CLIMATE SPECTATOR: Looking down the power project pipeline
With the preliminary findings from the RET Review largely giving the large scale renewable energy target the all clear, now concentration needs to turn toward delivering it.
In considering what's ahead, on November 14 the Bureau of Resource and Energy Economics released its listing of the Australian power project pipeline. AGL, Infigen Energy and Meridian Energy have given some interesting presentations to their investors over the past few weeks that also help provide some insights into what might be ahead.
Firstly, from AGL, it's pretty clear the market for conventional fossil fuel generation on the eastern seaboard is dead. Back in 2009 AGL thought we'd need 9500MW of renewables to meet the RET, but the company also saw a healthy demand for about 8300MW of new combined cycle and open cycle gas turbines. Now it can't see much more than 1000MW of fossil-fuel generation required. Although because we've had some false starts with the RET, we'll now need to build slightly more renewables than envisaged in 2009.
In terms of the breakdown on timing for renewables investment to meet the RET, it's very apparent we need to get cracking soon. So far electricity retailers have been living off a large surplus of certificates from the boom in certificate creation from solar hot water and solar PV in 2009 and 2010. But we are facing a large shortfall in certificates hitting in 2016 that builds-up very rapidly. Â
AGL's view is that over the five years between 2016 and 2020 (inclusive), implied annual new investment is around 1,900MW of capacity at a cost of $4 billion.
Source: AGL
Ideally we won't wait until 2016 to bring projects on line, and instead energy retailers and developers will reach agreements to commit a large swath of projects to construction early next year. According to BREE, there is a pipeline of nearly 5000MW of wind projects with planning approval. Of this probably around 1000 to 2000 MW would have their remaining ducks in a row such that they could start pouring concrete within 12 months.Â
Another reason why it would be a good idea to commit to projects soon is to take advantage of current depressed global prices for wind turbines. It is a buyer's market right now.
To get cracking, it is vital that the government, and ideally the opposition, give their response on the RET Review findings within days of the final report being issued in December. In terms of the large-scale component of the RET, the recommendations from the preliminary report are very much business as usual. Provided nothing changes in the final report, the government shouldn't need much time to affirm these findings, or at the very least, the recommendation to keep the 41,000 GWh target unchanged.