Leveraging new research, this News Flash episode dives into the Australian wind energy market, with insights from IntelStor on capacity, future growth, turbine tech, and factors impacting profitability like PPAs and maintenance costs. IntelStor provides valuable data and analysis on renewable energy markets, including this latest report on Australia.

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Allen Hall: I’m Allen Hall, president of Weather Guard Lightning Tech. And I’m here with the founder and CEO of IntelStor, Phil Totaro, and the chief commercial officer of Weather Guard, Joel Saxum. And this is your News Flash. News Flash is brought to you by our friends at IntelStor. If you need actionable information about renewable projects or technologies, check out IntelStor at IntelStor.com.

Well, Phil, IntelStor put out a really interesting report about our friends in Australia and the wind energy down there. A lot of moving pieces at the moment. 12 gigawatts already installed wind. What’s the future look like? What’s happening? What turbines are working down in Australia?

Philip Totaro: Well, thanks, Allen.

First of all, I appreciate the opportunity to come on and talk about this exclusively. The Australian market’s an interesting one because they’ve now got 12. 2 gigawatts operational as of the end of 2023. They’ve got another 4. 4 gigawatts under construction right now, which is absolutely explosive growth from the typical annual capacity additions they’ve seen.

Even last year they only added something like 800 megawatts. But they’ve also got 8 gigawatts of onshore wind that’s consented and hasn’t started construction yet, and another 90 gigawatts that is early to mid stage proposed, where a lot of this is tied to additional intrastate transmission lines being built, or even the transmission line they’re talking about building from Australia to Indonesia, and so they’ve got a ton of ambition and a ton of proposed projects.

 If a bunch of that capacity does get green lit, that does mean new factories in Australia because they’re gonna have more than enough capacity to be able to, Sustain a dedicated factory, certainly for companies like Vestas and maybe even GE.

Allen Hall: So the vast majority of the wind energy at the moment is in Victoria, which is down south by Melbourne, right? So they have like a third of the total install capacity. What do we know from that area? What have we learned? Where is Victoria headed? Because it seems like the rest of Australia is still playing a little bit of catch up.

Philip Totaro: Victoria’s got the highest installed capacity because they also have the highest demand and the highest concentration of population and load centers. So that explains a lot about both wind and solar being so popular there. They don’t have quite a lot of intrastate transmission built, so whatever is being built in terms of power generation, wind, solar, et cetera, in Victoria is for the most part being consumed in Victoria and so that’s going to be a challenge longer term for them to look at how they’re kind of Integrating their overall electric grid throughout the whole country, and whether or not they’re going to have intrastate market balancing mechanisms facilitated by intrastate transmission.

Joel Saxum: Yeah, if you look at some of the analysis that some experts have done on the country as far as queue lines and where load centers are, and where it looks like the installations are going to go for siting purposes. hotspot around Perth on the far west side, and then you have Melbourne, Sydney, Brisbane, all up kind of that west coast in the south.

And where those load centers are. But of course what we know about Australia, the center of Australia is basically void of people. So there’s not a whole lot of sighting going on in the middle there. But there is also, interestingly enough very good wind resource in the center of the country where there isn’t anybody.

So if they get some more transmission built there, that could be interesting. But again, we get back to the fact of I think there’s 25, 26 million people in Australia, , give or take 10 percent or something, they don’t need that much energy, they could be a net energy exporter if they get some things moving as well.

Allen Hall: But the PPA prices vary by state, right, that there’s, Victoria has some of the lowest PPA prices because of the installed capacity, while some of the other outer regions have relatively high PPA prices, even compared to the United States is that going to neutralize, Phil, are they going to level out over time if they do build these interconnectors, or is it A function of just that particular economy.

Philip Totaro: No, that’s a great question because they would harmonize the price a little more state to state if they built more transmission, but for right now, you’ve got New South Wales, Queensland and even Western Australia with average prices for wind projects above, you know, 80 a megawatt hour Australian, which is, let’s say it’s 55 to 57 U. S. Per megawatt hour. That’s towards the kind of higher, slightly higher than average in terms of the global average we saw for PPA prices in 2023. But PPA prices have been climbing globally. And so, I’d say that’s right in line. Victoria is kind of a special case.

 Even South Australia they’ve got kind of PPA prices in the middle, they’re around 51 a megawatt hour Australian, which is something like 35 to 38 US. But Victoria is down at 34 a megawatt hour, which is about 22 to 24 a megawatt hour US. And they’ve even got one project, MacArthur Project, which averaged last year 14 US.

14.72 US per megawatt hour. So, they’re getting down into like the Southwest power pool kind of prices that we see here in the United States. For some of these projects in Victoria, and it’s drastically changing the payback timeframe for a lot of those projects that are based in Victoria.

Normally with a more than, 20 a megawatt hour US PPA, your payback window is within the time frame of the project. You may have a project that’s 20 or 25 years, you’ll pay back in, 20 years. In this case, that MacArthur project, the low PPA has exploded the time frame for payback.

It’s now more than 60 years. Before they’re going to fully pay off the capital that was invested in that project. So, the low PPA prices are a concern. As we talked about, yes, the intrastate transmission and market balancing would help stabilize that. If they were able to pipe some of this excess capacity.

That they’re generating in Victoria elsewhere throughout the country. But until that happens you’re probably going to want to go build projects in Western Australia where there’s ample land, ample resources, Joel just said, and probably better prices.

