It’s been a stormy few weeks for Australia’s wind industry, with two investors pulling out of wind projects in Victoria.
So BusinessDay asked about a dozen people in the energy and investment industries about the future for wind in Australia. And most of them agreed that while investment uncertainty looks likely to remain an issue for the next few years, the longer-term forecast for wind energy looks more promising.
Three weeks ago, Australia’s largest energy retailer, AGL, announced it would not proceed with plans for a 48-turbine wind farm in Dollar, in south Gippsland, which would have contributed 79 megawatts to the Victorian Government’s renewable energy target.
Then a week later Danish company Vestas said it was closing its blade manufacturing business in Portland, resulting in the loss of 130 jobs.
Those decisions buck the global trend. Internationally the wind industry has had several years of strong growth, including 32 per cent alone last year with some $US23 billion ($A28 billion) worth of new wind farms added. The fastest growth has been in the United States, followed by Germany, India, Spain and China.
New wind capacity in Australia has grown at only half the global rate, partly because of our significantly lower electricity prices, but also greater investment uncertainty.
Victoria at present has the lion’s share of applications for new turbines due to incentives through its state-based Renewable Energy Target scheme, although that ranking may change with NSW about to set up its own scheme.
Wind industry advocates have been quick to blame the AGL and Vestas decisions on a lack of Federal Government support, due to the phasing out of its Mandatory Renewable Energy Target scheme. It required an additional 9500 gigawatt hours to be purchased from renewables by 2010, but this supply need has already been filled.
“Investors are investing in wind energy all around the world but they need the right framework,” said Dominique La Fontaine, chief executive of the newly formed Clean Energy Council.
But some in the industry say the reasons behind the AGL and Vestas decisions were slightly more complex.
“Look, there’s no doubt that the lack of a national renewable energy scheme played a major part in Vestas’ decision, because there are more attractive countries for them to invest their money, but I don’t think it was that relevant in AGL’s case,” said one wind farm developer.
“Gippsland has become a hard place to build a wind farm because the local opposition down there is just so well organised and well connected. If you’re as big as AGL and you’ve got other projects going on in parts of Victoria where the local community is actually happy to have the wind farms, why would you bother?”
Others point to last year’s orange-bellied parrot fiasco in Bald Hills – where the Federal Government unsuccessfully tried to block a new wind farm on the grounds of protecting an endangered parrot, despite its own reports showing the risk to the parrot was negligible – as an example of some of the political obstacles still facing the industry.
But some within the industry concede that the behaviour of a few “cowboy” developers has damaged the whole industry’s reputation.
“There’s no doubt that one of the problems in Gippsland has been that you’ve had a few companies that really haven’t dealt with the community well, and that’s brought the whole industry into disrepute,” said one energy analyst, who asked not to be named.
Ms La Fontaine said while Australia’s electricity grid system could handle about 8000 megawatts of wind power, there is at present less than 817 megawatts of installed wind capacity.
Wind advocates often contrast the growth of wind in Australia to Germany, which despite having a wind resource only half as good as Australia’s has become the world’s single biggest wind market and one of the industry’s main manufacturing hubs, employing about 70,000 people.
German Wind Energy Association policy adviser Claudia Grotz attributes that strong growth to Germany’s generous renewables subsidies, with a feed-in tariff scheme and a national renewable energy target.
“That’s the secret behind why we’ve had such strong growth in renewable industries,” Ms Grotz said.
But not everyone agrees that wind and other renewables should enjoy special treatment.
Energy Supply Association of Australia chief executive Brad Page argues that a free market should operate and that wind energy should not be propped up through feed-in tariffs or renewable energy targets.
“Companies like Vestas that want to blame the Government for not continuing what effectively is a subsidy program just remind you about all the debates that went about the floating of the dollar, the removal of tariff barriers and the like because they are the same thing and they are a deadweight loss on the economy.”
Mr Page is also critical of the patchwork of different state-based schemes, saying Australia needed to adopt a national approach on energy.
Origin Energy is one company that may add wind to its solar and geothermal investments. Chief executive Grant King told ABC’s Inside Business that his company “will certainly look at” wind farms being put up for sale by the Queensland Government.
Overseas wind investment is proving a good option for companies including Babcock & Brown Wind Partners Group, which recently reported an annual net profit of $13.8 million, reversing a loss of $16.2 million in the previous year.
Chief executive Miles George said the group was extending its investment in wind after snapping up wind farms in Spain and Germany, preparing to build one in France, and with plans to add to its US operations. While the group does have investments in wind locally, Australia was left off that list.
“We would prefer to invest more money in Australia but while there is no effective renewable energy target, we have to look elsewhere,” he said.
Pacific Hydro is another company that has found more opportunities overseas.
Andrew Richards, Pacific Hydro’s manager of government and corporate affairs, said the company planned to invest $500 million over the next five years in Victoria because of the VRET scheme, which will boost renewable energy in Victoria by 1000 megawatts by 2016.
“We think we can meet a quarter of that target ourselves but there are other big players in there as well,” he said.
“VRET is good but even with that wind is just limping along. Compared to what we can do in places like Chile and Brazil, we are investing $1 billion in Chile over the coming years, $500 million in Brazil, and they are great investments for us, but we want to be more and more involved in Australia – there just aren’t the right policies in place.”
A senior energy analyst says investment in wind would only pick up strongly in Australia with similar national price mechanisms here.
Liz Minchin travelled to Germany to meet climate change and energy experts courtesy of the German Government.
By Mathew Murphy and Liz Minchin
3 September 2007
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