The RET was agreed several months ago but the effects are still ongoing. Flickr: Tim Swinson
Tampering with the Renewable Energy Target (RET) by Australia’s Federal Coalition government has made project financing extremely difficult, according to analyst firm Green Energy Markets.
If the country does not reach its revised RET target of 33,000GWh by 2020, energy retailers will have to pay the government penalties for any shortfall. There are concerns that Australian electricity consumers could have to shoulder up to AU$2 billion (US$1.4 billion) in extra costs as a result of these penalty prices.
Green Energy Markets claims that 4.4GW of renewables capacity must be committed this year to be on track to reach the RET goal. This kind of scale-up is in doubt considering that in 2015 just 448MW of large-scale projects and 8.5MW of small-scale projects were committed. Furthermore, 50% of 2015’s large-scale capacity came from the Australian Capital Territory (ACT) government which is not included in the RET.
A huge scale-up in 2016 instalments is required. Credit: Green Energy markets
Ric Brazzale, managing director at Green Energy Markets, said that there are plenty of projects in line to be constructed, including up to 100 large-scale solar projects following funding programmes proposed by the Australian Renewable Energy Agency (ARENA) and an auction from the utility Ergon Energy. There is also a further US$15 billion of wind projects awaiting construction.
However Brazzale claimed that the Federal government’s attempts to remove the RET and then to reduce the target, spanning a period of 15 months of “tinkering” means that “project finance is proving impossible to achieve”.
He added that the constant changes and the lack of certainty around the RET means that off-takers such as big utilities are not entering into long-term contracts, which also turns off potential lenders.
Only projects with long-term agreements are going ahead, said Brazzale, such as projects from the ACT government’s tendering program, which again do not count towards the RET.
Brazzale claims the market has already been pricing in failure for several months by selling large-scale generation certificates above the penalty price, which is set at AU$65/MWh. Renewable energy power stations are entitled to create large-scale generation certificates based on the amount of eligible renewable electricity they produce above their baseline. These can be sold and transferred to other individuals and businesses at a negotiated price.
Despite the setbacks, solar developers AGL Energy and First Solar this week completed Australia’s two largest solar PV plants at Nyngan (102MW) and Broken Hill (53MW), which included AU$166.7 million support from ARENA.