Joel Saxum: Are these lower prices due to, I mean, Australia has.

some of the highest adoption rates of rooftop solar at the residential level as well. Is that due to that?

Philip Totaro: In part, yes. If everybody in the world put rooftop solar on their roof, then, we pretty much wouldn’t need, like, conventional power generation. But we’d have a much different grid and much different way of balancing the grid.

With generation versus demand. So in Australia, yes, because of this distributed generation and the amount of microgrid applications they have, it’s definitely had an impact on prices, but it’s not quite as pronounced as that it’s just overall kind of saturation of the market in a place like Victoria, for instance, where you’ve got an ample supply of solar, you’ve got conventional power generation sources, they’re still also producing. So if you have a year where it’s very good wind, but you don’t have a lot of offtake and demand, you’re necessarily going to start depressing the price and curtailing a lot.

Allen Hall: So the profitability of each of the operators in Australia varies quite a bit.

One of the top producing and one of the wealthiest is squadron energy. They’re in the top five revenue per megawatt hour. That makes a lot of sense, I think, because of the growth that they’re planning to do over the next couple of years, where they’re going to push heavy into wind and to solar.

Are there some other top producers there that are going to continue to expand in Australia?

Philip Totaro: AGL, which is their biggest utility, is also in that top five at least for wind energy asset ownership. We are still completing the analysis for solar, but AGL’s up there.

Interestingly, some of the top owners, in terms of profitability in Australia are actually financially focused companies like the construction building union. CBUs. They’re in there. The Dutch investment fund capital and synergy, which is a utility and energy trading company as well.

They’re one of the top owners of wind energy. And so the profitability question and we’ve talked about this a little bit on the show before. But this kind of comes down to a combination of two things. One is, if you have an exceptionally high PPA, so like we talked about in Queensland, New South Wales, and Western Australia, your project’s probably doing fine, your profitability’s probably way up.

But, if you own projects in places like Victoria where the prices came way down in 2023, then your profitability’s also gonna be directly impacted by that. So, a high PPA necessarily makes up for a project where you’ve got a low capacity factor because you can have a 20 percent capacity factor and an 50 or 60 a megawatt hour PPA and still make money and still be profitable where you need to focus on product quality, availability, performance, et cetera, is when you don’t have high PPA.

So if you’re in Victoria. You have to make sure that you’re doing your maintenance, that your project is operating at peak performance, because you need as high a possible capacity factor to make up for the low PPA.

Allen Hall: It looks like, based on the IntelStor data, that the maintenance costs are about 6 on average per megawatt hour, which are I think pretty typical of the industry.

That’s a good sign for Australia. The other piece that is interesting from the IntelStor data is really the types of turbines that the Australians are choosing to install because of the capacity factor, because of the wind situation and because of the reliability. And they have, they’re competing with solar that, as Joel pointed out, there’s a lot of rooftop solar there.

What turbines are the Australian operators choosing to install and where does that go over the next year or two? What turbines are going to be leading the way?

Philip Totaro: The majority of what’s being installed now are really on the four megawatt plus range. The most popular units have been the Vestas V150, the Vestas V162 6 and 6.

2 megawatt. That’s going to continue to be a very popular turbine, and again, Vestas is tied into some of these huge projects like the Asian Renewable Energy Hub project. Which is something on the order of about 17 gigawatts of capacity. So they’ll definitely build a factory for that six megawatt platform in Australia.

If they get the green light on, on projects like that. Nordex is also been very successful with sales on the N163 platform. And GE has been deploying the, I guess you could at this point call it kind of legacy 3 megawatt, 3. 6 megawatt 130 and 137, as well as the new Cypress platform, which is the 4. 8 to 5. 3, 158. So that’s the bigger turbines, because they’ve got more open space in Australia, the bigger turbines have been favored. And let’s not also forget Goldwind, who actually has a pretty decent chunk of capacity installed in Australia. Their, four, five, and six megawatt turbines are also going to be part of that conversation.

As far as the maintenance cost goes, It is actually fairly comparable to the price that you see in the United States. The big difference with Australia is in the U. S. we see a much faster rate of drop off in performance, so you’ll see turbines that have kind of a historical average AEP, and then because of asset degradation over time, all these types of Typical component wear and things like that.

You’ll see a degradation of performance of more than 10 percent from that historical average. Once you see that, it’s typically not recovered. And so you see the cost per megawatt hour being produced increasing. In Australia there’s a doubling from like a brand new project, which is around like 5 a megawatt hour in maintenance cost.

It doubles, but only after about 25 years. In the U. S., that starts off at about the same, it’s about 5 a megawatt hour U. S., and it doubles, but it doubles in only 20 years. So we’re running the turbines in the U. S. a lot harder than what they’re being run in the Australian market. The reason for that being that in the U. S. we’re largely production tax credit driven, and so we’re deliberately trying to run the turbines harder in the first ten years of operation. In Australia, they put the thing up, they do their maintenance, and they just let them run. And they haven’t actually had a ton of repowering in that market yet, because most of the turbines installed aren’t quite 20 years old yet.

But there’s a decent chunk of capacity that’s getting ready to be repowered and that’ll be interesting.

Allen Hall: Phil, this data is really fascinating. Thanks for the update on Australia. And if anyone is interested in the Australian market or energy markets around the world, you can visit IntelStor at intelstor.com and learn more.