Australia settles argument - Agreement on renewables strategy

Australia's major political parties have ended months of dispute and reached agreement on an expanded long-term renewable energy target (RET) that is set to boost the country's wind sector.

The legislation, finally approved in August, requires 20% of electricity to be generated from renewable sources by 2020. This means that Australian consumers must purchase around 45,000 GWh of clean energy annually by 2020, or about four times the level of the existing national Mandatory Renewable Energy Target (MRET).

Wind's contribution to the 20% is expected to be second only to hydroelectricity. "Wind will obviously make a significant contribution but more precise forecasts vary according to modelling," says Rob Jackson, policy manager of renewable energy trade body the Clean Energy Council (CEC). The CEC puts current annual wind generation at 2500 GWh.

The industry has welcomed the agreement, although it has not really come as a surprise. The legislation has been in the pipeline since Australia's centre-left Labor party opposition defeated the centre-right Liberal party in 2007.

"The wind sector factored in the 20% target in 2007 after the federal election because it was (the new) government's policy," says Graham White, managing director of renewable energy consultants Garrad Hassan Pacific. "So, there won't be any immediate big jump in the number of wind project developments. Activity really accelerated (after the Labor win) - but slowed a little this year because of delays with the legislation."

Many developers have been relying on supportive eastern-state governments since the Australian wind sector slumped after electricity prices fell in the middle of the decade. West Wind's general manager Toby Geiger said the company operates on an RET set by the Victoria state government but had always assumed a nationwide RET would eventually be created.

Developers are particularly hopeful that the new RET will boost project financing, which has become more difficult as a result of the global recession, with lenders requiring higher levels of equity. "The crisis has reduced the number of customers we can sell to because they can't get financing that is attractive from a return point of view," Geiger says. "But wind is still regarded as a conservative investment and there is sufficient appetite from both debt and equity sides to invest."

Geiger dismissed predictions that existing generous government assistance to rooftop solar photovoltaic panels may disrupt wind's growth in the short-term. He says: "This is mainly for small, non-project installations, and I think the government's budget concerns will see spending on this restricted."

Developers of less mature renewable technologies such as geothermal, ocean generation and larger-scale solar may succeed securing special treatment under the new renewables target quarantined for them - they argue that the timing of the RET inadvertently favours wind. Environmentalists criticised the Government's recent acceptance of waste coal mine gas as renewable energy under the RET.

But a potentially much more significant challenge for wind's expansion is weak grid financing. "Some wind projects are actually off grid now but the main bottleneck is going to be a few years away," White says. "The federal government is now looking at the issue and we are hoping for an investment mechanism solution soon."