbott casts a long shadow.

Last week, the Weekend Australian newspaper argued that low investor confidence was stifling growth in Australia’s wind market. There are 58 wind farms in operation in Australia, with total headline capacity of 4.2GW, and 67 more proposed or approved. Despite this, only five are on-site, with total capacity of 918MW.

This is partly due to the legacy of Australia’s anti-wind former prime minister Tony Abbott, and the revisions made to the country’s renewable energy target last June. This cut back the goal of energy from renewable sources in 2020 from 41,000GWh to 33,000GWh; and failed to give investors any certainty after 2020.

The lack of certainty for investors in the RET system means that continued support for wind is reliant on having government support. It is true to say that there is more support for wind now than under Abbott, but these continue to be difficult times.

Let’s look at South Australia. In May, the state’s last coal-fired power station closed down. The green lobby cheered. But one month later, the state saw a spike in electricity prices because the removal of that power from the system coincided with slow winds and a period of cold weather. Energy price fluctuations have continued since then.

This has sparked a debate about energy security in which some
are casting wind and solar as the villains. South Australia currently sources 40% of its electricity from renewables, and the state is facing questions about whether it makes sense to grow wind and solar rather than other fossil fuel-based sources. While this debate rages it makes sense for wind investors to hold off spending.

But here’s the kicker. If developers do not build wind farms that have been given support under the RET then the government will have to pay high rates of A$93/MWh to make up the shortfall. This will get passed on to consumers and further inflame tensions. The upshot is that wind investors are damned if they build and damned if they don’t.

The other issue here is that some Australian states are making bold commitments to renewables.

In April, the Australian Capital Territory committed to source 100% of its electricity from renewables by 2020. It is a laudable aim, but we would have a concern if the territory was seeking to gain 100% of power from wind and solar, because this does little to address concerns from consumers that electricity prices will stay steady.

The other problem is that this taps into a popular fallacy that those in the wind sector think wind farms in their current form should be used to produce 100% of a country’s electricity. Not true, but it is such black and white thinking that will dominate debate.

It is a shame as this is overshadowing the good news in the sector. For example, this week the Australian Capital Territory hailed the fact that it has secured record low rates for wind power, of A$73/MWh ($56/MWh), at the 109MW Hornsdale 3 project.

But all is not lost. There are plenty of schemes in planning, and the government has shown that it is looking to fix its energy policy. If developers can get funding in order then the relatively quick development cycle should make it possible to hit Australia’s 2020 targets. The Clean Energy Finance Corporation says it is seeing a rise in wind investment after an 80% slump in the Abbott years.

Ultimately, Australia does have room to grow this low-cost source from the 4% from the mix it is now. There is plenty of scope, but growth will rely on investors putting money into a market where debate rages. Abbott is gone, but his legacy continues.

Once bitten, twice shy. When damaging policies bite investors on their bottom lines, it can take years for those companies to feel confident about doing business again.

We have seen it in Spain, where the wind market is still paralysed after retrospective cuts. And we are now seeing it in Australia, where ex-leader Tony Abbott casts a long shadow.

Last week, the Weekend Australian newspaper argued that low investor confidence was stifling growth in Australia’s wind market. There are 58 wind farms in operation in Australia, with total headline capacity of 4.2GW, and 67 more proposed or approved. Despite this, only five are on-site, with total capacity of 918MW.

This is partly due to the legacy of Australia’s anti-wind former prime minister Tony Abbott, and the revisions made to the country’s renewable energy target last June. This cut back the goal of energy from renewable sources in 2020 from 41,000GWh to 33,000GWh; and failed to give investors any certainty after 2020.

The lack of certainty for investors in the RET system means that continued support for wind is reliant on having government support. It is true to say that there is more support for wind now than under Abbott, but these continue to be difficult times.

Let’s look at South Australia. In May, the state’s last coal-fired power station closed down. The green lobby cheered. But one month later, the state saw a spike in electricity prices because the removal of that power from the system coincided with slow winds and a period of cold weather. Energy price fluctuations have continued since then.

This has sparked a debate about energy security in which some
are casting wind and solar as the villains. South Australia currently sources 40% of its electricity from renewables, and the state is facing questions about whether it makes sense to grow wind and solar rather than other fossil fuel-based sources. While this debate rages it makes sense for wind investors to hold off spending.

But here’s the kicker. If developers do not build wind farms that have been given support under the RET then the government will have to pay high rates of A$93/MWh to make up the shortfall. This will get passed on to consumers and further inflame tensions. The upshot is that wind investors are damned if they build and damned if they don’t.

The other issue here is that some Australian states are making bold commitments to renewables.

In April, the Australian Capital Territory committed to source 100% of its electricity from renewables by 2020. It is a laudable aim, but we would have a concern if the territory was seeking to gain 100% of power from wind and solar, because this does little to address concerns from consumers that electricity prices will stay steady.

The other problem is that this taps into a popular fallacy that those in the wind sector think wind farms in their current form should be used to produce 100% of a country’s electricity. Not true, but it is such black and white thinking that will dominate debate.

