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Year in review

This year has seen a record level of investment in renewable energy in Australia. As renewables costs reduce and electricity costs increase, there has been a surge in investment in and delivery of renewables, particularly under the Renewable Energy Target. The momentum in the market has meant enough new capacity required to meet Australia’s Renewable Energy Target has been announced.

Biggest year ever for renewables

This past year was the biggest ever for renewables with the most small-scale system installation capacity and the highest amount of large-scale capacity both firmly announced and accredited in a single year.

A word from the industry

Accelerating the next phase of Australia’s clean energy transition

Since its inception, the Clean Energy Finance Corporation’s (CEFC) direct investment commitments in new large-scale solar and wind projects have exceeded $1 billion and catalysed the development of almost two gigawatts of additional renewable generation capacity Australia-wide.

As the single largest debt financier in large-scale solar, with $440 million committed to 10 new projects in 2016–17, the CEFC saw rapid improvements in the cost competitiveness of solar, so that it is now possible to develop a commercially viable large-scale solar project without grant funding. Such projects are attracting new domestic and international financiers alongside the CEFC’s debt finance.

As the wind sector has matured, the CEFC has also seen growing investor interest in projects that may have either partial offtake arrangements or full merchant price exposure. CEFC commitments to large-scale wind projects in 2016–17 were notable for both the size of the CEFC investments, at $200 million, and the scale of the projects, to accelerate 383 megawatts of new clean energy.

Recent CEFC investment commitments underscore its innovative approach to financing renewable energy generation.

The CEFC is investing $94 million in Australia’s first fully integrated wind, solar and battery project, at the central north Queensland Kennedy Energy Park. The 60 megawatt hybrid project will connect to the local grid, providing electricity to communities from Julia Creek to Charters Towers, more than 500 kilometres away.

The landmark project creates a new model for renewable energy that brings together the benefits of wind, solar and battery storage to overcome intermittency and improve reliability. Financing three separate technologies on one site was a complex undertaking that had not previously been achieved in Australia. As the sole debt financier for the project, the CEFC demonstrated the bankability of large-scale, integrated hybrid renewable energy projects for the future. The CEFC expects such projects to become an increasingly important part of Australia’s electricity system, with complementary battery storage addressing the intermittency of wind and solar generation to support grid stability.

The CEFC committed a further $150 million in debt finance to the Lincoln Gap wind farm in South Australia. The project includes Australia’s first unsubsidised large-scale grid-connected battery alongside a greenfield wind development, signalling an important new milestone in the evolution of the energy storage sector.

With large-scale battery technology developing rapidly, costs are expected to fall significantly, reflecting the pathway of wind and solar. As the first development project in Australia that has been able to secure debt finance for a grid-connected large-scale battery component on a non-subsidised basis, Lincoln Gap provides an important financing model for other developers and investors wanting to be at the forefront of closer integration of renewables into the grid.

These commitments confirm the CEFC’s view that, through a planned and coordinated approach, Australia’s energy mix can incorporate higher levels of clean energy alongside strengthened transmission, better demand management systems and increased storage capacity, contributing to improved system reliability, energy affordability and environmental sustainability.

CEFC provided this content.

Photo: Kennedy Energy Park, CEFC, Queensland

Investment surge in small-scale

This year saw an unprecedented level of investment by Australian households and businesses in small-scale renewable energy systems.

There was an upturn in small-scale system installations in 2017, characterised by the following achievements:

  • more than 6500 megawatts of installed capacity reached overall
  • more than 1050 megawatts installed
  • a nine per cent increase in air source heat pump installations nationally, continuing the steady increase since 2015, and
  • 21.7 million small-scale certificates were validated.

This brings the total to 2.9 million small-scale systems now installed in Australian homes and businesses.

There were 225,991 installations in 2017, up from 194,695 in 2016. The majority of these were solar. There was also a notable increase in 10 to 50 kilowatt size systems, with 11,353 systems installed in 2017, a 51 per cent increase over 2016 installations. As costs fall, the average size of systems continues to increase, by 11 per cent from 5.6 kilowatts in 2016 to 6.3 kilowatts in 2017.

