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Climate
change
75
Sustainable generation sources
Renewable energy target
Investing in renewable energy delivers an immediate
benefit in ensuring AGL contributes its share of meeting
Australia’s Renewable Energy Target, and in the medium
term will deliver greater value to the organisation
when the cost of carbon is accounted for in the energy
supply chain.
Approach
In August 2009, the Commonwealth Government passed legislation
introducing a 20% Renewable Energy Target (RET) by 2020 for
Australia. The new Large Scale Renewable Energy Target (LRET)
requires 41,000 GWh of renewable generation by 2020 to
2030, a four-fold increase on the original Mandatory Renewable
Energy Target. Retailers are required to comply with the target
by purchasing Large Scale Renewable Energy Certificates (LGCs)
created by renewable energy generators. The LRET constitutes the
vast majority of the 20% RET by 2020.
The market for LGCs was oversupplied during FY2012. This was
largely a legacy issue associated with the 2010 split of the original
RET into a Small Scale Renewable Energy Scheme (SRES) and the
LRET. Significant surplus volumes of certificates created as a result
of the installation of small scale solar PV and solar hot water are
gradually being used for compliance. AGL expects that significant
new investment will be required in FY2013 to ensure that sufficient
renewable energy is being produced in FY2016 to meet the
expanded LRET targets.
A critical issue in FY2013 will be the statutory review of the
Renewable Energy Target by the Climate Change Authority (CCA).
The CCA is required to review the operation of the RET and provide
a report back to the Commonwealth Parliament by December
2012. It is critical that the RET be left unamended. It is one of
the few energy policies where bipartisan support exists and is
designed to underpin investments with lifespans of several decades.
Amendments to the scheme would be likely to have serious negative
consequences for investor certainty. Accordingly, AGL will be
vigorously advocating for the policy to be left unamended during
the statutory review (see AGL Applied Economic and Policy Research
Working Paper No.35). At the time of printing, the CCA had issued
its draft recommendations which involve no material change to the
legislative framework underpinning the LRET.
Performance
Building new renewable generation
It is estimated that meeting the 20% target by 2020 will require
around $30 billion of investment in new renewable energy
generation. As an energy retailer with a significant market share of
Australia’s electricity consumption, AGL’s developments are poised
to make a significant contribution to meeting this target.
In FY2012, AGL completed work on the 52.5 MW AGL
Hallett 5 Wind Farm and the 63 MW AGL Oaklands Hill Wind Farm.
These projects add 115.5 MW of new renewable capacity to
AGL’s operated electricity generation portfolio. AGL is continuing
to develop a number of other renewable projects including:
>> Macarthur Wind Farm: The 420 MW Macarthur project in
south-western Victoria will be one of the southern hemisphere’s
largest wind farms, producing enough energy to power 220,000
households.
>> Solar PV: Following success in the Commonwealth Government’s
Solar Flagships program, AGL is developing two of the largest solar
projects in the world, totalling 159 MW. Within New South Wales,
AGL will develop a 106 MW project at Nyngan and a 53 MW
project at Broken Hill.
>> Silverton Wind Farm: During FY12, AGL also acquired the rights
to build up to 1,000 MW of new wind capacity near Silverton,
approximately 25 kilometres from Broken Hill in western New
South Wales.
Securing demand
AGL’s strategy of investing in renewable energy is not only in
response to government-mandated targets. Consumer-driven
demand is also important. As part of managing issues such as
legislative risk, AGL has sought to contract renewable electricity
supply directly with large consumers that is in addition to mandated
targets. AGL has secured significant customer loads for renewable
energy, which effectively underwrite new renewable energy
projects. Through these contracts, AGL is meeting its goal of being
Australia’s largest retailer of new renewable energy, selling more
than 1 TWh annually.