Pacific Hydro’s A$2 Billion of Wind Projects Rely on Energy Law

By Angela Macdonald-Smith

Dec. 19 (Bloomberg) -- Pacific Hydro Ltd., the Australian hydropower and wind energy producer, said it expects to proceed with about A$2 billion ($1.4 billion) of wind energy projects once the nation’s renewable energy legislation is passed.

The investments in projects in the states of Victoria, Western Australia and South Australia would likely be approved within three to five years, Andrew Richards, a spokesman for Melbourne-based Pacific Hydro, said today by telephone. Pacific Hydro still has concerns about the draft legislation, he said.

Under the draft rules, released Dec. 17, Australia will have a 20 percent target for renewable energy use by 2020, expanding an existing 2010 target for 9,500 gigawatt-hours of power from renewable sources, to 45,000 gigawatt-hours. The legislation, once passed, will trigger more than A$20 billion of new investments and drive immediate cuts in greenhouse gas emissions, said the Clean Energy Council, an industry group.

“This gives a fillip to the market for the first few years,” Richards said in an interview. “We should be able to get a lot of those projects away.”

The draft legislation includes a plan for solar credits to encourage people to install solar panels. It would allow consumers to earn five credits, or Renewable Energy Certificates, for each megawatt-hour of solar energy produced by their panels. That’s five times as many credits as for other renewable energy generation. The credits provide extra income for renewable energy project developers, in addition to electricity sales.

‘Critical Step’

Pacific Hydro, owned by Industry Funds Management Pty, is concerned that means the 20 percent renewable energy target may not be met because the contribution from solar projects will be a fifth of the credits generated, Richards said. It’s also examining the proposed “dramatic” fall-away in the renewable energy target after 2025, which may have implications for the certainty of long-term investments, he said.

Those aspects of the draft legislation place uncertainty around longer-term investments Pacific Hydro is considering in geothermal and wave energy, Richards said.

The law will be a “critical step to the long-term development” of renewable energy in Australia, Martin Poole, executive director of Epuron Pty, a unit of Germany’s second- biggest solar energy company Conergy AG, said in a statement yesterday. Poole couldn’t be reached for comment today.

Epuron is studying the feasibility of building a wind energy project near Yass in New South Wales state and is developing the Gullen Range project near Goulburn in the same region. The company is also working with Macquarie Capital Group on the Silverton project near Broken hill, which would be Australia’s largest wind energy park.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net