WESTWIND ENERGY PTY lTD ABN 94 109 132 20 1 Gisborne Head Office Address: O f fice 5. Level 1 Nexus Centre . 12- 14 Prince Stree t Gisborne V I C 3 437 Te lephone: 03 542 1 9999 Fac simile: 03 5428 3 100 Your Contact: Tobias Geiger Direc t: M obil e: E - Moil:

Executive Officer Victorian Parliament's Economic, Education, Jobs & Skills Committee Parliament House Spring Street East Melbourne VIC 3002

Submission to the Inquiry into Community Energy Projects

Westwind Energy is an Australian developer of renewable energy projects with a focus on wind energy projects in Victoria. The company is incorporated in Australia and is part of the international Westwind group of companies. To date Westwind Energy has obtained development approvals for t he Mt Mercer (130MW built and operated by Meridian Energy since 2014L the Lal Lal wind farm (expected to consist of 60 wind turbines with an installed capacity of app. 192MW) and the (up to 107 wind turbines with an installed capacity of app. 300MW). At present we employ 7 f ull-time staff at our office in Gisborne and we hope that the Victorian Government's initiatives in the renewable energy sector will allow us to substantially grow our team going forward and deliver more exciting renewable energy projects.

The Westwind group's headquarters are in Germany and the company there has developed, financed, constructed and operates in the order of 3SOMW of wind energy facilities. Most of the German projects consist of a handful of turbines with the largest operating project having 15 turbines and the smallest project being a single turbine. A significant portion of the investment in these projects comes from numerous private individuals who live in the region where the projects are located and community engagement, partnerships as well as community ownership of renewable energy projects that the compa ny develops are part of the company's normal "modus operandi".

The benefits of community enerqv projects Community energy projects typically benefit loca l communities through an increased inflow of -or at least retention of- money in a community that otherwise would transfer that cashflow out to a network of energy companies and utilities with very limited retention of benefits from t hat activity in a local community. However, community energy projects not only benefit the communities that are part of such a proj ect but are also vital to foster and retain support for renewable energy in genera l.

The energy transformation away from fossil fuels and towards cleaner renewable sources means significant change to our society as well as many individuals. Whilst there is overwhelming support for renewable energy in principle, it is with change that come many concerns.

One of the main reasons why renewable energy is so successful in Germany is a high level of acceptance, which has been fostered by enabling ownership of renewable energy generation assets by the people. The German "Energiewende" (energy revolution) has not only lead to a change in electricity generation technologies but also to a substantial change in ownership of generation assets. WWE, 29 SEPTEMBER 2016

Community energy projects allow people to engage at a much more in-depth level, create a much better understanding of the energy sector and help greatly with the education of a large portion of the community. This is a vital component to gain and retain acceptance of renewable energy also in Victoria.

The challenges communities face to establish energv projects Without significant specialist knowledge, communities face enormous cha llenges to successfully deliver energy projects. The associated risk profile of those challenges makes it very difficult to raise the capital needed to get community energy projects beyond the concept stage.

It is probably fair to say that apart from domestic solar, energy projects are typically very complex projects with a high risk of failure before they reach the operations phase. These projects involve significant cost, revenue uncertainty, complex technology, resource uncertainty, a highly regulated and highly complex technical and regulatory environment, a complicated planning environment (as far as wind farms are concerned), significant resistance from vested interests and a market and policy environment t hat is tailored to the incumbent, usually large energy providers. Community energy projects face further cha llenges when individuals or groups with great ambitions, yet limited specialist skills, are faced with critical decisions that significantly exceed their expertise.

The best wavs to encourage and support the development ofcommunitv energv projects There are many ways for government, utilities and expert professionals to encourage and support the development of community energy projects. What we submit here are some ideas, which we think would really help but whether they are the best ways is surely subject to debate.

Government Community energy projects are yet to be appropriately defined. In the absence of an agreed def inition we suggest for this submission that any renewable energy project

• of a total project value of less than $50 million1 and • with an opportunity for private individuals or community groups to invest I acquire some form of ownership and

• that are developed with demonstrable, meaningful engagement with the loca l community shall be considered community energy projects. In this context community and community groups can be local, regional or national groups with a strong interest in a renewable energy project.