It is a shame as this is overshadowing the good news in the sector. For example, this week the Australian Capital Territory hailed the fact that it has secured record low rates for wind power, of A$73/MWh ($56/MWh), at the 109MW Hornsdale 3 project.

But all is not lost. There are plenty of schemes in planning, and the government has shown that it is looking to fix its energy policy. If developers can get funding in order then the relatively quick development cycle should make it possible to hit Australia’s 2020 targets. The Clean Energy Finance Corporation says it is seeing a rise in wind investment after an 80% slump in the Abbott years.

Ultimately, Australia does have room to grow this low-cost source from the 4% from the mix it is now. There is plenty of scope, but growth will rely on investors putting money into a market where debate rages. Abbott is gone, but his legacy continues.

Once bitten, twice shy. When damaging policies bite investors on their bottom lines, it can take years for those companies to feel confident about doing business again.

We have seen it in Spain, where the wind market is still paralysed after retrospective cuts. And we are now seeing it in Australia, where ex-leader Tony Abbott casts a long shadow.

Last week, the Weekend Australian newspaper argued that low investor confidence was stifling growth in Australia’s wind market. There are 58 wind farms in operation in Australia, with total headline capacity of 4.2GW, and 67 more proposed or approved. Despite this, only five are on-site, with total capacity of 918MW.

This is partly due to the legacy of Australia’s anti-wind former prime minister Tony Abbott, and the revisions made to the country’s renewable energy target last June. This cut back the goal of energy from renewable sources in 2020 from 41,000GWh to 33,000GWh; and failed to give investors any certainty after 2020.

The lack of certainty for investors in the RET system means that continued support for wind is reliant on having government support. It is true to say that there is more support for wind now than under Abbott, but these continue to be difficult times.

Let’s look at South Australia. In May, the state’s last coal-fired power station closed down. The green lobby cheered. But one month later, the state saw a spike in electricity prices because the removal of that power from the system coincided with slow winds and a period of cold weather. Energy price fluctuations have continued since then.

This has sparked a debate about energy security in which some
are casting wind and solar as the villains. South Australia currently sources 40% of its electricity from renewables, and the state is facing questions about whether it makes sense to grow wind and solar rather than other fossil fuel-based sources. While this debate rages it makes sense for wind investors to hold off spending.

But here’s the kicker. If developers do not build wind farms that have been given support under the RET then the government will have to pay high rates of A$93/MWh to make up the shortfall. This will get passed on to consumers and further inflame tensions. The upshot is that wind investors are damned if they build and damned if they don’t.

The other issue here is that some Australian states are making bold commitments to renewables.

In April, the Australian Capital Territory committed to source 100% of its electricity from renewables by 2020. It is a laudable aim, but we would have a concern if the territory was seeking to gain 100% of power from wind and solar, because this does little to address concerns from consumers that electricity prices will stay steady.

The other problem is that this taps into a popular fallacy that those in the wind sector think wind farms in their current form should be used to produce 100% of a country’s electricity. Not true, but it is such black and white thinking that will dominate debate.

It is a shame as this is overshadowing the good news in the sector. For example, this week the Australian Capital Territory hailed the fact that it has secured record low rates for wind power, of A$73/MWh ($56/MWh), at the 109MW Hornsdale 3 project.

But all is not lost. There are plenty of schemes in planning, and the government has shown that it is looking to fix its energy policy. If developers can get funding in order then the relatively quick development cycle should make it possible to hit Australia’s 2020 targets. The Clean Energy Finance Corporation says it is seeing a rise in wind investment after an 80% slump in the Abbott years.

Ultimately, Australia does have room to grow this low-cost source from the 4% from the mix it is now. There is plenty of scope, but growth will rely on investors putting money into a market where debate rages. Abbott is gone, but his legacy continues.

Once bitten, twice shy. When damaging policies bite investors on their bottom lines, it can take years for those companies to feel confident about doing business again.

We have seen it in Spain, where the wind market is still paralysed after retrospective cuts. And we are now seeing it in Australia, where ex-leader Tony Abbott casts a long shadow.

Last week, the Weekend Australian newspaper argued that low investor confidence was stifling growth in Australia’s wind market. There are 58 wind farms in operation in Australia, with total headline capacity of 4.2GW, and 67 more proposed or approved. Despite this, only five are on-site, with total capacity of 918MW.

This is partly due to the legacy of Australia’s anti-wind former prime minister Tony Abbott, and the revisions made to the country’s renewable energy target last June. This cut back the goal of energy from renewable sources in 2020 from 41,000GWh to 33,000GWh; and failed to give investors any certainty after 2020.

The lack of certainty for investors in the RET system means that continued support for wind is reliant on having government support. It is true to say that there is more support for wind now than under Abbott, but these continue to be difficult times.

