Australia - Carbon price brings new hope after lean years

AUSTRALIA: Australia's wind market looks promising for 2012 after legislation to introduce a carbon price was passed in November. This should help make renewable energy more profitable. The Clean Energy Act comes into effect on 1 July. It will impose a fixed carbon tax of A$23 per tonne (US$24) on the country's top 500 polluters, which will be replaced by a market-based cap-and-trade mechanism from July 2015.

The legislation favours wind over other renewables, as wind offers the most direct path to carbon abatement in Australia due to higher deployment and capacity factors, according to IHS Emerging Energy Research.

Renewable energy has been held back in Australia by the oversupply of renewable energy certificates (RECs), low wholesale power prices and uncertainty over the carbon price. But the introduction of the carbon tax, an expected 50% rise in wholesale electricity prices and a rebound in REC prices of up to 60% will make renewable projects far more viable. Since the law was passed, Australia's largest energy retailer, Origin Energy, has signed its first power purchase agreement in three years for Acciona's 46.5MW Gunning wind farm.

Australia's installed capacity stands at 2.2GW, up from 1.88GW a year ago. Last year saw the strengthening of the market in Western Australia, with the 206MW Collgar wind farm coming online to almost double the state's 262MW of installed capacity. The region's project pipeline is also healthy, with plans for at least 250MW of wind announced in 2011.

Permitting remains a concern for the wind industry. In August, Victoria introduced a minimum distance of two kilometres between wind turbines and residences and prohibited wind developments in large areas of the state - which is home to around 20% of Australia's installed wind capacity. Industry body the Clean Energy Council warned that Victoria risks losing more than A$3 billion investment as a result of the new rules.

The New South Wales coalition government is also reviewing its permitting regime, raising fears that stricter rules for wind development could be introduced.

Meanwhile, South Australia remained in pole position, with 54% of Australia's wind capacity. Last year, Suzlon announced plans for up to 600MW to be located on the state's Yorke Peninsula.