Targets upgrade will put the wind up electricity

Australian
01/10/2007 Page: 36

FOR more than a century, windmills have played an important part in Australian agriculture, pumping water from underground aquifers to supply homesteads and livestock in the drier parts of the country. Their simple durability has become part an enduring icon of surviving in a wide brown land. The imagery is about to get a big upgrade. Technologies harnessing the wind's kinetic energy have been around for centuries. It's hardly surprising, then, that wind energy is, to date, the most mature, and therefore the cheapest, of the emerging fleet of low emission energy technologies. Optimal sites can generate electricity at about $80 per megawatt hour, still about double the cost of conventional coal power in Australia.

Wind energy therefore currently needs subsidies or a significant price on greenhouse emissions to compete in the current market. It generates about 1 per cent of total supply courtesy of the existing Mandatory Renewable Energy Targets (MRET) in place since 2001. But all that is about to change following last week's pre-election upgrade of the scheme by John Howard. The Government's new clean energy target of about 15 per cent of low-emissions electricity by 2020 effectively underwrites the existing array of state renewable targets and foreshadows an even bigger national scheme from Labor in the coming days.

Wind is expected to be the big winner from these expansions. As with MRET, electricity retailers will be required to subsidise the gap between the wholesale electricity price and low-emissions technologies. The final bill will depend on changes in these prices as well as the impact of a price on greenhouse emissions set by emissions trading from about 2011, but by 2020 is likely to be somewhere north of $6 billion.

These developments pose a question over claims made last month by Danish wind-turbine supplier Vestas that the poor state of the Australian market was forcing them to close a turbine-blade factory in Portland, Victoria. There are no subsequent suggestions now that it is about to re-open. More likely is that its Australian factory was tooled to build an older type of blade and had been acquired by Vestas from NEG Micon in 2003 as part of a restructure of the Danish wind sector. The scale of the Portland plant has also become too small to be competitive by industry standards.

A more realistic gauge is the number of bidders lined up to buy five wind farms owned by Queensland government energy utilities Stanwell and Tarong. A Melbourne Cup field has gathered from Australia and overseas, with potential buyers likely to emerge from the major private wind players such as Pacific Hydro, Babcock and Brown Wind, or more conventional energy companies, such as TRUEnergy, looking to diversify.

Modern wind turbines are nearing the bottom of their technological development curve. The price of wind electricity has been driven down by economies of scale in turbine manufacture as well as increased efficiency from larger sizes. New turbines in Australia are about two megawatts but in Europe they have begun to install five megawatts of output per turbine. These turbines are almost 200 metres high, constrained mainly by the logistics of installing a steel tower on this scale. Offsetting these savings have been price increases driven by strong global demand and rising steel prices.

The purchase price of a two megawatt turbine has been pushed up from about $3 million to about $4.4 million as a result. The actual turbines represent from 20 to 50 per cent of the final installed cost of any new wind farm, the rest being spent on site investigation, assessment and testing, as well as the installation and infrastructure costs required to connect to the grid, often from remote locations. Conventional electricity grids can handle up to 20 per cent of supply from intermittent supplies such as wind before encountering problems with voltage stability.

Australia has some good wind resources, mostly along the southern edge of the continent, particularly the west coast of Tasmania and the Eyre Peninsula in South Australia. Global wind energy resources tend to increase towards the poles. Wind assets are further enhanced by suitable geography such as hills and gullies, which corral and further concentrate prevailing winds. Optimal sites require constant wind speeds of about eight to 10 metres per second. A wind capacity factor of about 35 per cent the amount of time the wind actually blows over a year is needed to make a site viable.

There is currently about 800 megawatts of wind energy installed in Australia, but more than 5000 megawatts on the drawing board. Most of this and more can he expected to he installed over the coming decade subject to approvals processes that can take five years or more in populated areas where, as with other types of power generation or major industrial facility, local politics has a strong and well-documented history of slowing or halting potential projects.