The windmill industry looks ready to boom with the new 20 per cent target for renewable energy by 2020. But the boom could have been even bigger, if a lack of Federal legislation had not halted the industry in recent years. Jeppe Funder reports.

A wind farm.

The windmill industry has more or less been on hold for the past three years because the original Mandatory Renewable Energy Target (MRET) introduced in 2001 by the Howard government, that was meant to last until 2010, had already been easily met. The Howard government’s decision not to renew the target took away any incentive to invest in new wind farm development in Australia.

The investments were primarily driven by the price of Renewable Energy Certificates, which is a tradable good received when producing renewable energy. The more renewable energy, the more certificates. These certificates were, and still are, traded amongst energy producers because the MRET dictates how big a percentage of the total energy output of any provider should come from renewable sources. Fossil fuel power plants have to buy up energy certificates to make up for the fact that they produce zero per cent renewable energy, and wind farms can sell their certificates to the fossil power plants since they produce 100 per cent renewable energy.

The system works as a basic supply and demand market. As long as the demand is high, the price of the certificates will stay high, thereby creating an incentive to invest in wind farms. But if the demand is low, so is the price and so is the incentive. Keeping the demand high is in other words the key factor, and as long as wind farms keep going up the MRET percentage for how much renewable energy power suppliers must produce must go up as well. This is where things turned sour in the past years.

An original MRET of 9400 gigawatt hours was set up in 2001. This was meant to last until 2010, when a new goal would then be set. The wind industry, alongside other renewable energy industries such as solar power, took off and started building up. It was soon clear that the goal was simply set too low as in late 2005 to early 2006 the target of 2 per cent was met.

The renewable energy certificates that were to drive the renewable industry forward instead began spelling its downwards spiral. In just one year the price plummeted from around $35 to $15, according to a report published by the Office of the Renewable Energy Regulator.

“It is really quite simple. The price went down because the demand was low. The renewable energy target worked really well until 2006, where the industry realised that enough renewable energy was either built or being built to meet the target by 2010. This sent the whole industry into a slump,” says Dr. Mark Diesendorf from the Institute of Environmental Studies of the University of New South Wales.

The decision not to renew the target was made in 2005 by the Howard government after it became clear the target was well on its way to fulfilment. The government appointed a commission to provide a recommendation and the Talbert review eventually gave a renewed and higher target the thumbs up. Yet this was denied by the Howard government, and the target remained the same, rendering the wind industry helpless.

Statistics from the World Wind Energy Association show that in 2005 Australia had a total of 579 MW of windmill capacity installed. In 2006 the number rose to 817 MW, but from 2006 to 2007 nothing changed, and at the end of 2007 still only 817 MW of wind power was installed.

After the 2007 election and with a fresh 20 per cent by 2020 MRET promise from the Rudd Government in the bag, the industry sparked up again and installed 677 MW of power, bringing the end-2008 total to 1494 MW.

Opportunities lost

The issue has since left the media spotlight and as statistics show, the industry indeed slowed down. In late 2007, when electoral campaigns were focussing on environmental politics, the CEC issued a statement addressing the past years. In the statement, Dominique la Fontaine again heavily criticised the decision not to renew the energy target in 2005: “The MRET has demonstrated its ability to increase investment in new clean energy infrastructure, create jobs and manufacturing. When it was not renewed in 2005, investments were put on hold leaving manufacturing no option but to reduce its Australian operations or pack up and leave.”

And pack up and leave is what some companies did through 2006 and 2007. The world’s biggest windmill producer, Vestas Wind Systems, which is based in Denmark, had set up two factories in Australia after the original MRET target was introduced, one in Portland, Victoria and one in Tasmania.

These factories were closed down in 2006 with the Asia Pacific Director of Vestas, Jørn Hammer, stating in 2007 that “Fact remains, that the wind industry in Australia does not justify investments of this size. If the Federal Government would provide the necessary framework for wind energy we will have another look at the Australian market, but we will probably be more careful next time.”

At the time, the government took some heat from the closings which resulted in a total of 195 Vestas jobs lost in Victoria and in Tasmania. Again, the non-renewed renewable energy target was to blame, said critics.

Tasmanian liberal MP, Eric Abetz defended the decision saying the MRET was not renewed as it could create a spike in electricity prices: “Some wind farms are going to be more viable than others and there are some that could only become viable by jacking up the price of electricity.”

Another big renewable energy company, Pacific Hydro, built three wind farms in Victoria before sending the company’s investments overseas. Andrew Richards, Executive Manager of the company also blamed the lack of green legislation: “We’re an Australian company, we want to invest in Australia but we can’t at the moment because there’s no mechanism to help us do that. There’s no mechanism that levels the playing field between clean energy and dirty energy.”

Not surprisingly, the Greens were in an uproar. In a parliamentary session in 2006, Green senator Christina Milne decried the decision, saying: “We’re going to see a loss of investment, we’re going to see more jobs and more technologies going overseas and we’re going to struggle to meet our own greenhouse gas emission target. It’s a lose, lose, lose situation.”

Senator Ian Campbell, Environment Minister at the time, instead looked for a positive spin on the situation: “Quite frankly what a wonderful thing for a policy to create a domestic industry and see it exported around the world. That’s a good thing, not a bad thing.”

He was backed by then Coalition Agricultural Minister Peter McGuaran. He stated: “They [wind farms] go in, divide communities, devalue properties, scar the landscape. There’s no justification for them.”

The ghost of the infamous Greenhouse Mafia again took centre stage with allegations that the Howard government was under heavy influence from the fossil fuel industry. In a Four Corners edition on ABC aired in 2006, a whistleblower from within the industry observed that: “Their influence over greenhouse policy in Australia is extraordinary.”

Mark Diesendorf from the University of New South Wales agrees: “The original MRET did not stand a chance of getting an expansion and time extension. The Greenhouse Mafia had way to much influence over the Howard government for that to happen.”

But they should not have been necessary, says Research Director at the Institute for Sustainable Futures, Chris Riedy.

“The Victoria target was announced first and went ahead to a greater degree. New South Wales came along afterwards. Both were using the Mandatory Renewable Energy Target system as the Federal one, just extending the targets. But there is no doubt a Federal target would have been better. Had the federal government increased the size of the target at the first review of the legislation, it would have been more efficient and effective, as companies can take up the best sites for renewable energy in all of Australia instead of just in the various states. It would have avoided the boom-bust cycle that we saw.”

Dr. Mark Diesendorf agrees. “It is all a matter of supply and demand. If the target had been set higher, it would have created a bigger demand and thereby fuelling the industry.”

Exactly how much have been lost and how much a wind industry slump has set Australia back is yet to be seen. The CEC recently stated that the new 20 per cent renewable energy target by 2020 will “unleash more than 20 billion AUD of new clean energy investment.”

Furthermore, the Chief Executive of the Council, Matthew Warren, stated that the target will help the development and deployment of renewable energy technologies in Australia.

“Successfully deploying the 20 per cent target of renewable energy in Australia by 2020 will unleash the ingenuity of Australia’s energy industry, accelerate research and development and will reveal quickly the scale and potential of this important emerging industry.”

While the wind industry once again looks ready to prosper and supply Australia with a continuously growing portion of renewable, clean energy, one thing seems clear: the previous setbacks mean that years of opportunities, investments and growth have gone with the wind.