Australia’s clean energy industry is facing a boom-bust cycle as depressed green energy prices forced the owners of the nation’s biggest baseload renewable energy project to call in receivers.
NSW Sugar Milling Co-operative chief executive Chris Connors has blamed lower renewable energy prices from the government’s “botched” renewable energy legislation for the financial failure of the joint venture co-generation project between Sunshine Renewables and Delta Electricity.
Nationwide, wind farm projects have been stymied by low prices for the renewable energy certificates that are supposed to be a key income stream for the projects – sparking fresh warnings of a boom-bust cycle related to the government’s renewable energy target scheme of 20 per cent by 2020.
Critics say the RET is “simply a government-created market”.
Underlining this, International Power Australia estimates 61 per cent of the 1400 megawatts of wind generation that have been built or promised since 2008 will be used to help meet contracts with state governments, often for taxpayer-funded water desalination plants.
Mr Connors said green energy prices were depressed because the solar credit scheme – which subsidises households that install solar panels – had led to a glut of 30 million RECs.
Ferrier Hodgson, appointed receivers and managers two weeks ago, said the plants would run as normal and there would not be a large number of job losses as they were mostly automated.
On Friday, REC prices were almost $36, well below the price of $45 to $50 that renewable energy companies say is needed to underwrite new investments in the absence of a carbon price.
This is despite the government’s move to deal with the glut of RECs last year by splitting large-scale renewable projects and small-scale projects into two separate markets.
National Generators Forum executive director Malcolm Roberts said the RET was “simply a government-created market” that required retailers to buy more expensive energy.
Pacific Hydro corporate and government affairs executive manager Andrew Richards said there was a significant backlog of shovel-ready wind farm projects, but developers struggled to lock in the power purchase agreements needed to finance them.
There would be a need to build new projects in the future, because while energy retailers have been banking the glut of cheap RECs, these are expected to be used by about 2014 to 2015.
“We just hope the industry is still here and able to deliver,” Mr Richards said.
“You don’t want a situation where you bottom out in the cycle as we are now and everybody has to build wind farms in a hurry, because that’s going to shoot the prices up.”
It was unfortunate “that’s been the history of the industry, the boom-bust cycle”, while industry wanted sustainable growth.
Clean Energy Council chief executive Matthew Warren said uncertainty about the carbon price was weighing heavily on REC prices.
But he did not expect a boom-bust situation “at this stage” as industry knew what its needs would be.
A spokesperson for Climate Change Minister Greg Combet said the RET was always designed to complement a carbon price to drive clean energy investments.
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