Wind energy development and the energy market

Russell Marsh, Policy Director

Clean Energy Council

Outline

1. The Clean Energy Council2. Wind Energy Development in Australia3. Market Support for Wind Energy in NSW4. Power Purchase Agreements5. Other issues

The Clean Energy Council

The CEC is the peak body representing Australia’s clean energy sector. It represents more than 350 member companies active in developing and deploying renewable energy and energy efficiency.The CEC’s members are involved in the full suite of clean energy technologies including wind, hydro, wave and tidal, solar pv , solar thermal, solar hot water, bio energy, geothermal and cogeneration.

Wind Energy in NSW

• 7 wind farms currently operating• Total installed capacity of 187 MW• 116 wind turbines• Provide enough electricity to power 78,500

homes• A further 4,204 MW are under development

Wind Energy in Australia• 55 wind farms operating• Total installed capacity is 1,880 MW• 1056 wind turbines• Around 10,000 MW wind expected to be

needed to meet 20% renewable energy target

Market Support

The Renewable Energy Target• Mandatory Renewable Energy Target (MRET) introduced in 2001:

target of 9,500 GWh of renewable electricity generation by 2010• Renewable Energy Target (RET) implemented in August 2009: target of

20% (45,000 GWh) renewable electricity generation by 2020• Enhanced Renewable Energy Target legislation passed June 2010: splits

market into LRET (Large scale Renewable Energy Target) and SRES (Small scale Renewable Energy Scheme)

• SRES: supports the deployment small-scale renewable energy technologies. No target for amount of generation from this scheme. Small-scale wind (up to 10kW) included)

• LRET: supports the deployment of large-scale renewable energy technologies. Target of 41,000 GWh by 2020

Market Support

The LRET• Market works on basis of demand and supply• Liable parties (retailers and large energy users)

have to surrender certain amount of RECs every year.

• REC price a function of number of RECs needed and number of RECs available

Market Support

REC prices

Market Support

NSW Feed-in Tariff• Applies to wind turbines up to 10kW• Provides 60c gross• Commenced 1st January 2010 runs for 7 years

Power Purchase Agreements (PPA)

• PPAs are a long-term (off-take) contract with an electricity retailer for the output (energy and RECs) from an electricity generator (wind farm)

• Wind farms are capital intensive and most financed through bank debt.

• A PPA for both the energy and RECs produced a pre-requisite for lenders – usually 10 year minimum

Other issues

Market risk: PPA essentialCounterparty risk: Lenders will require the counterparty to a PPA to be investment grade Regulatory risk: REC prices – and therefore value of contracts heavily influenced by government policy. Uncertainty as to future policy drives prices down.