Electricity retailer 'strike' unplugs renewable sector's growth plans
Andrew Richards, executive manager of corporate affairs at Pacific Hydro, said EnergyAustralia and Origin Energy, which control more than half the national electricity market, had halted the signing of long-term power purchase agreements with wind and other renewable energy suppliers, in effect blocking developers from securing loans for new projects.
"For whatever reason, they're just not contracting," Mr Richards said. "Unless they start contracting, you just simply can't get the finance - particularly non-recourse project finance - to build these projects."
Last month, the government agreed to leave the renewable energy target largely unchanged after its latest biennial review.
Under the policy, large-scale generators must supply 41,000 gigawatt-hours of renewable energy annually by 2020.
Origin Energy chief executive Grant King last month said renewables would supply closer to 27 per cent of electricity - exceeding the scheme's original target of 20 per cent - by the end of the decade.
Mr Richards said Origin and EnergyAustralia appeared to be adopting a wait-and-see approach before the election in September, betting that the Coalition would weaken the target if it won office.
A spokeswoman for Origin said the company was well positioned to meet its target obligations and customer demand for cleaner energy.
Origin's most recent power purchase agreement, signed in May last year, was for the 270 MW Snowtown II wind farm, the company's largest such deal.
The company can develop its own wind farms, execute agreements with other wind developers or buy renewable energy certificates on the market to meet its targets, the spokeswoman said.
AGL, with its larger investments in renewable energy, mostly supplies its own renewable needs. EnergyAustralia did not comment.
Australia's small market left it open to domination by large retailers, Mr Richards said. Smaller players struggle to convince banks to fund projects over 10 to 15 years.
The big three "are, unfortunately, just holding the industry in the palm of their hand", he said. The Clean Energy Council estimates the renewable energy target had drawn in $18 billion in investment since its inception in 2001, a figure that could double by 2020 if policies remain unchanged.
The Coalition has backed the renewable energy target but plans to review the policy next year.
That review "is a sliver of light that [the big retailers] think they can exploit," Mr Richards said.
Frequently Asked Questions about this Article…
The article describes a “buyer’s strike” where two big electricity retailers — EnergyAustralia and Origin Energy — have paused signing long-term power purchase agreements (PPAs) with wind and other renewable suppliers. Pacific Hydro’s Andrew Richards said this stoppage is blocking developers from securing long-term finance and delaying new renewable projects.
Long-term PPAs are often required by banks to provide non-recourse project finance. If major retailers stop contracting, developers can’t lock in revenue streams, which makes it hard or impossible to obtain loans to build wind and other large renewable projects.
The RET requires large-scale generators to supply 41,000 gigawatt-hours of renewable energy annually by 2020. The policy underpins demand for renewable generation and influences investment flows, so its stability is important for investors assessing the sector’s growth prospects.
Origin’s spokeswoman said the company is well positioned to meet its target obligations and customer demand. The article notes Origin can develop its own wind farms, sign agreements with other developers, or buy renewable energy certificates; its most recent large PPA was for the 270 MW Snowtown II wind farm.
According to Pacific Hydro’s Andrew Richards, Origin and EnergyAustralia appear to be taking a wait-and-see approach ahead of the federal election, betting the Coalition might weaken the RET. The Coalition has backed the target but plans a policy review next year, creating political uncertainty that could influence retailer behaviour.
The article says Australia’s small market is open to domination by large retailers. Smaller players struggle to convince banks to fund 10–15 year projects, meaning concentration can limit competition and slow project financing — a risk investors should be aware of when evaluating sector opportunities.
The Clean Energy Council estimates the RET has attracted about $18 billion in investment since 2001. The council suggests that figure could double by 2020 if policies remain unchanged, indicating significant potential upside contingent on policy stability and contracting activity.
Investors should watch whether major retailers resume signing long-term PPAs, announcements of new PPAs like Snowtown II, statements from companies such as Origin, EnergyAustralia and AGL, and government actions — especially the election outcome and the planned RET review — because these factors directly affect project finance and sector investment flows.
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