Australia faces community, regulatory hurdles in renewable energy push

A fence is seen in front of wind turbines that are part of the Infigen Energy Capital Wind Farm located on the hills surrounding Lake George, near the Australian capital city of Canberra
A fence is seen in front of wind turbines that are part of the Infigen Energy Capital Wind Farm located on the hills surrounding Lake George, near the Australian capital city of Canberra, Australia February 21, 2018. REUTERS/David Gray/File Photo
  • A$78 billion in new transmission lines needed
  • Projects face rising costs in labour, steel
  • New rules needed to drive renewable back-up projects

MELBOURNE, June 7 (Reuters) - Australia's plans to overhaul its strained power grid are running into community protests that threaten to slow investments in wind and solar farms needed to replace retiring coal-fired power generation over the next 25 years.

The industry needs to raise better awareness of the benefits to communities, come up with incentives to encourage development of back-up for renewables and speed up projects to beat rising costs, energy executives and regulators said on Tuesday.

The challenges come as Australia suffers a power and gas crunch due to coal-fired power outages and coal supply problems which have highlighted the need for a more rapid but carefully managed transition to cleaner energy.

The country's new Labor government plans to provide A$20 billion ($14.4 billion) in cheap finance to unleash a further A$58 billion in private investment to build 10,000 kilometres of transmission lines to areas where wind and solar farms are being built.

The new transmission will be needed for the 140 gigawatts (GW) of renewable generation the energy market operator estimates the market will have by 2050 - about nine times the renewable capacity in the market today.

However, the first new transmission project in 30 years - the Western Victoria Transmission Network Project - proposed by AusNet, is facing protests from farmers.

"What we're seeing is that local communities are upset, that their concerns weren't heard early enough," Daniel Westerman, chief executive of the Australian Energy Market Operator, told the Australian Energy Week conference.

Another company, Transgrid, looking to build the VNI West project to beef up transmission between the states of Victoria and New South Wales, highlighted the need to pace what will be several years of construction on transmission projects.

"We're going into a period of a lot of supply constraints around labour and materials," said Transgrid Chief Executive Brett Redman.

"Until we're built, a lot of those grid-scale renewables can't be built."

Another major hurdle is the slow approval process for transmission projects, in which regulators determine whether a project should go ahead and how much of its costs can be passed through in tariffs.

While several projects have been proposed, only one, the A$3.5 billion Marinus Link project between the island of Tasmania and the mainland, has received approval so far.

To back up all the new renewable capacity, 60 GW of so-called firming capacity, or three times the back-up capacity in the market today, will be needed for when the sun is not shining and the wind is not blowing.

To encourage development of that firming capacity regulators and industry agree a "capacity market" is needed, which would reward those who have power available for dispatch at any time.

Regulators' recommendations last year for a capacity market ran into opposition from those who see it extending the life of fossil-fueled power, currently the main back-up for renewables.

"A capacity mechanism is a critical part of making sure we've got sufficient investment in dispatchable capacity ... to keep the lights on, to keep prices low and support the energy transition," Australian Energy Regulator Chair Clare Savage said.

($1 = 1.3914 Australian dollars)

Editing by Jacqueline Wong

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