A “buyer’s strike” by two of Australia’s biggest electricity retailers is potentially stalling growth in the renewable energy industry just two weeks after the government gave its backing for the sector, a big renewable energy supplier said.
Andrew Richards, executive manager of corporate affairs at Pacific Hydro, said EnergyAustralia and Origin Energy, which control more than half the national electricity market, had halted the signing of long-term power purchase agreements with wind and other renewable energy suppliers, in effect blocking developers from securing loans for new projects.
“For whatever reason, they’re just not contracting,” Mr Richards said. “Unless they start contracting, you just simply can’t get the finance – particularly non-recourse project finance – to build these projects.”
Last month, the government agreed to leave the renewable energy target largely unchanged after its latest biennial review. Under the policy, large-scale generators must supply 41,000 gigawatt-hours of renewable energy annually by 2020.
Origin Energy’s chief executive Grant King last month said renewables would supply closer to 27 per cent of electricity – exceeding the scheme’s original target of 20 per cent – by the end of the decade.
Mr Richards said Origin and EnergyAustralia appeared to be adopting a wait-and-see approach before the election in September, betting that the Coalition would weaken the target if it won office.
“They’re not really contemplating . . . a longer-term compliance strategy under the [renewable energy target],” he said.
Power purchase aggreements with the big three retailers ‘‘are available but not at prices that are attractive to Infigen’’, said Richard Farrell, investor relations manager at renewable energy generator, Infigen.
Origin, EnergyAustralia view
A spokeswoman for Origin said the company was well positioned to meet its target obligations and customer demand for cleaner energy, and regularly reviewed the timing of any future renewable energy investments.
“Origin has substantial renewable energy investments,” the spokeswoman said. “This includes an 800 megawatt portfolio of wind power which was recently expanded with the execution of two new wind power purchase agreements.”
Origin’s most recent power purchase agreement, signed in May last year, was for the 270 MW Snowtown II wind farm, the company’s largest such deal.
The company can develop its own wind farms, execute agreements with other wind developers or buy renewable energy certificates on the market to meet its targets, the spokeswoman said.
EnergyAustralia also defended its stance on power purchase agreements.
“Last year, EnergyAustralia announced two new PPAs in 2012 in relation to two proposed wind farm projects in NSW, which are progressing towards finalisation,” a spokesman said. “These projects, Boco Rock and Taralga, have a total installed capacity of almost 215 (megawatt).”
“EnergyAustralia’s generation portfolio includes the 111MW Waterloo wind farm and a 50 per cent share in the 123MW Cathedral Rocks wind farm, both in South Australia. In 2012, Waterloo and Cathedral Rocks wind farms generated 508 GWhrs of energy – enough renewable energy for approximately 70,000 residences and small businesses.”
“As well as the PPA announced in 2012, EnergyAustralia is also seeking to develop the $300 million Stony Gap (123MW) wind farm in South Australia,” the spokesman said.
AGL, with its larger investments in renewable energy, mostly supplies its own renewable needs.
Australia’s relatively small market left it open to be dominated by a few large electricity retailers, Mr Richards said.
Along with AGL, Origin and EnergyAustralia control about three-quarters of the electricity retail market serving most of the ACT, NSW, Queensland, South Australia, Tasmania and Victoria.
Smaller players struggle to hold large enough customer bases to convince banks to fund projects over 10 to 15 years.
The big three “are, unfortunately, just holding the industry in the palm of their hand”, he said. “It’s a bit unfortunate for those with (renewable) projects out there ready to go.”
Pacific Hydro is owned by investment firm Industry Funds Management and is developing hydro, wind, solar and geothermal power projects in Australia, Brazil and Chile.
It also competes as a retailer in the market for medium- and large-sized electricity customers.
The Clean Energy Council estimates the renewable energy target had drawn in $18 billion in investment in large- and small-scale projects since its inception in 2001 – a figure that could double by 2020 if policies remain unchanged.
The Coalition has so far backed the renewable energy target although it plans to review the policy next year.
That review “is a sliver of light that (the big retailers) think they can exploit,” Mr Richards said.
A spokesman for Climate Change Minister Greg Combet said Coalition support for renewable energy was as paper thin as their views on the science of climate change itself”.
“The Coalition have never articulated support for achieving more than 20 per cent renewable energy by 2020 because they want to cut renewable support after the election and are not serious about addressing climate change,” the spokesperson said.
Greg Hunt, the opposition climate change spokesman, said the Coalition had consistently stated that it supports the 20 per cent renewable energy target and has endorsed the government’s response to the RET Review.
“What the energy companies decide to do is a matter for them,” Mr Hunt said. “We have not proposed and are not proposing any changes to the RET.”
“Both parties have for three years supported the legislated two-year review,” Mr Hunt said. “We have not changed that position but after three years the ALP has changed its position.”
Greens leader Christine Milne said: “Tony Abbott, despite repeated requests, has refused to give the renewable energy industry an assurance that the Coalition will not wreck the sector by undermining the renewable energy target. As it stands, investors fear that the Coalition will move from the existing 41,000 gigawatt (hour) target in 2020 to a floating target of around 27,000 gigawatt hours.
“This would more than halve the number of expected projects over the next several years,” Senator Milne said.
URL to article: https://www.wind-watch.org/news/2013/04/03/renewables-future-at-mercy-of-big-power-retailers/