Let’s look at South Australia. In May, the state’s last coal-fired power station closed down. The green lobby cheered. But one month later, the state saw a spike in electricity prices because the removal of that power from the system coincided with slow winds and a period of cold weather. Energy price fluctuations have continued since then.

This has sparked a debate about energy security in which some
are casting wind and solar as the villains. South Australia currently sources 40% of its electricity from renewables, and the state is facing questions about whether it makes sense to grow wind and solar rather than other fossil fuel-based sources. While this debate rages it makes sense for wind investors to hold off spending.

But here’s the kicker. If developers do not build wind farms that have been given support under the RET then the government will have to pay high rates of A$93/MWh to make up the shortfall. This will get passed on to consumers and further inflame tensions. The upshot is that wind investors are damned if they build and damned if they don’t.

The other issue here is that some Australian states are making bold commitments to renewables.

In April, the Australian Capital Territory committed to source 100% of its electricity from renewables by 2020. It is a laudable aim, but we would have a concern if the territory was seeking to gain 100% of power from wind and solar, because this does little to address concerns from consumers that electricity prices will stay steady.

The other problem is that this taps into a popular fallacy that those in the wind sector think wind farms in their current form should be used to produce 100% of a country’s electricity. Not true, but it is such black and white thinking that will dominate debate.

It is a shame as this is overshadowing the good news in the sector. For example, this week the Australian Capital Territory hailed the fact that it has secured record low rates for wind power, of A$73/MWh ($56/MWh), at the 109MW Hornsdale 3 project.

But all is not lost. There are plenty of schemes in planning, and the government has shown that it is looking to fix its energy policy. If developers can get funding in order then the relatively quick development cycle should make it possible to hit Australia’s 2020 targets. The Clean Energy Finance Corporation says it is seeing a rise in wind investment after an 80% slump in the Abbott years.

Ultimately, Australia does have room to grow this low-cost source from the 4% from the mix it is now. There is plenty of scope, but growth will rely on investors putting money into a market where debate rages. Abbott is gone, but his legacy continues.

Once bitten, twice shy. When damaging policies bite investors on their bottom lines, it can take years for those companies to feel confident about doing business again.

We have seen it in Spain, where the wind market is still paralysed after retrospective cuts. And we are now seeing it in Australia, where ex-leader Tony Abbott casts a long shadow.

Last week, the Weekend Australian newspaper argued that low investor confidence was stifling growth in Australia’s wind market. There are 58 wind farms in operation in Australia, with total headline capacity of 4.2GW, and 67 more proposed or approved. Despite this, only five are on-site, with total capacity of 918MW.

This is partly due to the legacy of Australia’s anti-wind former prime minister Tony Abbott, and the revisions made to the country’s renewable energy target last June. This cut back the goal of energy from renewable sources in 2020 from 41,000GWh to 33,000GWh; and failed to give investors any certainty after 2020.

The lack of certainty for investors in the RET system means that continued support for wind is reliant on having government support. It is true to say that there is more support for wind now than under Abbott, but these continue to be difficult times.

Let’s look at South Australia. In May, the state’s last coal-fired power station closed down. The green lobby cheered. But one month later, the state saw a spike in electricity prices because the removal of that power from the system coincided with slow winds and a period of cold weather. Energy price fluctuations have continued since then.

This has sparked a debate about energy security in which some
are casting wind and solar as the villains. South Australia currently sources 40% of its electricity from renewables, and the state is facing questions about whether it makes sense to grow wind and solar rather than other fossil fuel-based sources. While this debate rages it makes sense for wind investors to hold off spending.

But here’s the kicker. If developers do not build wind farms that have been given support under the RET then the government will have to pay high rates of A$93/MWh to make up the shortfall. This will get passed on to consumers and further inflame tensions. The upshot is that wind investors are damned if they build and damned if they don’t.

The other issue here is that some Australian states are making bold commitments to renewables.

In April, the Australian Capital Territory committed to source 100% of its electricity from renewables by 2020. It is a laudable aim, but we would have a concern if the territory was seeking to gain 100% of power from wind and solar, because this does little to address concerns from consumers that electricity prices will stay steady.

The other problem is that this taps into a popular fallacy that those in the wind sector think wind farms in their current form should be used to produce 100% of a country’s electricity. Not true, but it is such black and white thinking that will dominate debate.

It is a shame as this is overshadowing the good news in the sector. For example, this week the Australian Capital Territory hailed the fact that it has secured record low rates for wind power, of A$73/MWh ($56/MWh), at the 109MW Hornsdale 3 project.

But all is not lost. There are plenty of schemes in planning, and the government has shown that it is looking to fix its energy policy. If developers can get funding in order then the relatively quick development cycle should make it possible to hit Australia’s 2020 targets. The Clean Energy Finance Corporation says it is seeing a rise in wind investment after an 80% slump in the Abbott years.

Ultimately, Australia does have room to grow this low-cost source from the 4% from the mix it is now. There is plenty of scope, but growth will rely on investors putting money into a market where debate rages. Abbott is gone, but his legacy continues.

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Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.