Australia's solar, wind boom to power past grid woes in 2019
* Deluge of solar projects, wind farms vie for hook-ups
* Grid congestion, instability slow connection approvals
* Extra equipment to stabilise grid adds to costs
* International developers undaunted by challenges
By Sonali Paul
MELBOURNE, Jan 21 (Reuters) - 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, whose biggest market is
Companies like Neoen, its compatriot Total-Eren,
India's Adani, U.S. utility AES Corp and
Germany's Sonnen are expanding in Australia, looking to fill a
gap as ageing coal-fired plants are retired over the next two
"Confidence is high as the industry enters 2019, with
unprecedented levels of construction activity under way," said
Anna Freeman, a director at the Clean Energy Council, an
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
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.
(See graphic https://tmsnrt.rs/2AGa36n)
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 last November.
A Clean Energy Council survey of senior executives in
December found grid connection is the biggest industry concern
heading into 2019, Freeman said.
UK-based solar investor Octopus Investments said grid issues
were what took it two years to choose its first investment in
Australia. The Darlington Point solar farm is about to begin
construction and will be the country's largest.
"The grid is the biggest issue where assets fail in our
project filter," Octopus Managing Director Sam Reynolds told
Reuters, declining to name projects the company rejected.
Developers and project lenders said they need to consider
grid congestion, which can curtail power that gets to the
network from any one plant; intermittency of wind and solar
power, which affects current flow; and transmission losses,
called marginal loss factors (MLFs).
"There's a bit of nervousness around MLFs, curtailment, and
then there's construction and commissioning risk," said Stephen
Panizza, head of renewable energy at Federation Asset
MLFs measure energy lost over power networks and have been
increasing, with renewable projects being on the outer reaches
of the grid, weakening returns for some operators.
Another factor is the cost of the extra technology to keep
current steady on the grid as more intermittent power is added.
In November, France's Total-Eren agreed to buy a
synchronous condenser to secure a connection agreement so it
could build the A$330 million Kiamal solar farm in Victoria.
Delays due to talks with AEMO about the condenser, however,
led to Total-Eren losing one of its power purchase agreements
Total-Eren's Asia Pacific director, Michael Vawser, says
other projects will face the same trouble.
"I do think there are other projects ... caught off-guard by
new grid regulations that will lose their PPAs through delays in
being allowed to connect to the grid," Vawser told Reuters in an
interview in November.
Neoen, which has built 1 GW of wind and solar farms and the
world's biggest battery in Australia over the past four years,
said in a recent prospectus it had collected 14 million euros
($16 million) in damages from a contractor building three solar
farms because of hook-up delays.
Despite the challenges, Neoen, Total-Eren and their rivals
are still scouring Australia for more opportunities.
"Australia is still an attractive market for us," Vawser
($1 = 1.3875 Australian dollars)
(Reporting by Sonali Paul; Editing by Tom Hogue)
© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.