Juggling the costs of going green -- Weighing up MRET changes

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Proposals to exclude generation technologies from Australia's Mandated Renewable Energy Target (MRET) that only questionably qualify as "renewable," or to significantly increase the target, would open up a far larger market for wind power, concludes a report by the Australian Bureau of Agricultural and Resource Economics (ABARE). But if wind power as a result is expected to meet up to half the target, the cost of MRET would leap, making "wind energy costs over time critical to the outcome of the program," says ABARE.

Excluding wood waste from MRET would increase wind's contribution to 4281 GWh or 45% of the 2010 target, says the report, although after 2010, the rate of wind's contribution would slow, reaching 4425 GWh by 2020 and requiring 1500 MW of wind development in that period. Excluding large hydroelectric projects as well would see wind's contribution jump to 50% of the target, or 4730 GWh. An alternative to excluding these technologies is to double the MRET target between 2010 and 2020 to 5% of Australia's electricity portfolio, or to 19,000 GWh -- making wind again likely to contribute just over 50% (10,900 GWh) of the target.

The ABARE report, "Excluding Technologies from the Mandated Renewable Energy Target," confirms that with the cost of wind predicted to fall 5% a year to 2010, wind energy will be one of the largest contributors to the current target for 9500 GW of renewable energy by 2010. But it questions the estimate of the Australian Wind Energy Association (AusWEA) that MRET will stimulate 2035 MW of wind power by 2010, saying that 900 MW, contributing 30% of the targeted volume of electricity, is more realistic.

Wood and hydro cheaper

ABARE agrees that the cost of Australian wind power is expected to decline sharply up to 2010 -- from A$55.88-A$64.85/MWh in 2000 to $28.12/MWh-$35.15/MWh. Fixed investment costs, it adds, are likely to fall by 40% from A$1900/kW in 2000 to A$1200/kW in 2010. The report stresses, however, that even with this decline, the exclusion of wood waste and large hydroelectric projects from the program -- or a doubling of the target between 2010 and 2020 -- could see MRET costs rise by between 1.3% (A$25 million) and 37% (A$670 million). "If ABARE's assessment of changes in the cost of wind energy prove to be optimistic, it will be significantly more expensive to meet a larger mandatory renewable target," states the report.

AusWEA agrees with ABARE that wind's contribution under the current MRET target would realistically be around 900 MW, with many planned projects being abandoned or put on hold. But based on the 2035 MW of wind projects now in the pipeline, "the Australian industry could deliver 5000 MW by 2010 if the MRET target is substantially increased," insists the association's Ian Lloyd-Besson. He stresses that wind is one of the cheapest renewables, as demonstrated by the level of investment interest in projects.

"One thing that we can be sure of is that, in the medium term, the cost of fossil fuel generation will rise as it is forced to internalise many of its indirect costs, such as pollution and its contribution to global warning, making wind power even more competitive than it currently is," says Lloyd-Besson. The cost to residential consumers of an additional 10% of clean energy would be in the order of $3.5 a month, he continues, referring to a study by Hugh Outhred of the University of News South Wales. "It is worth noting that some analysts put the cost even lower," he adds.

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