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Byron Shire
April 15, 2021

Why $5bn energy giant turned its back on Australia

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By Giles Parkinson

“Governments come and go and attitudes change.” Right now however, says Mark Binns, the CEO of Meridian Energy, a $5 billion renewable energy company, it is clear that Australia has a conservative government that just doesn’t like renewable energy. And Binns, who works in a country with a conservative government that does like renewable energy, will give Australia a wide berth until that changes.

Binns’ complaints last week about the changes in policy and the hostility of the Abbott government to wind energy are a perfect reminder of why the renewable energy industry remains at a standstill in Australia.

Even with the passage of legislation cutting the renewable energy target, the industry remains in the doldrums, with little or no activity – apart from a few projects funded by the agencies the Abbott government is still trying to repeal, some from the ACT government’s own renewable energy program, and the installation of rooftop solar by thousands of households and businesses looking to cut their energy costs and hedge their bets.

Binns cites the repeal of the carbon price and the review of the renewable energy target, and its subsequent cut to 33,000GWh from 41,000GWh, as two of the big issues changing the nature of the market.

But his complaints go further than that. It is clear, he says, that the current Australian government does not like renewable energy.

“We’ve been disappointed with the approach that has been taken by the Abbott Government to the review of the renewable energy target and its attitude to renewables overall – particularly Mr Abbott’s very clear personal antipathy to wind farms,” Binns said during a results briefing in New Zealand last week.

“A new target was agreed after 18 months of political posturing, which together with the delay, has done significant damage to investor confidence. And the government’s commitment to the longevity of the scheme was less than convincing.”

Binns does not believe that Australia’s antipathy to wind farms is tenable over the long-term – the Paris climate talks will increase pressure on it to change its stripes and, as mentioned at the top of the story, “governments come and go.”

But right now, Meridian Energy, with a market capitalisation of $5 billion and with the NZ government as its major shareholder, is not interested in the Australian large-scale renewable energy market.

Binns says the company has looked at more than 100 projects in the past year but “none of them were compelling” in the current policy and political environment.

He says there is no interest by any major retailers to write long-term power purchase agreements – a complaint echoed across the industry, and confirmed by AGL Energy earlier this month, when its CEO Andrew Vesey pointed out that there was no point in entering such contracts when the Abbott government was talking down the technology, and there was a risk that policy may be diluted or removed.

Indeed, the only wind farms to get the go-ahead since the RET was cut have been those receiving 20-year feed in tariffs from the ACT government, which now has a 100 per cent renewable energy target for 2025. In contrast, Abbott says Australia will have 23.5 per cent renewable energy by 2020 “and that is more than enough”.

The only other projects going ahead are solar projects such as the Broken Hill solar plant and Moree solar plant being co-funded by the Australian Renewable Energy Agency and the Clean Energy Finance Corp. Even rooftop solar is declining as regulators and network operators chop feed-in tariff and jack up fixed charges. Several states have promised higher renewable energy targets, but apart from the ACT’s reverse auction program, it has been all talk and no action, so far

Meridian Energy, which co-developed Australia’s largest wind farm to date, the 420MW Macarthur wind farm in Victoria, has taken a $38 million charge on the value of its Mt Millar wind farm, due to those changing policies. It also operates the Mt Mercer wind farm.

It’s an ironic situation for Binns, because while Abott’s policies in Australia have caused a rebound in coal-fired generation, in Meridian’s home market, New Zealand, coal-fired generation is soon to become a thing of the past.

Binns notes that 1,000MW of thermal capacity had been slated for closure by Mighty Riverm, Contact Energy and Genesis, a situation that would leave New Zealand coal-free by 2019.

That, he says, would create opportunities for Meridian for either wind energy, geothermal or gas plants. “We are already looking at opportunities,” he said.

Binns also took a swing at the Australian retail energy market, where the Meridian subsidiary PowerShop is making inroads in the Victorian and NSW market, with customer numbers already jumping to more than 50,000.

Binns says the service from energy retailers in Australia was “woeful” and also criticised pricing systems, which reward customers who constantly move around looking for cheaper deals.

“We offer the same pricing to new customers and incumbent customers, but the large Australian players have differential regimes, which effectively penalise existing customers.

Binns said the PowerShop model was attracting interest overseas, and one large northern hemisphere retailer, which he did not identify, was looking to establish a franchise arrangement. A decision could be made this year.

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