Momentum continues in large-scale

There were record levels of investment in large-scale renewable energy projects in 2017, building on the momentum observed towards the end of 2016.

An unprecedented 6535 megawatts of capacity has been firmly announced since 1 January 2016, with more than 4900 megawatts already operating or under construction. The remaining projects are underwritten by power purchase agreements and we expect they will begin construction in 2018. The generation capacity of these projects will create enough large-scale generation certificates to meet the 2020 Large-scale Renewable Energy Target.

The project announcements were accompanied by a record-breaking year in 2017 for large-scale accreditation in the scheme, with:

  • 124 renewable energy power stations accredited, up from 98 in 2016
  • 120 per cent increase in accredited capacity, from 494 megawatts in 2016 to1088 megawatts in 2017, and
  • 19 million large-scale generation certificates created.

In total, there are 711 accredited power stations with combined capacity of 15,286 megawatts. In 2017, accredited power stations generated 16.9 million megawatt hours of renewable energy above baseline.10

It should be noted that generation in 2017 reduced compared to 2016, however validated certificates went up. 2016 was an exceptionally good year for hydro powered generation, and while generation was included in 2016 numbers, the certificates were validated in 2017 and are included in 2017 numbers.

A word from the industry

Origin’s investment in renewables rapidly accelerating

Origin is accelerating its commitment to clean energy with plans to nearly triple capacity from solar and wind in coming years.

With an aim for renewable energy to comprise up to 25 per cent of its generation mix by 2020, Origin is targeting 1500 megawatts of new large-scale solar and wind coming online by the end of the decade.

Four major solar farms in Queensland—Clare, Lakeland, Darling Downs and Daydream—are expected to come online in 2018 with a combined capacity ofmore than 470 megawatts.

The biggest of the Queensland solar farms is the 150 megawatt Daydream project near Collinsville in northern Queensland, which features a single-axis tracking system with panels that track the sun during the day to maximise output. It will generate approximately 380,000 megawatt hours of electricity a year—enough to power more than 53,000 homes with clean energy.

Despite the Lakeland solar farm being the smallest of the four projects at just10.8 megawatts, it punches above its weight. Its location at the edge of the grid in Far North Queensland and an integrated 5.3 megawatt hour battery will provide valuable insight into how to achieve a consistent supply from solar during periods of cloud cover and how to stretch a renewable resource into periods when it is not generating. Insights like these will enable battery storage to improve in effectiveness and cost, and in the future help batteries to play a stronger role in maintaining energy security.

In Victoria, work is expected to start early in 2018 on the huge 530 megawatt Stockyard Hill wind farm. Slated to be Australia’s largest wind farm, Origin’s agreement to purchase energy from Stockyard Hill set a new benchmark for renewable power purchase agreement pricing in the market and demonstrated how rapidly renewable energy costs have come down.

Origin is also involved in one of the largest solar farms in Australia, the 220 megawatt solar farm at Bungala near Port Augusta, which will have nearly 1.2 million solar photovoltaic panels. Also due to come online in 2018, Bungala will further add to Origin’s ability to deliver clean energy to Australians, and importantly will boost jobs in South Australia, with more than 350 local jobs created during construction.

As Origin rapidly grows the share of clean energy in our portfolio, it is also mindful of the need to maintain downward pressure on energy prices and maintain reliable supply. With Australia’s largest fleet of peaking gas-fired power stations, Origin is already able to support its growing renewables portfolio with firm, dispatchable power to maintain a reliable energy supply that homes and businesses rely on.

All of this demonstrates Origin’s commitment to lead the transition to a cleaner and smarter energy future for Australia.

Origin provided this content.

Photo: Moree Solar Farm, Origin Energy, Queensland

States on the move

During 2017, utility scale investment was highest in Queensland, Victoria and New South Wales. Projects in Queensland amounted to 1478 megawatts in new capacity financedand 141 megawatts of power stations accredited. There was also a lot of activity in Victoria, with 1025 megawatts in new capacity financed and 67 megawatts of power stations accredited.

