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Wind storm of green energy is a flat calm

By Mark S. Lawson - posted Monday, 14 December 2015

Renewable energy was a major topic at the Paris climate conference but in Australia, despite all the green energy hype and discussion over the Renewable Energy Target, investment in green energy projects has tailed off to almost nothing.

This marked lack of activity, despite hopeful stories about how green energy is now cheaper than conventional fuel generators, underlines the point that energy retailers won't bother with alternate projects unless they are forced to do so.

And they are not being forced at the moment. Despite a bipartisan deal on the RET being hammered out in May, a disastrous decision by the Rudd government in 2010 has crippled the market. Investment in renewables collapsed in 2014 and has stayed very low.


An announcement by wind energy development company Windlab in late October is typical of what is not happening in the industry. The Windlab announcement was for the Kennedy Park project in north Queensland that would eventually have an installed capacity of 1200 megawatts – about that of a full-scale nuclear plant. But a closer look at the company's release shows the initial proposal was for a modest first stage, $140 million, combined wind and solar energy park of about 80 MW (a small installation) split evenly between the two technologies, construction of which is due to start after June 2016, if it goes ahead at all. The project does not yet have financing.

Windlab chief executive Roger Price is confident he will get a power purchasing agreement, where one of the power retailers agrees to take the power produced – an essential step towards getting financing. But the lack of a PPA for what is undoubtedly an innovative project shows the difficulties facing renewables industry.

The activity that is occurring is mainly due to a separate decision by the ACT government to source 90 per cent of its electricity needs from renewable sources by 2020.

This is despite the fact that the final, agreed target of 33,000 megawatt hours of green electricity from large-scale projects, wound back from 41,000 MWh, plus another 4000 MWh from small-scale projects – the countless photovoltaic panels on roofs – will be reached in 2020, or in just five years' time. Expected to amount to the equivalent of 23 per cent of total demand for that year, the target is not just imposed in that year but builds up to that amount under the watchful eyes of the Clean Energy Regulator.

The hiatus is the result of a Rudd government decision to allow those selling small-scale solar systems to claim an enormous benefit in renewable energy certificates. Those selling the systems at the time were allowed to claim the equivalent of five times the renewable energy certificates those systems were expected to earn over their entire 15-year life span, up front, and store them.

RECs bought by the barrow load


The result at the time was to flood the market with the RECs, each representing one clean megawatt hour-worth of power generated, with the price falling to about $30 each. Major electricity retailers bought them by the wheelbarrow load and have been using them to meet regulatory requirements since.

Subsequent attempts to change regulations in order to soak up the RECs overhanging the market, and chopping the target into separate figures for small-scale and large-scale systems, have not fixed the problem, with REC prices only really starting to show signs of life in the past few months.

National co-ordinator for the Australian Wind Alliance, Andrew Bray, says he wrote submissions to the Rudd government recommending against such a generous concession for solar systems to no avail.

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An earlier version of this article was printed in the Australian Financial Review.

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About the Author

Mark Lawson is a senior journalist at the Australian Financial Review. He has written The Zen of Being Grumpy (Connor Court).

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