Warwick Forster, Union Fenosa: Wind industry turbulence – Navigating a path for wind farm project development in changing wholesale electricity markets
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Warwick Forster, Union Fenosa: Wind industry turbulence – Navigating a path for wind farm project development in changing wholesale electricity markets

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Warwick Forster, Energy Trading Manager, Union Fenosa delivered this presentation at 2013 Australian Wind Energy Conference. The event gave conference attendees key insights into how the new Abbott ...

Warwick Forster, Energy Trading Manager, Union Fenosa delivered this presentation at 2013 Australian Wind Energy Conference. The event gave conference attendees key insights into how the new Abbott Government may impact future developments in the industry. The conference has a long-standing history of bring together key policy stakeholders, government representatives, project developers, energy companies and regulators. For more information about the annual event, please visit the conference website: https://www.informa.com.au/windenergyconference.

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Warwick Forster, Union Fenosa: Wind industry turbulence – Navigating a path for wind farm project development in changing wholesale electricity markets Warwick Forster, Union Fenosa: Wind industry turbulence – Navigating a path for wind farm project development in changing wholesale electricity markets Presentation Transcript

  • 1 Wind industry turbulence – Navigating a path for wind farm project development in changing wholesale electricity markets By Warwick Forster Energy Markets Manager Union Fenosa Wind Australia 18th November 2013
  • 2 Renewable Energy Target history  The Renewable Energy Target (RET) was introduced in 2001 with the modest goal of 9500GWh by 2010.  Tambling review in 2003-4 recommended (amongst others) the following scheme changes that were not implemented:  Extend scheme to 2020 and increase to 20,000GWh.  End date to be beyond 2020 so that renewable energy from projects commencing after 2005 receive REC’s for a full 15 year period.  Shortfall charge in 2010 of $40/MWh to be indexed until 2020.  A review of the act if a “defined, economy-wide greenhouse abatement scheme” or more than 15% of the liability for two consecutive years made up by shortfall charge.
  • 3 Renewable Energy Target history  In the 2007 federal election, the Liberal party promised 15% renewables by 2020.  The Labor party won the 2007 election with a 20% renewables target.  The ERET (Expanded Renewable Energy Target) was passed in 2008 with a 2020 Target of 45,000 GWh flat lining until the scheme end in 2030.  Shortfall charge was increased to $65/MWh (~$93 post tax).  Demand side measures including solar hot water and PV were deemed for 15 years.  Solar multiplier of 5 was added.  Rooftop PV boomed with additional subsidies such as FiT’s.
  • 4 Renewable Energy Target history  REC production up to 13/11/2013 * Waste Coal Mine Gas 45,000 SWH - solar 40,000 SWH - heat pump SGU 35,000 Photovoltaic/Solar Landfill & sewage gas 30,000 Hydro Agricultural, bagasse, wood waste 25,000 Wind Target 20,000 15,000 10,000 5,000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
  • 5 Renewable Energy Target history  In early 2010, a review of the target was instigated due to booming solar REC production.  Roughly 180% of the target in 2010 was met by solar.  Scheme was split into LGC’s (Large-scale Generation Certificates) and SRES (Small-scale Renewable Energy Scheme).  2020 target for LGC’s was reduced to 41,000GWh and SRES target of 4,000GWh was established.
  • 6 Renewable Energy Target history  Largest contributors*2013 figures incomplete 9,000 8,000 Wind 7,000 Agricultural, bagasse, wood waste Hydro 6,000 Landfill & sewage gas 5,000 4,000 3,000 2,000 1,000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
  • 7 Renewable Energy Target history  At the moment there are approximately 37m LGC’s in the registry.  Production at the moment is around 10-12m per annum.  Likely that the 2013 production will be high due to hydro running during the carbon price period from July 2012 when they get increase in pool revenue plus LGC’s for exceeding baseline.  The 2013 target is 19,088 GWh and the 2014 target is 16,950 GWh.  Target has always and should always be in surplus BUT this lasts until at least 2017. Retailers won’t need to commit to PPA’s until 2015 or later.
  • 8 Renewable Energy Target history  LGC Surplus 60,000 40,000 20,000 Surplus 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020 2030 -20,000 -40,000 -60,000 New target