Examples for each group could be

v' local: direct neighbours and residents within Skm of any generation infrastructure (i e. wind turbine or solar panels or biomass plant)

v' Regional: local environment groups, landcare groups, sporting clubs with members out of the local community, business groups I associations, farmers' associat ions, residents from nearby towns etc.

v' National: urban environment and other interest groups wit h a strong interest to be part of a renewable energy project, WWF, Friends of the Earth, Greenpeace etc. Government could significantly facilitate the success of such projects by providing certainty of off-take for the electricity and Large Scale Generation Certificates (LGC) at a price that allows for a modest return on investment. Provided of course that the projects are located in areas with reasonably good natural resources and suitable infrastructure. The price for electricity and LGCs (as a bundle) could perhaps be determined

1 Koonooer Bridge Wind Farm in north western Victoria for example has a total project value of app. $50 million

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The simplification of the planning and permitting process, perhaps with some dedicated and experienced case managers to support community energy projects would help significantly with the successful implementation of sound projects. One suggestion would be that DELWP organises a workshop with community renewable energy project proponents, professional town and environmental planners and experienced renewable energy project developers to identify areas where the process could be simplified and become less costly for smaller projects.

Government can also support community groups and developers willing to work with community groups by a full or part sponsorship of dedicated personnel. As an example, a developer and a community group agree to jointly develop a community renewable energy project. To ensure the project is driven by a dedicated person and that knowledge and skills are also passed on to the community group involved in the proj ect, the developer and government could perhaps share the cost of a staff member. The employee's f ocus would then be the community energy project and working in a paid position would allow full dedication to a project. For the community energy sector at large this would mean that a number of people get trained up by experienced developers and they could continue to develop further projects either in the same community or join another community energy project partnership. For the renewable energy sector in Victoria t his also means that most likely more Victorians are trained and employed locally, rather than project development positions being filled with candidates from interstate or overseas.

Importantly, government should play a lead role in the education process around renewa ble energy. Too often the education of people in areas near proposed wind energy projects is left to co ncerned residents groups that are often misinformed and run divisive FUD campaigns (Fear, Uncertainty and Doubt). Community energy groups or developers are being discredited by those groups as being purely driven by greed, personal advantages or blind believe. Governments (state or local) generally enjoy a higher level of trustworthiness in the community and it would be very helpful if t he releva nt depart ment s (planning, community engagement etc.) could get a first hand impression of the questions and concerns of people, and develop suitable educational programs to deal with community questions and concerns.

Utilities I Network Service Providers (NSP) It is fair to say that the process of connecting a community energy project to the grid is one of t he biggest challenges for any project. It typically involves the engagement of expensive expert consultants that t hen work with the connection experts of the NSP in a regulatory framework that has been designed by and large for large generation projects. The NSP also ask for significant upfront payments to cover t heir cost of assessing connection applications and so the renewable energy project has to cover t he cost of its experts and the experts working for the NSP. As a result the whole connection process is incredibly expensive on a $/MW basis for typically smaller community energy projects.

One way of improving the cost effectiveness could be standardised connect ion agreements and connection conditions that the NSP, the regulators and experienced professionals in this area could agree on. And instead of two groups of experts discussing the technical, regulatory and co mmercial aspects of a connection this could be reduced to one group of experts.

The experience by many renewable energy projects has also been that the NSP tend t o "gold plate" what could be a relatively simple and straight forward connection. In our view the government and the regulators need to step in here and not leave it to the utilities to enforce their "wish list". Unfortunately the regulatory environment rewards the value of assets of the NSP and hence the NSP are incent ivised to have expensive connection assets rather than lower cost options. Of course, the network security must not be materially jeopardised and there are instances where a simple connection is not adequate.

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Perhaps instead of incentivising the NSP for the value of new connection assets, in the case of community energy projects they could be incentivised to find low cost connection options?

