Renewable energy in Australia Market and industry overview © McCullough Robertson Disclaimer This publication has been prepared for general Information contained in this publication information purposes only and should not be regarded as is current as at 16 June 2017. legal advice or other professional advice. Further advice All Rights Reserved. should be obtained before taking action on any issue dealt with in this publication. Renewable energy in Australia - Market and industry overview About McCullough Robertson McCullough Robertson is a leading • advising on the redevelopment of independent Australian law firm with the abandoned Kidston Gold Mine four offices across the country. For by Genex into a hydropower facility more than 90 years, major Australian for the northern Australian electricity and foreign owned corporations, market. The Kidston Project will financial institutions, governments, be the first in the world to use two private enterprises and high net worth disused mine pits for hydroelectric individuals have trusted our advice on power generation; their most critical legal challenges. • advising on all aspects of the Our whole-of-project approach ensures development and delivery of seamless legal services are on hand from Mackay Sugar Limited’s bagasse the project approval and development cogeneration facility at its mill in phase, through to project financing, Mackay, Queensland; operation and expansion. Our specialist • acting for Mackay Regional Council in lawyers bring expertise, experience and relation to a landfill gas management in-depth knowledge of the renewables and energy utilisation project at industry, having worked on solar, Hogan’s Pocket and Bayersville hydro, wind, biomass and geothermal landfill sites; renewable energy projects in Australia • acting for Ergon Energy to provide and overseas. advice for the geothermal power Key highlights of our experience include: station at Birdsville, Australia’s only • advising on the delivery of a solar commercial geothermal power power station at Alice Springs Airport plant; and in the Northern Territory • advising on market design and for Ingenero; competition law issues in this space. • advising various wind farm operators, We understand the opportunities energy utilities and banks on the and challenges facing those in the development of wind farms and on renewables sector and provide the regulation of the renewables and commercial, outcomes focused advice electricity industry; on the full range of issues confronting participants in this field. Note from the editors The increasing global demand for It provides: energy presents both opportunities and • an overview of the current state of the challenges for Australia. Australia is well Australian renewable energy industry, known for its abundance of renewable its key players, trends and priority energy sources and has not fully areas for future development; capitalised on them to date. However, as renewable energy projects become more • an examination of the challenges and cost competitive, and local demand for opportunities in the renewable energy renewable energy soars, domestic policy industry; and is developing to help drive local and • an in-depth guide to navigating the international investment in renewable legal framework in Australia, including energy projects. potential legal hurdles that investors face or are likely to face when doing The Australian Renewable Energy Target business in the Australian renewable (RET), for example, is a federal mandate energy sector. to create a supportive environment for long-term investment in Australia’s We will step you through the funding renewable energy industry. The RET has opportunities, structuring and corporate set a target of 23.5% of Australia’s total considerations, national electricity power to come from renewable energy regulations and preferred project by 2020. delivery methods. The Renewable energy in Australia three While we cannot delve into every detail part series provides some insights into in this guide, please contact any of our the issues you will face, and how best experts should you have any specific to overcome them, in proceeding with queries – we would be more than happy a renewable energy development in to help. Australia. Renewable energy in Australia - Market and industry overview REN NIEMANN Partner Construction and Project Delivery Methods t +61 7 3233 8770 e [email protected] LOUISE HORROCKS Partner Structuring and Corporate Advisory t +61 7 3233 8734 e [email protected] ADRIAN SMITH Partner Funding and Corporate Advisory t +61 2 8241 5639 e [email protected] JOHN KETTLE Partner Funding and Electricity Regulation t +61 7 3233 8962 e [email protected] TIM HANMORE Partner Approvals and Planning t +61 7 3233 8955 e [email protected] DAVID GILHAM Partner Funding and Project Finance t +61 2 8241 5611 e [email protected] Market overview A market that is poised for growth. In June 2015, the Federal Government set a new RET of 33,000GWh of renewable energy generation capacity by 2020. This target requires Australia to double its current renewable energy generation capacity and ensure that 23.5% of Australia’s total electricity generation will be from renewable sources by 2020.1 Renewable energy in Australia - Market and industry overview The legislative implementation of An abundance of resources the RET in June 2015 was significant Australia has the highest concentration because it signalled the first instance of solar radiation per square metre of bipartisan political agreement on on Earth, making it environmentally the RET. ideal for solar power generation. In conjunction with the Federal RET There is incredible potential for solar legislation, individual State governments energy generation in Australia, given have also implemented their own that Australia receives an average of targets, which will affect the direction 58 million picojoules of solar energy of renewable energy investment per year – 10,000 times more than the 5 among States. country’s total energy consumption. The effects of the widely supported RET Australia is also home to some of reform and a more stable renewable the most favourable conditions for energy policy contributed to 3,150MW wind energy generation in the world of new generation capacity and $6.9 in terms of average wind speed billion being invested nationally in clean and conducive topography. energy projects set to go to construction The high potential yield for wind and in 2016.2 This represents the biggest year solar energy production make them for clean energy investment in Australia. the two most important renewable Half of the remaining 14,500GWh energy sources in the years to come. of additional generation required to meet the RET is expected to be under Both the Clean Energy Finance construction in 2017, most of which will Corporation (CEFC) and the Australian be delivered within a single year. 3 The Renewable Energy Agency (ARENA) industry is confident that the RET is have identified wind and solar as priority clearly within reach by the 2020 deadline. areas for both research and development investment and for project development. Energy generation versus 2020 target 2016 2020 Target 17,500 GWh 33,000 GWh Source: Clean Energy Council, Clean Energy Australia report 2016 (May 2017) – see [4] Renewable energy generation technology Solar Wind The output of rooftop solar Wind generators accounted for PV installations reached 7.5% of capacity and generated over 3% of the National 6.1% of output in 2015–16. Electricity Market’s (NEM) Overall, wind generation electricity requirements in rose by 12% in 2015–16. The 2016. The amount of solar announcement of a record powered energy in the NEM number of new large-scale wind is expected to dramatically farms in 2016 will see a strong increase over the next decade rise in the capacity of wind due to reducing powered energy in the NEM. solar technology costs. Hydroelectric Geothermal Hydroelectric generators Utility-scale geothermal power accounted for 17% of generation is not expected to registered capacity in be commercially viable until the NEM in 2015–16, 2020. Birdsville, in Queensland, supplying 10% of electricity is host to Australia’s only generated. The bulk of commercial geothermal Tasmanian generation is power plant. hydroelectric. NSW, Victoria and Queensland also have hydroelectric generation. Marine There is enormous potential to Bioenergy harness the power of waves, Bagasse (e.g. sugar cane tides and currents for electricity waste) is the most common generation. Marine energy form of Australian bioenergy remains at an embryonic generation. Biomass can stage of development across also be converted to liquid the world. The Carnegie fuels (biofuels) for energy Wave Energy Project, based generation. Bioenergy in Perth, was the first array of makes up 1.7% of the total wave power generators to be generation capacity in connected to an electricity the NEM. grid, worldwide. Renewable energy in Australia - Market and industry overview Renewable generation contribution to NEM electricty supply 20 16 12 8 4 Percent of total generation total of Percent 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Hydro Wind Solar farm Rooftop solar Note: Rooftop solar PV generation is not traded through the NEM. Electricity generated from this source acts to reduce the demand for grid supplied electricity. Source: Australian Energy Market Operator, Energy Update: June 2016 (May 2017) – see [6] Renewable