September 11, 2018 / 10:14 AM / 10 days ago

Australia states power ahead with renewables after national policy collapses

MELBOURNE (Reuters) - Australia’s Victoria state on Tuesday agreed to back six new wind and solar farms to help meet a target of getting 25 percent of its power from renewables by 2020, just weeks after a year-long attempt at crafting a national energy policy collapsed.

The announcement came the same week as South Australia, the state most reliant on wind and solar energy, said it would invest A$100 million ($71 million) to help households buy battery storage from Germany’s sonnen, which will link the batteries into a “virtual power plant”.

The two states are forging ahead on their renewable energy programs, providing some certainty to investors who have been asking the federal government for stability in the national energy policy after more than a decade of turmoil.

The conservative federal government last month scrapped its National Energy Guarantee (NEG) plan - which aimed to make the grid more reliable, cut emissions and lower prices - yielding to pressure from politicians wanting more coal-fired power.

“What the industry is looking for is certainty. The collapse of the NEG removes that certainty,” said Steve Symons, chief financial officer of Tilt Renewables Ltd.

The NEG had been pushed by former Prime Minister Malcolm Turnbull, who was toppled last month and replaced by Scott Morrison. Morrison has split the energy and environment portfolio and named Angus Taylor as the new energy minister.

“My goal, the goal of my department and the goal of the electricity sector, must be simple and unambiguous: get prices down while keeping the lights on,” Taylor said in his first speech as energy minister last week.

The Australian Industry Group, which had been pressing the for a national policy rather than uncoordinated state policies which have led to power outages on the grid, said the new generation in Victoria will help energy users.

“With national uncertainty inhibiting needed investment, even second best options are frankly welcome,” Australia Industry Group Chief Executive Innes Willox said in a statement.

GUARANTEED PRICES

Victoria sought bids last November for 650 megawatts (MW) of renewable energy last November, but attracted so much interest that on Tuesday it chose projects that will deliver 928 MW of capacity at a combined cost of A$1.16 billion.

The wind and solar farms will generate about 6 percent of the state’s power.

“Greater supply of renewable energy means lower power prices and more jobs for Victorian families,” Victoria Premier Daniel Andrews said in a statement.

The state picked three wind farms, the biggest of which is the A$560 million, 336-MW Dundonnell project owned by Tilt Renewables. The other two are owned by Spanish companies Acciona and Global Power Generation.

Victoria also chose three solar projects, owned by Canadian Solar, Italy’s Enel and Saudi-owned Fotowatio Renewable Ventures.

The state declined to comment on how much it would spend to buy power from the six projects.

Each deal involves a “contract for difference” based on a guaranteed strike price, with the state making up the difference between the strike price and the market price when power is sold for less than the strike price. When power is sold for more than the strike price, the project pays the surplus to the state.

Victoria state has contracted to buy power from the six solar and wind projects for 15 years.

The state will buy 37 percent of Dundonnell’s capacity, giving the project more certainty and helping it attract other short-term and long-term customers, Tilt’s Symons said.

($1 = 1.4047 Australian dollars)

Reporting by Sonali Paul; Editing by Tom Hogue

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