On Friday BloombergNEF released its latest Global Wind Market Outlook. It showed wind farm development has slowed in Australia with no wind farm project reaching financial close to date in 2021.
Delays in the projects are resulting as investors are more cautious to put money into projects that could be exposed to lower spot prices and potentially constrained off due to the continuing network challenges. In the previous your Covid-19 impacted our lives and slowed developments. Last year only 449MW of wind projects reached financial close, significantly lower than the boom year of 2018 when 2,500MW reached financial close.
Based on AEMO data, there is substantial pipeline of wind projects under construction across the NEM with 3,600MW being built. Many of these projects are experiencing delays due to the approval of connection agreements in some cases requiring additional infrastructure to be added.
BloombergNEF analysis predicts up to 700MW of generation could be delayed and not see first generation until 2023. It is understood we may see some progress in wind farm development before the year is out, with the MacIntyre wind farm and the Kaban Wind farm both approved by AEMO, the next barrier is financial close.
As system strength increases across the NEM due to greater interconnection and more stringent connection requirements the flow in the pipeline will increase. With the announcement of Project EnergyConnect which will link between South Australia and NSW it is expected to lead to more than $5B in new projects.
NSW is adding new Renewable Energy Zones (REZ), and these REZs are expected to allow up to $30B of new projects, however development has stagnated as developers wait for the REZ roll out.
While lower electricity prices are good for end users, the low-price environment is making investors nervous resulting in banking a project hard to achieve. With the power purchase agreement (PPA) market seeing more interest from large companies looking to reduce their carbon footprint we will continue to see deals being done and projects starting to be built through the remainder of 2021, 2022 and beyond.
