Visit windpowermonthlyevents.com for the latest on our upcoming conferences and webcasts

Australia

Australia

Analysis: Doubt over renewables target hits investor confidence

AUSTRALIA: The two recommendations made by a review into Australia's renewable energy target (RET) programme would be disastrous for the country's wind sector, industry professionals claim.

The RET review made two recommendations to the Australian Government
The RET review made two recommendations to the Australian Government

The RET is a subsidy programme with a current target for large-scale renewables to produce 41TWh by 2020 – approximately 20% of Australia's projected energy demand. Prime minister Tony Abbott – accused of backtracking over an election pledge to maintain the RET – appointed known climate sceptic businessman Dick Warburton to lead the review.

The review acknowledges the scheme's impact on the cost of wholesale electricity prices by "exerting some downward pressure" and admits the RET has had a "relatively small" influence on household bills. The RET has been "broadly" successful in meeting its objectives by encouraging investment in renewables and reducing carbon emissions, the review concludes.

However, there are concerns Warburton's review suggests renewables should only be used to meet demand rather than reduce the country's carbon emissions.

The Clean Energy Council said the recommendations would "decimate the industry" and warned that very few if any new wind projects would be built for the next decade.

This view has been reinforced by developers and manufacturers in the industry itself. CEO of German turbine manufacturer Senvion, Andreas Nauen, said the sector would "be ruined" if the recommendations are adopted.

Recommended changes

The federally mandated biennial review recommended two changes to the RET, despite acknowledging its successes. The first suggestion is to close off the scheme to new participants and only fulfil existing contractual obligations until 2030 — known as grandfathering.

The second would link the RET to growth of energy demand in Australia on a yearly basis. It recommends setting the target at a 50% share. The report says this option would continue to encourage investment in renewables when it is needed.

But forecasts suggest energy demand up to 2020 is lower than was anticipated when the current RET was adopted in 2010. Thus the second option would mean the installation of fewer projects.

The review claims that the RET is contributing to a surplus of generation capacity, but Chris Judd, CEO of Senvion Australia, said the oversupply of energy is an "excellent justification for a timely and safe retirement of obsolete, dirty generation technology". He called the recommendations "reckless, short term and visionless".

"Should either of the recommendations take place, the more likely outcome is a downgraded target," said Robert Liew of Make Consulting. "The other option of closing the RET to new investors is too severe even for members of the coalition government."

Liew also said the recommendations are unlikely to get past the Australian Senate, which is keen on maintaining the RET. But the doubt over the RET's future is driving away possible investment.

This view is echoed by Nathan Fabian, CEO of the Investor Group on Climate Change (IGCC), which represents investors concerned about the impact of climate change on investments.

"There are insufficient votes in our senate for any change to the scheme," Fabian said. "The regulatory uncertainty in the short term means that it is very difficult to be confident about the economics of deals." He warned that potential investors are already looking elsewhere. Nauen agreed, saying, "If the goal posts keep moving on business, globa investors moveon to more stable environments."

The sector wants to long-term economic framework to increase certainty in the sector, which is needed to boost investor confidence.

"We want some confidence that the government is actually welcoming renewable energy, and particularly wind energy in Australia, and we want to see a long-term policy framework to back that up," Fabian said.

Senvion's Judd added: "If the government is serious about attracting investment to Australia, reducing emissions, creating employment opportunities, and keeping power affordable for consumers and businesses then it should reject the recommendations in the Warburton report, and reaffirm its commitment to an effective Renewable Energy Target."

While many in the industry believe the recommendations would not be passed by the Senate, the doubt which has been cast over the RET is seemingly enough to drive investors away and push back the wind sector's development in Australia.

Have you registered with us yet?

Register now to enjoy more articles
and free email bulletins.

Sign up now
Already registered?
Sign in

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus

Windpower Monthly Events

Latest Jobs