But while the delay has prompted many to push back projects, there has still been steady progress, with Australia passing the gigawatt milestone to reach 1306 MW of wind capacity by the end of 2008, says industry body the Clean Energy Council (CEC). Six wind farms totalling 482 MW were commissioned during the year, nearly 60% of the entire 824 MW that was operating in Australia by the end of 2007. Another six projects totalling 535 MW are due online in 2009, which is being described as "the most important year in the history of Australia's renewable energy industry," by CEC's Matthew Warren. What happens with the MRET "will really frame how the industry deploys over the next decade," he says.
Under MRET, electricity retailers buy renewable energy certificates (RECs) to demonstrate they are complying with their annual MRET requirements, with each REC currently representing a megawatt hour of electricity. To achieve the 20% by 2020 target, renewables generation is to increase to 45,000 GWh. Wind power is expected to supply the bulk of the 10 GW of installed capacity required to get there. The MRET will subsequently be phased out as a planned emissions trading market matures and electricity prices become high enough to drive renewables investment alone.
Concern is mounting, however, that the new legislation will give undue advantage to small generation systems, notably solar. A "solar multiplier" provision is included in the draft legislation, which awards generating facilities less than 1.5 kW five RECs for every megawatt hour of electricity produced. All other generators still get just one certificate. The plan is to phase out solar subsidies in favour of standard offer contracts. The wind industry says that as the legislation is currently drafted, the 20% target for RECs could be met, but without being backed by the actual 45,000 GWh of physical electricity.
Another concern the industry has is about a potential cliff-like drop in development from 2025 to 2030 once the target has been met. Unlimited banking of RECS is allowed under the plan, enabling retailers to build up the volume of certificates they hold and in any given year save surplus RECS to meet targets in subsequent years. The pattern resulting could be huge investment early on, followed by a sharp fall in later years, warns the industry. For wind developer Pacific Hydro, its early excitement about the new MRET has been tempered by these concerns and the lack of action in 2008. It brought just one wind project online last year, with another two due this year (table). A further 600 MW is ready to go, but waiting for the right market.
The government believes the coming carbon trading system will provide that market. But its plan is embroiled in controversy, coming under fire from environmental groups and renewable energy firms as well as large energy users. The 800-page draft legislation, notes the wind industry, calls for a soft start, with the carbon price potentially not delivering enough incentive for investment before MRET expires. Think tanks on the left and right are suggesting plans for carbon trading be abandoned and a carbon tax introduced instead, while energy intensive business groups are citing the credit crisis as a reason to put all such plans on hold.
Undeterred, the government says it is committed to seeing the plan through though. "We cannot allow the global financial crisis to weaken our determination to address the very real and long term threat that climate change poses. Deferring action at this point would increase investment uncertainty at precisely the wrong time," says climate change minister Penny Wong.
Wind Prospect, a major independent wind developer in Australia, agrees and says it is keeping its fingers crossed for June. It, too, is worried about the details in the new MRET. Nonetheless, having sold its 95 MW Hallett 1 and 71 MW Hallett 2 projects to AGL, Australia's largest electricity retailer, Wind Prospect is continuing to expand and CEO Michael Vawser says he is bullish about the future. The company has 400 MW of projects on the table for 2009, he says, and 500 MW a year for "the next four or five years." For Australian developers, it has become a buyer's market for turbines, he says, with manufacturers much keener now. "A year ago you could not get a turbine for 2010, but now they are happy to commit to turbines for late 2009."
From turbine supplier Suzlon, Dan Kofoed Hansen is also optimistic. "We are quoting more projects than ever and most are mature projects," he says. As soon as the new MRET legislation kicks in, a number of projects will firm up, he adds. Even with some delays in the legislation and the global financial crisis, "the future is bright," he says. In the past two years, Suzlon Australia has doubled turnover to about A$550 million (EUR 277.5 million) and more than tripled staff levels to 210, with further expansion expected. It has around 268 MW under construction, including the 141 MW Capital Wind Farm project.
Meanwhile, the face of Australia's wind industry has changed somewhat throughout 2008. Several companies, hit by the credit crisis, have sold out altogether, enabling others to expand their reach. Most notably, AGL has expanded significantly. As well as the Wind Prospect projects, it acquired wind assets from Investec and Allco. It paid Investec A$14 million (EUR 7 million) for two development projects, in Queensland and Victoria, respectively, while Allco got A$12 million (EUR 6 million) for seven projects spread across the states of Queensland, New South Wales and South Australia (Windpower Monthly, September 2008). AGL says the planned new MRET legislation is a good enough driver to justify the expansion.