Investment in New South Wales was more subdued during 2017, with 519 megawattsin new capacity financed. It was, however,a strong year for accredited capacity, with 525 megawatts of capacity accredited.

The highest existing capacity of utility scale renewables is in South Australia, but activityin that state was lower than in Queensland, New South Wales and Victoria, with 578 megawatts in new capacity financedand 232 megawatts accredited.

In 2017, new investment and accredited capacity in Western Australia, Tasmania and the Northern Territory was relatively low at 123 megawatts in total. However, power purchase agreements were signed for more than 300 megawatts in new capacity based in Western Australia and Tasmania during the year. These agreements indicate an emerging interest in new utilityscale generation infrastructure among electricity retailers in these states.

In the Small-scale Renewable Energy Scheme, Queensland continues to lead the nation with more than 45,000 solar panel system installations and 294 megawatts in additional capacity. The Australian Capital Territory had the highest level of growth with a 44 per cent increase in total installations.

Changing profile of renewables

This year saw a major proportional shift between wind to solar in the large-scale renewables industry—more significant than we had predicted—with the most solar capacity accredited since the scheme began. The accredited capacity of utility solar (projects of more than one megawatt) doubled from2016 to 2017. For the first 15 years of the Renewable Energy Target, solar’s share of the above baseline accredited capacity was four per cent. In 2017, solar accounted for 22 per cent of accredited capacity. The bulk of the increase in solar occurred in the past two years.

Businesses turn to solar

Much of the investment was in commercial and industrial as businesses turn to solar to address their energy challenges. The number of commercial and industrial installations and power stations increased from 2016 to 2017. More significantly, there was a 29 per cent increase in the average capacity of accredited commercial and industrial solar power stations, and an 11 per cent increase in the average capacity of solar installations installed in the Small-scale Renewable Energy Scheme.

Collectively, commercial and industrial solar installations in the Small-scale Renewable Energy Scheme and Large-Scale Renewable Energy Target added 319 megawatts to Australia’s energy market, up from 223 megawatts in 2016. The biggest increase in accredited capacity was in large-scale, with a 66 per cent increasefrom 2016.

Table 1: Commercial and industrial solar installations
Year Power station quantity Power station capacity (megawatts) Installation quantity Installation capacity (megawatts)
Large-scale Renewable Energy TargetSmall-scale Renewable Energy Scheme
2016 76 16.22 8388 206.52
2017 98 26.92 12,446 292.27
Year Quantity Capacity (megawatts)
Total for both schemes
2016 8464 222.74
2017 12,544 319.19

A word from the industry

The Kidston renewable energy hub

The small, rural town of Kidston inFar North Queensland was once a prosperous, bustling mining centre, home to the largest open-cut gold mine in the country. In 2001, the mining operations ceased, and the town was left desolated.

Turning to 2018, Genex Power is in the process of transforming this abandoned mine into a renewable energy hub.Genex has completed the first of two stages of the hub, with the 50 megawatt solar project (‘K1’) finalised and connected to the grid.

K1 comprises 540,000 solar panels, capable of producing 145,000 megawatt hours of renewable energy each year. This is the equivalent of powering 26,500 homes entirely with renewable energyand offsetting 120,000 tonnes of CO2 per year.

Significantly, this renewable energy hub is unlike any other in the world, as it utilises the existing infrastructure left behind from the mining operations in order to significantly reduce construction timeand cost.

Genex has used the tailings storage facility of the abandoned mine for the K1 Project, as the consistent, flat topography creates an ideal surface for a large-scale solar project. Genex has also capitalised on a number of other infrastructure pieces left from the mining operations, including an existing substation, transmission line connected to the grid, solid road access, accommodation camp and airstrip.

However, of most significance for Genex are the two mining voids that were left behind. As a result of previous rehabilitation processes, these voids are now filled with large volumes of water, providing the perfect framework for the company’s 250 megawatts Pumped Storage Hydro Project (‘K2H’).