  • 9 Energy Demand  Demand for grid electricity in the NEM (national Electricity Market) has declined since 2008.  Most of the time prior to 2008, annual load growth for the NEM was around 2%.  Embedded generation growth, energy efficiency (“pink batts”) and declining industrial consumption such as the closure of Kurri Kurri smelter have all played a part.  AEMO predicting load growth of only 1.3%.
  • 10 Energy demand -AEMO 230000 220000 210000 200000 190000 180000 170000 160000 150000 2013 High Annual energy consumption (GWh) 2013 Medium Annual energy consumption (GWh) 2013 Low Annual energy consumption (GWh) Actuals Annual energy consumption (GWh)
  • 11 Energy Demand  It is likely that the 2020 target will supply around 26-27% rather than 20% based on revised forecasts.  Suggestions have been to revise the target to 20% of actual i.e. a percentage target rather than a fixed target. Despite the fact that many of those who previously argued for a fixed target are now asking for a floating target.  The main challenge at the moment is that renewables including both wind and PV are displacing rather just growing generation.  In the absence of a carbon price and without an increased renewable target, additional growth will rely on being competitive with fossil fuels.
  • 12 Network constraints  Many prospective wind farm sites need additional costly network infrastructure to connect to the transmission network.  Any new generator project regardless of the technology, be it renewable or fossil fueled needs to factor this cost into the investment decision.  Many existing generators are effectively subsidised for these network costs as they are levied through existing transmission charges.  Additional issues with congestion such as the case with high levels of wind farm capacity and limited network are a problem such as the case with South Australia.
  • 13 Planning restrictions * www.yes2newewables.org
  • 14 PV growth  Large scale PV is predicted to become competitive with wind as panel prices fall.  Currently most wind farm LCOE’s in Australia are between $80-$100/MWh.  Royalla PV solar farm in the ACT signed at $186/MWh with no escalation, equivalent to around $150/MWh.  Solar is peak, rather than flat so the difference in pricing is not so large.
  • 15 Storage  One solution for the issue of intermittency in renewables is storage. This can be pumped hydro, flywheels, heat capture or others but battery storage is the technology which has great scalability.  Presently, the economics for storage are more compelling at the retail level for 2 reasons:  Avoided network charges  Arbitrage between peak and off-peak prices  The cost of storage ($/MWh) is the capital cost/energy cycled but limited by technical issues including battery degradation, # discharge cycles, charge/discharge rate. Economic if storage cost less than energy arbitrage or market price of energy.
  • 16 2020 target and beyond  The annual targets in the RET do not increase after 2020 and the legislation only lasts until 2030.  The intention was that the 2020 target was to be maintained and not increased as a carbon price would factor in the externality of pollution such that renewables would be more competitive than fossil fueled technology.  It must be noted that most utility scale investments have at least a 15 year investment horizon so it becomes more difficult after 2015 under the current legislation.  Most private investments in fossil fueled generation since deregulation such as Milmerran, Kogan Creek etc have relied upon a known cost advantage in fuel and LRAC.
  • 17 2020 target and beyond  One potential hypothesis is that given it is unlikely that new coal fired power stations will be built, that gas fired CCGT’s will determine the new entrant price of generation. With rising gas prices wind + back up could be more economic. 140 120 100 $/MWh 80 WIND w CCGT 60 CCGT 40 20 0 1 2 3 4 5 $/GJ 6 7 8 9 10 *prices for descriptive purposes
  • 18 Key points  Wind is still the most economic form of clean energy at present. Solar has boomed due to generous subsidies, falling prices and the avoidance of network costs.  Large scale solar PV may be a competitor in the medium term with falling prices.  Falling prices for storage may make the case for storage investment but this will happen at the retail level first.  Increased storage may make the value of storage fall and reduce the value of peak energy.  The issue with the RET is that the subsidy is transparent (even though it is often overstated in its impact) whilst others such as offpeak hot water heating to subsidise coal are hidden.  The goal of energy policy should be to reduce emissions in an efficient manner.
  • 19 Sources of Information  AEMO, www.aemo.com.au  REC registry, www.rec-registry.gov.au