Australia: Renewing Interest in Renewables

---

By K.Ravi

Hydropower is the primary renewable technology in Australia

Though Australia is relatively well endowed with renewable energy sources such as wind, solar, hydro and biomass, the share of renewable in the country's total power generation is just 10.5 percent, with large scale developments limited to hydroelectric and biomass. Remoteness of certain electricity markets (Tasmania and Northern Territory) and abundant availability of sources (water and Bagasse) has been the traditional drivers for the renewable industry.

Frost & Sullivan's extensive Renewables Portfolio analysing European, Latin and North American markets is briefly extended in this short article to Australia.

Legislation becomes a cornerstone for market growth

The Renewable Energy (Electricity) Act, 2000 and Renewable Energy (Electricity) Regulations 2001, introduced by the Commonwealth Government is expected to have wide spread ramifications for the electricity market in general and grid based renewable industry in particular. This legislation requires generation of 9,500 GWhr of extra renewable energy per year by 2010 (see table for interim year wise targets), and also place a legal liability on wholesale purchasers of electricity to source an additional 2% of power from renewable energy. What are its implications for the renewable industry and what are the technologies that are likely to benefit?

The suppliers of equipment for industrial scale renewable energy plants are expected to benefit the most from this regulation. The key driver will be the establishment of the Office of Renewable Energy Regulator (ORER) with powers to implement the mandatory regulation.

Australia: Mandatory Renewable Energy Target

Year	Required additional power GWh
2001	300
2002	1100
2003	1800
2004	2600
2005	3400
2006	4500
2007	5600
2008	6800
2009	8100
2010-2020	9500

Source: Office of the Renewable Energy Regulator, Australia

While the large hydro and biomass markets are in the advanced stage of maturity, deregulation of the electricity market is impacting its further development. The bagasse based cogeneration plants, which were traditionally owned, and operated by the sugar plants themselves are seeing the entry of Independent Power Producers (IPP). This has thrown up opportunities for market growth and also for development of new technologies such as gasification, anaerobic digestion and co-firing at coal power plants.

Mini hydroelectric plants and wind turbines are the technologies with higher growth potential. Here again IPPs are expected to drive the requirement of mini hydroelectric plants, with the supplies mostly met indigenously.

With both the utilities and IPPs actively pursuing wind energy projects, it provides immense opportunities for overseas

Up to $10 bn in a decade

suppliers, especially because of the nascent state of the domestic wind turbine industry. While Pacific Hydro has put up a 18 MW capacity wind farm in Victoria, Western Power is commissioning $45 million, 22MW wind farm in Western Australia. Companies like Sulzon, NEG Micon, Nordex and Vestas are the major competitors in this fledgling market. Estimates suggest that nearly $10 billion needs to be invested over the next decade in giant wind farms, if Australia is to have a right mix of renewable and also meet the greenhouse emission targets.

While Australia is one of the world leaders in solar photovoltaic technology, costs have been restricting its large-scale use for power generation. However, the new renewable energy act should help further research for arriving at commercially viable solutions.

Other technologies like landfill gas, tidal, and geothermal are likely to be developed on specific opportunities, rather than on wider commercial scale.

However, abundant availability of cheap black coal, brown coal, and natural gas, is a major restraint for the development of large-scale renewable energy in Australia, beyond the mandatory limits. But Government subsidies for renewable technologies to meet the 2% target in itself are expected to lead to maturity of the renewable technologies. This will in turn bring down the equipment costs and hence help renewable compete with other conventional technologies.

Domestic applications

Solar Power diminishing

Despite the Government's high profile legislation on aggressively pushing the renewable among industries, Australian Bureau of Statistics has indicated recently that the use of renewable, especially solar power for domestic purposes has actually declined. One of the main reasons could be due to the expansion of grid and availability of grid power to larger segment of the population. Various green groups and building advisory associations have awaken to this reality and are in fact pressing the Government to offer its home grant for builders of first new homes, only on the basis of energy efficiency and use of renewable sources. If accepted, this factor will also be one of the major drivers for further growth of renewable and in this case domestic solar photovoltaic industry.

Conclusion

Even though regulation is proving to be a common driver for all the renewable technologies, the level of deployment and hence the market growth would depend on various other factors like maturity of the technology, time required for project completion, cost, greater level of domestic components etc. Moreover, with the introduction of competition in electricity market, the operational and generation costs have assumed greater significance. Those technologies and suppliers that satisfy these criteria are expected to benefit in the near future. In the longer run however, resources spent on development and commercialisation of new technologies would pay off.

Frost & Sullivan is currently researching on a new European Renewables Market Report due for publication in January 2001. It will analyse each major technology segment allowing comparison to our current Renewable Energy Market reports on North America and Latin America.