K2H will use the mining voids as the upper and lower reservoirs for the Project, releasing the water from the upper to the lower reservoir via a turbine-generator system to generate electricity during peak demand, and pumping water back into the upper reservoir during off-peak periods. The scheme is essentially a ‘giant water battery’, as water held at height is potential energy stored, with the ability to release the water/produce electricity instantaneously on demand.

K2H is capable of storing and producing250 megawatts for eight hours. Furthermore, the scheme will be paired with an additional 270 megawatts of solar panels, which will be used to pump the water back into the upper reservoir during the day. This will be the first integrated solar-pumped hydro project in the world, creating dispatchable, reliable and affordable renewable energy, or in other words, ‘renewable energy on tap’.

Genex Power provided this content.

Photo: Kidston Renewable Energy Hub, Genex Power, Queensland

Emerging technology

The renewables industry continues to adapt to Australia’s energy needs. Single-axis tracking has improved the productivity of solar farms and concurrent battery storage at solar and wind farms has reduced the variability of electricity they produce.

Single-axis tracking

Single-axis tracking technology involves mechanisms that pivot solar panels during the day to face the sun, tracking east to west. Single-axis tracking increases the capacity factor of solar renewable energy power stations by around 18 per cent 11, and is able to generate more energy throughout the day than fixed panels, particularly early in the morning and late in the afternoon. Single-axis tracking installations use slightly more land area, and costs more, for the same number of panels. However, the market believes the value proposition is better given the additional electricity generation from single-axis tracking projects and the extra electricity generated early and late in the day.

This technology dominated the solar industry in 2017, with five accredited projects using the technology and another 19 announced.

Battery storage on the rise

Battery storage is attracting significant interest from the market. It is not incentivised under the Renewable Energy Target, but it helps reduce the variability of electricity generation from renewable energy technology.

There were two large-scale projects with concurrent battery storage accredited in 2017—Lakeland Solar and Storage in Queensland and Hornsdale Power Reserve in South Australia. There are five similar projects in the pipeline.

On a smaller scale, household batteries are being installed in a greater proportion of homes and businesses. Participants in the Small-scale Renewable Energy Scheme can voluntarily provide information about the installation of batteries.The data we collected showed a more than doubling of grid-connected solar panels with battery storage, from 1568 in 2016 to 4356 in 2017.12

A word from the industry

Sun Metals Solar Farm

Sun Metals Zinc Refinery is located 15 kilometres south of the city of Townsville in North Queensland. The refinery was built in 1996 by Sun Metals Corporation Pty Ltd, the Australian subsidiary of the Korea Zinc Company Limited. Korea Zinc produces 10 per cent of the world’s zinc from plants in Korea and Australia.

Sun Metals is the largest electricity user in the region and the second largest industrial consumer in Queensland. Its state of the art facility consumed just less than one million megawatt hours of electricity in 2017 to produce more than 220,000 tonnes of special high grade zinc products.

Zinc metal production is highly energy intensive, even with the very latest technology and management practices. Sun Metals is at the forefront of energy efficiency in zinc production because of its drive to reduce electricity costs, with electricity charges currently representing more than 50 per cent of its operating costs.

Sun Metals has actively sought to find the most cost effective way to meet current and future power requirements. This included a detailed review of solar power in 2016, which culminated in the company’s decision to invest $200 million of capital to construct a124 megawatt (AC) solar farm on approximately 130 hectares of suitable land surrounding the Sun Metals Zinc Refinery.

Detailed design was conducted in early 2017, and construction commenced in April 2017. Half of the solar farm will be energised in March 2018 and full generation will occur in April 2018, with project completion in May 2018. Benefits to the region include around 300 local construction jobs and the injection of millions of dollars into labour, housing, materials and increased general economic activity.

The Sun Metals Solar Farm will consist of approximately 1,260,000 solar photovoltaic modules installed on frames that are supported byaround 135,000 steel posts. The modules will be installed at a fixed (non-tracking) tilt, at a 14 degree angle, and will face north.The modules will be wired together in arrays connected to inverters to transform the DC current produced by the modules into AC current that can be fed into the grid network. Sun Metals has an existing132 kilovolt substation allowing for efficient connection into the electrical grid.