Expert Professionals Expert professionals are vital to ensure the success of almost any community energy project due to the complexity these projects typically have to deal with. A good way to utilise the skills of expert professionals for community energy projects are partnerships between community energy projects and renewable energy project developers, who already employ expert professionals. This allows communities to work with expert professionals on community energy projects and brings specific experience to these projects that community groups otherwise couldn't afford. The benefits of such co-developed projects are then shared between community energy groups and the developers and both parties can recoup their initial expenditure over the operational life of a project.

Alternatively, community energy projects could partner directly with many different expert professionals. However, it appears harder and more complex to develop suitable business models to compensate these expert professionals, as in most cases these expert services can't be provided for free. Of course expert professionals could also work pro bono for community energy projects, but the pool of professionals that can afford to work without pay is fairly limited.

The challenges specific to establishing projects in metropolitan areas and how to overcome them There are obvious challenges to renewable energy projects in metropolitan areas such as a

• lack of suitable land for renewable energy projects with compatible land use on site and off-site (ie. set backs from wind turbines)

• many residents living in appartments or houses with no prospect to use solar on their roofs

• competing land use (ie. residential developments)

• compromised resource (wind speeds and turbulence unsu itable du e to high rise buildings; overshadowed roofs ruling out solar) Nonetheless there are suitable sites dotted across metropolitan areas that could be used for wind and solar community renewable energy projects. They may need some amendments to the planning and permitting framework though, in particular for wind energy (ie. removal of the lkm setback rule as long as noise is not exceeding acceptable limits, which may also be higher in urban areas as other activities lawfully exceed 40dBA).

Another way of overcoming the challenges listed above could be com munity partnerships where metropolitan communities partner with renewable energy project developers or rural communities who could host a project for a metropolitan group. Socially it could also be quite beneficial to foster partnerships between rural communities and metropolitan communities. rvpes of renewable energv resources that could be used other than solar and For community renewable energy projects biogas is also an option that should be seriously considered. Biogas from the fermentation of green waste and manure is a commercially viable option overseas. Gas could also be captured from landfill and turned into electricity or mixed into the gas supply network (gas tanks and pipelines). Biogas is an interesting resource to firm up wind and solar in the electricity generation sector as it is relatively easy to store.

Another viable resource that still has some potential is hydro, in particular micro hydro that does not require major environmental changes (dams, diversions etc.) and is as such relatively easy to master by a community energy group.

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Models of community ownership for enerqv projects To date community energy projects in Victoria are very much associated with the . That model is probably fa irly well understood and documented and there is not much benefit from describing it in detail in this submission. However, that model requires some exceptionally favourable circumstances, which are rarely available.

We have already touched on community- developer partnerships above. The stake of a community group in such a setup can vary greatly, subject to the capital value of a project and the community's capacity to source funding for their share in a project. Typically a community should have the ability to raise "sweat equity" by actively undertaking important tasks in project development such as community engagement, landholder liaison, site identification, obtaining government grants and securing of landholder agreements. The community should also have the ability to raise equity from interested private investors (individuals, family trusts etc.) in such a partnership. The developer would usually raise the lion share of equity and debt that is required to develop, finance and build a joint project. Typically a special purpose entity will need to be established to manage the fair allocation of shares, deal with all the commercial aspects of a project and be a credible counter party for financiers, government authorities, landholders and other stakeholders in a project.

A model that our colleagues overseas frequently use is that of a commercially developed project where the developer takes on all development cost and risk and members of the local, but also regional and/or national community, can invest. This is a model that is very popular with people that would like to make an investment in something they feel good about but are either time poor or aware of their limitations in being able to develop community energy projects themselves or both. Often metropolitan communities that have less opportunity to develop community energy projects in their neighbourhood find this model attractive. But also farmers and rural residents in the vicinity of such energy projects feel better about t hese projects if they can get a financial benefit from these projects from making a sound investment. As Westwind Energy has demonstrated overseas, it is possible that significant community ownership can be achieved in conjunction with modest returns on investment. Further detailed information can be made available upon request on a confidential basis.

Best regards

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