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Overcoming barriers to wind project finance in Australia

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  • Kann, Shayle
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    Abstract

    The wind power industry in Australia is expected to grow rapidly over the next decade, primarily due to a forthcoming expanded national renewable energy target (RET) which will mandate that renewable sources provide approximately 20% of Australia's electricity production by 2020. However, development of new wind generation in Australia has stalled as a result of several barriers to project finance, the mechanism through which most wind farms have been developed historically. This paper provides an overview of wind power financing in Australia in light of recent political and financial trends. Drawing upon existing literature and a series of stakeholder interviews, it identifies three primary barriers to project finance: regulatory risk surrounding legislation of the RET, semi-privatization of electricity retailers in New South Wales, and limited capital availability resulting from the recent global credit crisis. The paper concludes that the confluence of these barriers limits the availability of long-term contracts that provide revenue certainty for pre-construction wind projects, while simultaneously making these contracts a necessity in order to obtain project finance. In an attempt to mitigate these effects, this paper identifies four alternative development strategies that can be pursued.

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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 37 (2009)
    Issue (Month): 8 (August)
    Pages: 3139-3148

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    Handle: RePEc:eee:enepol:v:37:y:2009:i:8:p:3139-3148

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    Web page: http://www.elsevier.com/locate/enpol

    Related research

    Keywords: Wind power Project finance Wind development;

    References

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    1. Kent, Anthony & Mercer, David, 2006. "Australia's mandatory renewable energy target (MRET): an assessment," Energy Policy, Elsevier, vol. 34(9), pages 1046-1062, June.
    2. Blyth, William & Bradley, Richard & Bunn, Derek & Clarke, Charlie & Wilson, Tom & Yang, Ming, 2007. "Investment risks under uncertain climate change policy," Energy Policy, Elsevier, vol. 35(11), pages 5766-5773, November.
    3. Owen, Anthony D., 2009. "The inquiry into electricity supply in New South Wales," Energy Policy, Elsevier, vol. 37(2), pages 570-576, February.
    4. Anderson, Edward J. & Hu, Xinin & Winchester, Donald, 2007. "Forward contracts in electricity markets: The Australian experience," Energy Policy, Elsevier, vol. 35(5), pages 3089-3103, May.
    5. Pollio, Gerald, 1998. "Project finance and international energy development," Energy Policy, Elsevier, vol. 26(9), pages 687-697, August.
    6. Saddler, Hugh & Diesendorf, Mark & Denniss, Richard, 2007. "Clean energy scenarios for Australia," Energy Policy, Elsevier, vol. 35(2), pages 1245-1256, February.
    7. MacGill, Iain & Outhred, Hugh & Nolles, Karel, 2006. "Some design lessons from market-based greenhouse gas regulation in the restructured Australian electricity industry," Energy Policy, Elsevier, vol. 34(1), pages 11-25, January.
    8. Luke Reedman & Paul Graham & Peter Coombes, 2006. "Using a Real-Options Approach to Model Technology Adoption Under Carbon Price Uncertainty: An Application to the Australian Electricity Generation Sector," The Economic Record, The Economic Society of Australia, vol. 82(s1), pages S64-S73, 09.
    9. Walls, W.D. & Rusco, Frank W. & Ludwigson, Jon, 2007. "Power plant investment in restructured markets," Energy, Elsevier, vol. 32(8), pages 1403-1413.
    10. Wiser, Ryan & Pickle, Steven & Goldman, Charles, 1997. "Renewable energy and restructuring: policy solutions for the financing dilemma," The Electricity Journal, Elsevier, vol. 10(10), pages 65-75, December.
    11. Venetsanos, Konstantinos & Angelopoulou, Penelope & Tsoutsos, Theocharis, 2002. "Renewable energy sources project appraisal under uncertainty: the case of wind energy exploitation within a changing energy market environment," Energy Policy, Elsevier, vol. 30(4), pages 293-307, March.
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    Cited by:
    1. MacGill, Iain, 2010. "Electricity market design for facilitating the integration of wind energy: Experience and prospects with the Australian National Electricity Market," Energy Policy, Elsevier, vol. 38(7), pages 3180-3191, July.
    2. Christoph Heinzel & Thomas Winkler, 2011. "Economic functioning and politically pragmatic justification of tradable green certificates in Poland," Environmental Economics and Policy Studies, Society for Environmental Economics and Policy Studies - SEEPS, vol. 13(2), pages 157-175, June.
    3. Makajić Nikolić, Dragana & Jednak, Sandra & Benković, Slađana & Poznanić, Vladimir, 2011. "Project finance risk evaluation of the Electric power industry of Serbia," Energy Policy, Elsevier, vol. 39(10), pages 6168-6177, October.
    4. Valentine, Scott, 2010. "Braking wind in Australia: A critical evaluation of the renewable energy target," Energy Policy, Elsevier, vol. 38(7), pages 3668-3675, July.
    5. Shrimali, Gireesh & Nelson, David & Goel, Shobhit & Konda, Charith & Kumar, Raj, 2013. "Renewable deployment in India: Financing costs and implications for policy," Energy Policy, Elsevier, vol. 62(C), pages 28-43.
    6. Hall, N. & Ashworth, P. & Devine-Wright, P., 2013. "Societal acceptance of wind farms: Analysis of four common themes across Australian case studies," Energy Policy, Elsevier, vol. 58(C), pages 200-208.

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