The power generated by the solar farm will supply the zinc refinery’s own industrial load and/or be sold into the National Electricity Market (NEM) depending on a dynamic consideration of the NEM price and production requirements. The Sun Metals Solar Farm is expected to generate 294,000 megawatt hours of clean, renewable electricity in the first year of operation, supplying about 30 per cent of Sun Metals’ total electricity need. The solar farm will reduce greenhouse gas emissions by 229,320 tonnes of CO2 equivalent per annum.

Sun Metals Corporation provided this content.

Photo: Sun Metals Solar Farm, Sun Metals Corporation, Queensland

Spotlight…National storage register

The Council of Australian Governments (COAG) Energy Council has agreed to establisha national storage register for distributed energy resources including battery storagesystems, and appointed the Australian Energy Market Operator (AEMO) as administratorof the national register, once it is in place from late 2018.

The national register will help Australia manage the electricity system by improvinginformation about the number, location and technical characteristics of the batteriesconsumers and businesses are choosing.

We are assisting AEMO to plan for this future national register by encouraging voluntary collection and disclosure where a battery is included in an installation of a small-scale generation unit in our online forms.

To simplify the collection of battery storage data, make the process easy and the dataconsistent, we have worked with the Smart Energy Council to incorporate a list of common battery storage products into our online forms.

Receiving battery storage information in conjunction with small-scale system registration information means we can transfer this battery data to AEMO once the national register is available, reducing the reporting burden on installers and agents.

Photo: Nyngan Solar Plant, AGL, New South Wales

Wind farms provide frequency control ancillary services

In 2017, Hornsdale Wind Farm successfully piloted a project providing frequency control ancillary services, with support from the Australian Renewable Energy Agency and Australian Energy Market Operator.

The Hornsdale Wind Farm pilot project provided frequency control ancillary services through pre-curtailment of output. The wind farm can reduce output below the technical limit set by the generator capacity and prevailing wind resource. This provides headroom to increase output byan agreed amount in response to the need for frequency control ancillary services.

Looking forward

This has been a noteworthy year for renewables in Australia, and we are confident the next two years will see even more significant activity.

Across both schemes, more than 2000 megawatts of capacity was added in 2017. Our expectation is this will double in 2018. Based on early data in 2018 in the small-scale scheme, installations and capacity will be higher in 2018 than it was in 2017. In the large-scale scheme, our projections indicate another 2600 megawatts of capacity will be accredited in 2018.

Our projections suggest a similar story for 2019, however we note the significant uncertainty in making projections in the consumer demand-driven Small-scale Renewable Energy Scheme.We expect more than 2700 megawatts of accredited large-scale capacity, and the Bloomberg New Energy Finance forecast indicates significant uptake of commercial and industrial solar, which will mean 2019 will exceed 2018.13

A word from the industry

AGL large-scale investment

The Powering Australian Renewables Fund (PARF) is a landmark partnership to develop, own, and manage approximately 1000 megawatts of large-scale renewable energy infrastructure assets and projects.

PARF is a partnership between AGL (20 per cent) and QIC (80 per cent, on behalf of clients the Future Fund and the QIC Global Infrastructure Fund). PARF’s scope represents 20 per cent of the estimated 5000 megawatts of new renewable generation capacity required by 2020 to meet the Renewable Energy Target.

Since its inception in July 2016, PARF now consists of more than 800 megawattsof renewable generation, both operational and under construction.

In November 2016, AGL announced it had reached financial close selling its 102 megawatt Nyngan and 53 megawatt Broken Hill solar plants to PARF. Following this, in January 2017, AGL announced it had reached financial close on the sale to PARF of the greenfield 200 megawatt Silverton Wind Farm construction project in western New South Wales.

Once constructed (expected 2018) the Silverton Wind Farm will produce approximately 780,000 megawatt hours of renewable energy annually, which can power more than 137,000 average Australian homes. The renewable energy produced from the wind farm’s 58 turbines will reduce CO2 emissions by655,000 tonnes annually, which is the equivalent of taking 192,000 cars offthe road each year.

