A little while ago I was fortunate enough to catch-up with the retiring chief executive of Pacific Hydro – Rob Grant – for a discussion reflecting on his time at the company, which stretched back to 1996.
For those not familiar with the Australian renewable energy scene, Pacific Hydro has been one of the bedrock companies of the industry.
It was there at the beginning of the creation of a private sector driven energy market in Victoria in the 1990s.
Initially, it was focused on smaller hydro projects but this was followed by expansion into wind, with PacHydro becoming the first private-sector company to develop a utility-scale wind farm in Australia – the 18 megawatt Codrington project in western Victoria. The project seems tiny in today’s terms but, at the time, it was an important demonstration of what was possible.
A range of energy utilities have dabbled here and there in large-scale renewable energy – including Stanwell way back in the late ‘90s; Origin Energy in the late 90s and early 2000s; and then AGL, with its acquisition of Southern Hydro in 2005. Yet all have found it easier in the end to make a buck in fossil fuels.
While those companies’ level of enthusiasm for renewable energy has come and gone, Pacific Hydro has remained a permanent and fully committed participant to growing renewable energy in Australia’s electricity supply – and is one of the very few pure-play Australian utility-scale renewable energy companies.
But it hasn’t been easy, as my discussion with Grant reveals.
One of the things you come to realise in interacting with Australian companies heavily involved in renewable energy is that you need to be flexible and versatile, forced by necessity to be capable of responding nimbly to changes in technology and the regulatory environment.
And so it has been with Pacific Hydro. Grant notes that the company started off as just six people working out of the suburb of Surrey Hills in Melbourne, and living hand to mouth. Now they own several billion dollars worth of power projects across several countries.
At the beginning, they thought there was large room for expansion of hydro in Australia but, Grant explains, after developing several projects it became apparent to the group that the opportunity was not great. Consequently, Grant and co spread out to southeast Asia in the 90s, but then the Asian financial crisis hit. And it was at this time the company took two fateful key steps – one was into developing wind farms in Australia, and the other was developing hydro projects in Chile.
In the end, they have become as much a South American company as an Australian one. While the company has been of the leading developers of utility-scale renewable energy projects in Australia, Grant himself has spent almost half of his time as chief executive based in South America, managing hydro projects in Chile and wind farms in Brazil. In the end the company has found that, in spite of its first-mover advantage here, Australia has been racked by political games and regulatory uncertainty. While in South America, Grant notes, the company is greeted by a political environment that inspires investment confidence:
“You hear from the people that ultimately determine your destiny, which are the politicians and policymakers, that they want you there, they need you there and you’re important to their economy – which for a business that’s got lots of capital at risk, is really the only things you want to hear.”
The large exclamation point to this story only came to me after I undertook the interview with Grant. Over several years his company had been working on trying to make the large-scale Moree solar PV farm a reality. I knew they were extremely close to pressing the 'go' button (following a false start, back in 2011, when power retailers refused to offer a power purchase contract). Then, on the very day it was declared that the iconic project would proceed, Pacific Hydro announced its withdrawal.
The board of the company decided it wasn’t prepared to risk further capital in an Australian renewable energy certificate market which had an Abbott Government axe threatening to fall down on it.
It must have been an incredibly bittersweet moment for the Pacific Hydro staff, which had spent years trying to get the project up and hadn’t given up despite a range of challenging circumstances.
But the owners had to be responsible with superannuants money and Brazil looks less risky. Who would have thought that?
The history of Pacific Hydro is one that most Australians would consider a wonderful success story. It started from scratch under the shadow of large government-owned utilities which were then bought up by large UK and US multinationals. And despite little in resources and an intimidating set of competitors, which have wielded their incumbency as a powerful weapon, Pacific Hydro persisted in pursuing the development of renewable energy in the belief there would be a market there for clean energy.
In pursuing that market, the company has had to expand overseas and is one of very few Australian firms to have expanded into power projects beyond the familiar accents of Australia and New Zealand – it's management have chosen to innovate and take risks.
Meanwhile, it seems, a number of other power companies operating in Australia (often foreign-owned) have been content to just milk assets established decades ago by state governments, and seem to think innovation is a new door-to-door sales technique.
The transcript for first part of interview available here.