The State Government will slash the amount of money it pays wind farm operators to provide capacity to the power grid after finding their projects were not reliable enough at times of peak demand.
The Independent Market Operator, which runs WA’s wholesale electricity market, has moved to almost halve the rate at which wind farms are paid to boost the South West’s theoretical capacity.
Wind farm generators are paid “capacity credits” based on an assumption there is a 40 per cent chance they will produce energy at times when demand is highest.
But the IMO has ruled this should be scaled back to a reliability rate of 26 per cent, meaning operators could potentially lose millions of dollars.
It is understood Western Power and more reliable generators such as coal and gas-fired power stations had pushed for a bigger cut.
“Given the lack of evidence surrounding the performance of large-scale intermittent generator facilities in the grid during extreme peak demand events, it is difficult to accurately assess the real contribution that these facilities make to the reserve capacity mechanism,” the IMO said.
In a bid to ease the blow on wind farm operators, the IMO said the reduction should be phased in over three years and then reviewed to see whether it was still fair.
The renewable energy industry said the IMO’s decision could stall investment in renewable energy at a time when WA was striving to meet a mandatory green energy target of 20 per cent by 2020.
Sustainable Energy Association boss Ray Wills said the move would have a muted effect on existing wind farms.
But he said it could make prospective projects unviable and deter investors from considering WA.
“Clearly, what it does mean for new projects is that there will be a lower capacity payment as a part of that and it may make them less bankable,” Professor Wills said. Despite the setback, Professor Wills still hoped the industry would prosper in WA with the passage of the Federal Government’s carbon tax and as turbines became cheaper.
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