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Australia

Australia

Australia's business agenda

It's crunch time in Australia. Energy policy is being revamped. The Mandated Renewable Energy Target (MRET), hugely successful in giving birth to Australia's wind industry, is up for revision. And the battle is well and truly on for wind energy to take its rightful place as a competitive, mainstream power source. In a country where electricity prices are extremely low, due to the abundance of cheap coal, and where six states and two territories are fiercely protective over their jurisdictional control and often at odds with the federal government, that battle will be a tough one. This is no time for bluffing, nor crying foul at the fossil fuel lot. The wind industry will come out on top only if it plays the game with a high level of sophistication.

The prospect of that happening looks good, as long as the industry's representatives stick to a well defined and clear-cut strategy. Significantly, by backing a liberalised market approach and opting for the market based mechanism that is MRET, Australia has already chosen to leapfrog into a position where wind could become the energy building block of the future -- a vision the chairman of last month's European Wind Energy Conference, Eddie O'Connor, called on delegates there to embrace. Rather than the subsidy-based environment agenda, which has driven development in the wind industry's leading European countries, it is a strong business agenda that is driving forward the fledgling wind industry in Australia.

It is an approach aimed at bringing not only environmentally, but also economically sustainable energy and a sustainable new industry to the country -- development without compromise or pain. A business driven environment agenda also presents a rationale that the fossil fuel lobbies and intensive energy users are increasingly finding harder to argue with. In making the economic case for wind as well as the environmental case, you win the argument and the vote. Job creation in remote areas, generation of power close to where it is needed, and freedom from the threat of carbon taxes and pollution penalties are all powerful selling points now being recognised by leading energy companies. The days of demanding subsidies without end should be allowed to fade into the past. Building a market reliant on never-ending hand-outs is a short term approach that in the long term does more harm than good, also to the wind industry.

Australia seems to have got the point. Not only has its approach convinced Vestas and NEG Micon to set up manufacturing facilities there and attracted a series of overseas wind project developers (pages 37-42), but the economic imperatives -- the promise of billions of dollars in inward investment, thousands of new jobs, and (as costs come down further) more cost-competitive electricity -- are winning the wind industry substantial support. State governments, in particular, are firmly behind it for these reasons, as their support of the pro-MRET campaign clearly indicates.

The country's wind association, AusWEA, has launched an admirable campaign for a stronger MRET. But it risks muddying the waters if it fails to keep its strategy sharp and its message crystal clear. Making a persuasive case for strengthening MRET based on sound economic principles on the one hand, while at the same time praising the subsidy systems in Europe on the other hand, is bound to confuse. AusWEA should stick to its guns and demand a market based on sound principles from the start. Australia is showing that the price subsidies needed in Europe over the past decade to kick-start a market for wind power are these days not the only way of getting wind farms built. Moreover, the European markets now face serious problems in taking their industries forward, aware that countries taking the market-mechanism route, such as the UK or US, are those that analysts are predicting will dominate the global scene in the not too distant future.

Think outside the bo

xTo maintain the upper hand in the energy policy debate, AusWEA needs to keep banging the MRET drum, but with a steady beat based on its solid business case. In particular, it must show the level of sophistication in its understanding of Australia's complicated market structure and the Australian people's needs that we have seen from several state energy ministers, notably South Australia's Patrick Conlon. With the Council of Energy Ministers' announcement of a new independent Australian Energy Regulator, we see the state ministers driving the market in wind's direction. To capitalise on that, the industry itself now needs to think outside the box.

Yes, grid infrastructure needs to be improved and new transmission lines built for wind to fulfil its potential, but that is hardly unique to Australia. Nor is the question of who should foot the bill. But the Australian industry is in a unique position to get that infrastructure built and perhaps at minimal cost to itself. Tangible solutions are available, but it does mean getting into bed with the coal and gas industries, which are struggling to keep up with soaring energy demand. The reason: insufficient grid and transmission networks. Most states are acutely aware of the impending power shortages that grid lock is bringing their way -- and with it possible hikes in electricity prices, a sure fire vote loser. The need for new infrastructure is not a wind-only issue. It is an all-energy, all-state issue that presents significant business opportunities and the industry should make that point loud and clear. It is this pragmatic view that state ministers have adopted. Australia is set to become a wind force to be reckoned with.

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