In August 2017, AGL announced it had reached financial close on the sale toPARF of the greenfield 453 megawatts Coopers Gap Wind Farm construction project at Cooranga North, approximately 250 kilometres north west of Brisbane.On completion in 2019 the project will be the largest wind farm in Australia.

Once constructed (expected 2019), the Coopers Gap Wind Farm will consist of up to 123 wind turbines and produce around 1,510,000 megawatt hours of renewable energy, powering more than 260,000 average Australian homes.The renewable energy produced would reduce CO2 emissions by approximately 1,180,000 tonnes annually, which is the equivalent of taking 340,000 cars off the road each year.

AGL provided this content.

Photo: Nyngan Solar Plant, AGL, New South Wales

A word from the industry

EnergyAustralia's demand response trial

Right now, Australia’s energy system is underpinned by coal but as those big, centralised plants retire fresh approaches and technologies are emerging, giving shape to a new,modern energy system.

In 2017, EnergyAustralia was announced as the largest single contributor to a three-year joint program by the Australian Renewable Energy Agency and Australian Energy Market Operator to explore how demand response can support delivery of affordable, reliable and cleaner supplies of energy.

Under the program, EnergyAustralia was awarded $9.8 million to secure38 megawatts of demand response—or reserve capacity—from this summer acrossNew South Wales, Victoria and South Australia, increasing to 50 megawatts byDecember 2018.

“Demand response is really exciting for its potential to reduce the peak draw onenergy, avoiding or minimising the need for investment to ‘gold plate’ the system,”said EnergyAustralia Managing Director Catherine Tanna.

“We think demand response has a critical role to play maintaining system reliability and security while supporting the integration of new supplies of renewable energy. It’s an approach that puts customers in control and keeps costs down,” she said.

Ms Tanna said customers participating in demand response initiatives agree to provide reserve capacity the market operator can call upon at short notice to stabilise the energy system.

The technique has already been used to offset extreme demand or emergencies, easing the strain on the electricity system and avoiding involuntary load shedding.

For example, a particularly high-demand summer day might trigger an agreement for a business to reduce its load by running its equipment less. Or it might mean tapping into the solar energy stored—but not being used—on a customer’s rooftop.

Customers typically receive a financial incentive in exchange for reducing their demand or making excess energy available.

Under the trial, EnergyAustralia will work with a range of customers from residential households to large industrial users, and through a mix of technologies and approaches such as:

  • Implementing mass market SMS alert campaigns, in which residential and business customers would agree to reduce or moderate their energy demand in response to a real-time notification that system capacity is tight.
  • Installing Wattwatchers monitoring and remote-control capability in residences and small businesses, allowing appliances (such as air-conditioners, pool pumps, machinery or other loads) to be curtailed.
  • Aggregating “smart” Redback solar battery storage systems across multiple sites to secure a reliable source of reserve for use during extreme peak periods or emergencies.
  • Working with large customers and energy exchange technology company Greensync on load shifting, for example, so businesses can schedulepre-cooling/heating activities to times of the day that minimise consumption.
  • Converting diesel generators at large customer sites to run on Australian made biofuel, which is derived from ethically sourced feedstock such as recycled cooking oils.

EnergyAustralia provided this content.

Photo: Redback battery storage system, EnergyAustralia, Australia

Footnotes

  1. The existing generation of renewable source electricity in 1997 is referred to as 'baseline'. See Glossary for more information.
  2. Source: http://gci.uq.edu.au/filething/get/11828/PVSyst%20Assessment%20of%20economics%20of%20array%20types%20at%20gatton%20-%20version%203-edit-final.pdf
  3. Participants in the Small-scale Renewable Energy Scheme are encouraged to voluntarily disclose when a system has been installed with battery storage as part of their application for small-scale technology certificates. We collect data for installations of small-scale solar panel systems including those with concurrent battery storage but do not collect data on existing solar panel systems that have batteries installed at a later date.
  4. Source: Bloomberg New Energy Finance New Energy Outlook 2017

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