A panel of experts at the CEC’s Wind Industry Forum in May weighed the rigidity and complexity of the current market with optimism for future opportunities as the NEM is weaned off coal.
Peter Cowling, country head Australia and New Zealand, Vestas
Geoff Dutaillis, CEO, Powering Australian Renewables
Tristan Edis, director analysis and advisory, Green Energy Markets
Anna Freeman (moderator), director energy generation, Clean Energy Council
Catherine Way, director country manager, DP Energy
The energy transition is gathering pace as governments and industry around the world target deep decarbonisation. In Australia, developers and investors are caught on a seesaw as the federal government appears bent on supporting old technology. The opening plenary session at the CEC Wind Industry Forum took the pulse of a sector that always seems to be running uphill.
Powering Australian Renewables CEO Geoff Dutaillis said customers should be acknowledged for driving the transition to clean energy as much as governments and boardrooms. “Customers are changing their buying preferences and being much more demanding,” he said. “It goes to the electrification of everything around us … which will lead to increased demand, which is what we need to deliver as an industry.”
With Octopus Investments claiming institutional investors are weighing $US1 trillion worth of opportunities in the sector, Vestas country head Peter Cowling said in Australia the process of getting connected is arduous and long-winded. “There is quite a backlog of projects that are pushing their way through the connection process,” he said. “We haven’t ever been quite as busy.”
Catherine Way, director country manager at DP Energy, agreed that investor eagerness is hosed down slightly by the hoops developers have to jump through before their shovels can be put to work. “The sites are more complex, they’re reviewed with greater scrutiny and … perhaps two years of ecological surveys are being required rather than just one,” she said. “It’s just harder. It’s been a tough year. It’s taking longer.” Crossing state borders to meet landholders has meant applying for up to five passes. “Landowners are key to projects and there is no other way of dealing with them [than face-to-face].”
Other than brief shutdowns of Vestas projects in Australia and New Zealand, Cowling said covid-19 was most keenly felt via its effect on movement of workers. “Labour is in short supply and cannot be augmented from overseas,” he said. “That’s huge in our game.” Personal stories have been wrenching, he said, with some workers separated from families in Europe for up to 14 months. “Everything just took longer because we didn’t have the right people when we needed them.”
As for energy users supporting the development of wind projects by signing power purchase agreements, Green Energy Markets director analysis and advisory Tristan Edis said 2020 was defined by being the year “the Queensland government got off their butts” on the back of a tender before the election. A flood of PPAs followed, he said. Not all deals supported new projects, however. “They’re signing up with gentailers and buying LGCs from projects that were supported off PPAs 12-24 months ago,” he said. That’s about 7,000GWh of additional demand for LGCs, but it leaves a surplus of 13,500GWh of additional generation before accounting for new projects. “There is just such a surplus of LGCs out there.”
States’ support for clean energy is welcome but the ongoing growth of rooftop solar is only going to push daytime prices lower, affecting revenues for wind. “The silver lining is that as solar carves out middle-of-the-day demand, that potentially knocks off a coal generator … and prices rise in all the other times of the day, which is great for wind.”
Edis cites research he worked on which predicted five coal generators will be unprofitable by 2025, based on assumptions about approved wind and solar projects and the growth of rooftop PV. “The thing is, if the government doesn’t want them to go it can do things to make sure they remain in the market,” he said. The fact that the Victorian government’s deal to keep the Yallourn coal station open until 2028 is secret will only deter new entrants. Yes, the government should be concerned about energy security, but there are ways to design capacity to encourage new dispatchable capacity, he said. “The deal with Yallourn is appalling.”
Dutaillis nodded in agreement. “Capital is there, it just has to have certainty to get its return,” he said. “Interventions or challenges with the transmission network or the market design are creating an uncertain investment environment.” As a consequence, wind and solar are in “stall mode”. Cowling at Vestas sees trouble on the horizon. “I fear we will hit a brick wall in a couple of years where, if the grid ain’t ready, we will run out of opportunities to connect.”
Bring everyone along
While engineers and financiers toil away at the transition to clean energy it’s easy to forget coal pays people’s wages. “Whole towns are built around coal,” said Way. “It’s a jobs issue – and both sides of government are really concerned.” She’s seen it at Biloela, Queensland, where DP Energy is working on a 400MW wind farm. The town is near the Callide B and C coal stations, worth more than 1.5GW to the grid. “That town can see that they need to transition, but it’s tricky for a council. For an efficient transition it needs to be done at a federal level.”
Way suspects more Australians are employed thanks to coal than renewables. “What I find engaging with communities is the fear of change and not being quite sure what [a wind farm] will look like is a big driver for why people don’t want something.” Asking a community to contemplate one project is one thing, she said, but expecting them to agree to multiple projects associated with the development of a renewable energy zone is something else. “I think that’s going to be quite a challenge.”
Everyone agrees there is no transition without transmission (to borrow a quote). “There is also no transition without a significant step-up in storage,” said Dutaillis, pointing to long-duration and inter-seasonal storage as a looming issue. “We can see the states intervening there because the market signals are not there yet for long-duration storage. You think it’s hard to get a wind farm up? Talk to all the people trying to get pumped hydro up.”
If a simple solution is to add storage to older facilities who may have paid off their debt, “technically it is almost impossible,” said Cowling, pointing to onerous grid-connection rules. “We need to have a discussion with AEMO about that, and TNSPs … it is devilishly difficult.”
Offshore on approach
Approaching the final straight in the plenary session, Freeman turned the topic to offshore wind. Enormous projects are planned off the coats of Victoria, Western Australia and NSW, which Cowling puts down to a dramatic fall in costs. “Australia is unusual for offshore [wind] in that we have such extraordinary onshore resources, but I do think there will be a place for offshore,” he said.
Whether all projects will be realised is another matter and will probably rely on identifying complementary generation patterns to onshore generation. Edis recounted a discussion with developers of the 2GW Star of the South facility planned for the Gippsland coast where modelling shows strong generation during the evening peak. It may come down to consumers accepting they are happy to pay a premium for power from turbines that can’t be seen or heard.
Venturing further, Edis suggested it would be naïve to underestimate the peak-supplying potential of electric vehicles. Imagine a near-future where 70% of cars are EVs and owners are happy for 10kW of their 70kW batteries to be available to the grid. “If you make that able to connect and generate, to supply electricity to the wholesale peak, it just destroys some of these arguments about not having enough capacity in the peak,” he said. “That’s the challenge for offshore wind – competing against storage.”