Australia could see investments in its wind farm industry, valued at AU$17 billion (US$13.3 billion), fall flat due to political uncertainty. The government’s review of the Renewable Energy Target (RET) has caused investment in clean energy to drop below that of Algeria, Thailand and Myanmar.
Just US$193 million was invested in new large-scale clean energy projects in the third quarter of 2014, according to Bloomberg New Energy Finance. Investment in the year to date is US$238 million. This represents a massive 70% slump on 2013 investment and has resulted in Australia slipping from the world’s 11th largest investor in clean energy to 31st in 2014.
Some 44 Australian wind farm projects, about half overseas-funded, have been shelved since a new conservative government said it wanted to cut state support for the industry a year ago. This resulted in a number of investors and operators either downscaling or leaving the country altogether.
Even Australian wind farm companies such as Infigen and Pacific Hydro have shelved their Australian operations. Infigen plans to rather invest in the US wind market which is growing rapidly.
Once the Bald Hills project and the Portland wind farm expansion in Victoria are complete, there will be no wind generation under construction under the RET.
Renewables industry in danger
The uncertainty over government subsidies or actual cuts is having a negative effect on the country’s solar industry too.
Wind farms are Australia's No. 2 renewable energy source, behind hydropower but ahead of solar, providing a quarter of the country's clean energy and 4% of its total energy demand. But while households can collect rebates for installing their own rooftop solar panels, wind farms rely on "certificates", or tradable securities handed out by the government, to offset costs.
That support hit a roadblock a year ago when new conservative prime minister Tony Abbott ordered a review of the country's target for clean energy use by 2020, which ultimately recommended cutting it by a third, in line with falling overall energy demand. A lower target would mean a lower certificate price.
The centre-left Labour opposition, whose support the government needs to lower the target, refused to budge on the higher target it set when in power in 2009, resulting in an impasse that has effectively seen the industry grind to a halt.
Investor confidence critical for development
A spokeswoman for US-owned GE Australia & New Zealand, which has stakes in several renewable energy projects, said further investment "will only occur once investor confidence in the policy environment is restored. For this to happen, bipartisan support regarding the future of the renewable energy target is essential."
The Australian arm of Spanish infrastructure group Acciona, the world's largest renewable energy firm, has put a stop to AU$750 million (US$586 million) of windfarm projects, says local managing director Andrew Thomson. He says, “When you're a subsidiary (of a global business), you're competing for capital, you're competing for your budget allocation next year. If the parent company can't see that there's a stable environment it becomes really difficult to get traction. For us at the moment it's a really difficult sell."
If the renewable energy target is cut, "it's the type of jolt to industry that basically would create such an upheaval that you would have a mass exodus", said Alex Hewitt, managing director of Bulgarian-Polish-U.S.-backed wind farm operator CWP Renewables, which has AU$1.5 billion of projects on ice.
We wrote recently that there was a major concern that Australia’s government will dismantle the target and unsettle an industry that has brought in AU$20 billion (US$19 billion) since the country first set goals for renewable energy 13 years ago. [Engerati - Australia’s Government Unsettles Renewable Energy Developers]. It appears that the industry has already taken a serious knock and is losing a phenomenal amount of investment in an industry which could see a whole country prosper from an abundance of natural resources.
Even if the government finally does come to its senses and reinstates the renewables target, it will take a long time (and much coaxing) before investors return to the table.