A glut in the renewable energy market caused by a massive take-up in solar rooftop panels threatens to stymie wind-farm developments in Australia for at least three years. Renewable energy operators say current energy prices are too low to justify investment in wind farms.
While renewable energy certificates closed on Friday at $35.25, an improvement of about $5 since Christmas, experts warned the price was still at least $10-$15 below what was needed to spark wind farm investment in the absence of the carbon price.
Andrew Richards, corporate and government affairs executive manager of Pacific Hydro, said based on current electricity wholesale prices, the certificates needed to be $45-$50 to spark investment.
Last month, AGL managing director Michael Fraser said the company was likely to hold back $2 billion of wind farm projects until the REC price improved. He said the market for the certificates had remained “soft and soggy” even after the government revised the scheme and that it would take until “2014 or 2015 for that surplus to wash through the system”.
Climate Change Minister Greg Combet has since moved to encourage investment in wind farms. The large-scale market occupied by wind farms and the certificates generated by the solar panels were separated into two from January this year.
But Mr Richards said the market continued to have a significant “overhang”, with retailers buying up cheap certificates to take advantage, which meant they were reluctant to enter into long-term contracts with wind farms.
Under the government’s renewable energy target (RET), wind farms receive one REC for each megawatt hour they generate, which they can then sell to energy retailers.
Origin Energy, a significant investor in geothermal, solar and wind, also warned that a proliferation of guidelines and standards by states and the draft national wind farms guidelines had created a “confused, cumbersome and inefficient” environment.
“It is an environment that is detrimental rather than supportive of wind farm projects … resulting in additional costs for project developers,” Origin said in a submission to a Senate inquiry.
A spokeswoman for Mr Combet said ongoing uncertainty over carbon pricing was a key issue holding back investment in long-lived renewable energy projects. “The RET was always intended to work alongside a carbon price in transforming the energy sector, where 20, 30 and 40-year assets need greater certainty over climate change policy to secure investment,” she said.
