Australia’s wind and solar boom looks set to power through 2019 following a record year, despite grid constraints and extra scrutiny from network operators to make sure new projects don’t spark blackouts like ones that hit two years ago.
Abundant wind and sun, falling turbine and panel costs, and corporate demand for contracts to hedge against rising power tariffs have attracted dozens of international developers looking to build wind and solar farms Down Under.
Even though the developers have met with flip-flops on energy policy, a strained grid that has trouble integrating intermittent renewable power, and unexpected hook-up costs, they still see Australia as a growth market.
“We believe that we have a great future in Australia, because we have the right answers,” said Xavier Barbaro, Chief Executive of France’s Neoen (NEOEN.PA), whose biggest market is Australia.
Companies like Neoen, its compatriot Total-Eren (TOTF.PA), India’s Adani (ADEL.NS), U.S. utility AES Corp (AES.N) and Germany’s Sonnen are expanding in Australia, looking to fill a gap as ageing coal-fired plants are retired over the next two decades.
Australia generates nearly 20 percent of its electricity from renewables. This is forecast to jump to 75 percent over the next 20 years.
A total of 14.7 gigawatts (GW) of large-scale solar and wind projects worth A$20 billion ($14 billion) were under construction or reached financial close last year, more than double 2017’s record, according to the Clean Energy Council.
This rush of projects, with no clear guidance on where they best fit, led to an “element of anarchy”, but that is changing, said Simon Currie, founder of advisory firm Energy Estate. The Australian Energy Market Operator (AEMO), the energy council and network companies are working out clear guidelines on where to build plants and how to connect them to the grid.
“We’re moving from what was an opportunistic-based approach … into something that will be much more planned,” said Currie, whose company wants to develop Australia’s biggest renewable energy hub, with 4 GW of wind, solar and pumped hydro capacity in New South Wales.
Renewable projects added to the grid have grown from 22 with 1.2 GW of capacity in 2013 to a record 45 projects with 2.9 GW added in 2018, AEMO said. There are 114 more applications representing 15.9 GW pending, indicating plenty of potential congestion ahead.
The biggest challenge is that developers are all vying to connect to a grid running 5,000 km (3,100 miles) from Queensland in the north to South Australia and Tasmania.
This grid was designed to deliver power mainly from always-on coal-fired plants near three big mining areas, while wind and solar farms generate intermittent power from more remote sites, where network capacity can be limited.
To keep the grid stable, equipment such as “synchronous condensers” or batteries need to be added, which can increase costs by at least $20 million for a condenser alone. Batteries could be much higher.
Developers who failed to account for these issues have run into delays on project approvals or grid hook-up, bringing unanticipated costs, which in one case, led to the collapse of engineering firm RCR Tomlinson (RCR.AX) last November.