Australia’s Government Unsettles Renewable Energy Developers

Renewable energy plans are on hold while Australia’s government considers cutting its renewable targets.
Published: Fri 22 Aug 2014

Solar Systems, a subsidiary of Silex Systems, has shelved plans for the 100MW Mildura solar power station in Victoria, Australia, due to the uncertainty surrounding Australia’s long-term renewable energy targets.

Australia’s renewable targets could be abolished

The proposed 2,000-dish solar farm near Mildura had been billed as being capable of producing enough electricity to run 30,000 homes. Stage one of the solar farm was completed in July 2013, when 40 dishes on a Carwarp sheep farm 30 minutes outside Mildura began feeding 1.5MW of electricity into the grid - enough power for 500 homes.

Silex Systems’ chief executive Michael Goldsworthy said the combination of uncertainty around the target, which requires 41,000GWh of electricity from renewable sources by 2020, and low wholesale power prices, meant the US$420 million project would not go ahead. He says, “'There’s not as much pressure on the market to have renewable energy in their portfolio now simply because the [target] is at least going to be wound back and possibly abolished.”

The project received initial funding commitments of A$75 million (US$69 million) from the Australian Renewable Energy Agency (ARENA) and A$35 million (US$32 million) from the Victoria Government's Energy Technology Innovation Strategy Fund. More than US$110 million in state and federal government funding for the project will be forfeited.

Unsettling a US$19 billion market

A government-commissioned review of the renewable target, being conducted by businessman Dick Warburton, has affected the market’s enthusiasm for sourcing renewable energy. According to acting chief executive of the Clean Energy Council Kane Thornton, the industry has been placed on hold due to the uncertainty and as a result, mature businesses like Pacific Hydro and Hydro Tasmania are being affected. Starter companies will probably also take a hard knock as a result.

The Mildura project is only one of many that are expected to be shelved. Suzlon Energy is already reconsidering its investment in the A$1.5 billion (US$1.4 billion) Ceres wind farm and Vestas Wind Systems’ Chief Executive Officer Anders Runevad doesn’t expect to see much activity in the country until the situation has been clarified.

Australia’s spending on large-scale renewable energy projects fell to A$58 million (US$53 million) in the six months through June from almost A$1.3 billion (US$1.2 billion) a year earlier, according to Bloomberg New Energy Finance.

There is major concern that Australia’s government will dismantle the target and unsettle an industry that has brought in A$20 billion (US$19 billion) since the country first set goals for renewable energy 13 years ago.

Thousands of jobs to be lost

Australia has been well-served by the modest renewable energy target. The target mandates that 20% of the country’s electricity must come from renewable sources like solar, wind and hydro by the year 2020.

Since being implemented under the Howard government and supported under the Rudd/Gillard government, it has attracted around US$18 billion of investment and is expected to see another US$18 billion by 2020.

Thousands of jobs have been created as a result of the target, and it is responsible for a substantial amount of the reduction in carbon pollution in the last few years. Thornton says that 21,000 people are employed in the renewable energy sector. If the target was slashed many businesses would close and thousands of people would lose their jobs.

He adds, “'You'd have to be pretty reckless to make a decision that ultimately doesn’t save anyone any money on their power bills, is at distinct odds with what 99% of people have asked for and will seriously damage investments and put people out of jobs.''

Further reading

The Climate Institute-Australians are no climate dinosaurs as support for action evolves:poll [pdf]