The Rudd Government’s embrace of renewable energy is expected to usher in a second wave of investment in wind power, despite a two-year waiting list for turbines.
Paul Curnow, a partner at law firm Baker & McKenzie, said the outlook was “very good”, with investors who had been lying in wait since 2004 now ready to “bring all that potential to market”.
The Government’s national scheme will include a legislated target of 45,000 gigawatt hours of renewables-based electricity in 2020. This will ensure 20 per cent of Australia’s electricity supply will be obtained from renewables by 2020.
The Renewable Energy (Electricity) Act 2000 currently requires the generation of 9500 gigawatt hours of extra renewable electricity per year by 2010 – enough power to meet the residential electricity needs of 4million people.
There are about 40 wind farms in Australia, and at a clean energy conference in Sydney later this month, delegates will be told by AGL Energy Ltd carbon and government affairs national manager Tim Nelson that this could turn into 250 over the next decade.
Mr Curnow expects the number to jump when the commonwealth and the states flesh out details relating to the target later this year.
He noted that when the Howard government introduced its Mandatory Renewable Energy Target in 2001, there was a burst of investment which dried up when it was clear the government was not going to extend the scheme.
“All the wind farms you see in Australia came out of that,” Mr Curnow said.
He said the industry stalled after 2004 at a time when investors were still buying land and gaining approval for farms. Those who could ride out this period, such as infrastructure powerhouse Babcock & Brown, extended their portfolios and are now set to reap the dividends.
Many of the sites have been optioned or acquired and the relevant permission obtained but work has yet to start, because the developers want to make sure the economics of the farms stack up once the emissions trading regime is set up.
“They will quickly bring all that potential to market,” said Mr Curnow.
“I would expect some significant sales in the next five years as well as actual construction.”
However, the availability of turbines looms as a potential brake on growth.
“The thing about wind is that it’s ready to go and it’s proven,” Mr Curnow said.
“You don’t need a higher price to make it viable, so I think the wind sector will be able to get in there quickly and snap up most of the target.
“The only restraint on wind, which is a big problem, is that you have a two-year waiting list to get a turbine at the moment. That’s how tight the market is.”
He said German and Danish manufacturers had been interested in coming to Australia before 2004 but changed their minds because of concern about the problems of achieving the economies of scale in manufacturing that had been possible in Europe, where offshore farms of more than 100 turbines were becoming common.
“They haven’t come back and probably won’t, so we are going to have to rely on getting turbines from overseas.”
Mr Curnow said he expected the preferred model for bigger investors would be to establish the potential of the business before selling and perhaps retaining an equity share.
He said geothermal energy was about “five years away before it gets to commercial grade” and that it was more likely to be useful in meeting future targets.
7 April 2008
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