The latest insight paper from Cornwall Insight – Wind in the Australian and Great British energy markets – examines whether the outlook for wind in both the Australian and Great British (GB) markets is being shaped by market design and infrastructure.
Photo by Lawrence Murray
Wind is set to become a dominant source of power as governments look to reduce their carbon emissions and although technology and wind resources are similar across the world the risk and values that wind power creates is primarily driven by the characteristics of the markets.
Key findings of the report are:
Both markets will see growth; however, both markets will have their challenges
The characteristics of the GB market means it will see more significant growth than Australia, with price cannibalisation a consequential risk, particularly for subsidy-free wind
There are good opportunities for wind in Australia if obstacles relating to volatile drivers of revenue can be navigated and addressed
“Wind will play different roles in the future of both the Australian and GB energy markets, with GB likely to see a much greater expansion of its already extensive wind capacity base” said Gareth Miller, CEO of Cornwall Insight. “This is as a result of the abundance of this natural resource and the mandatory need to act created by the net zero commitment. However, Australia also presents significant opportunities for wind developers, particularly in certain regions, and building off a strong initial foundation built under subsidy schemes”.
Mr Miller added that the GB wind market has some distinct advantages over its Australian counterpart – no equivalent risks around changes to network loss factors for investors to deal with, greater network resilience, and system services already beginning to explore the value wind can bring to delivering a smart, low carbon and flexible system. Australia, by contrast, does have the difficult challenge of loss factors to contend with. System operators have also been directing thermal plant to meet system needs of wind variability, even if such plants are out of the money, which has the potential to distort energy-only markets. Wind is also often being built at the periphery of a less resilient network not always as well interconnected as it could be.
“The common themes that link the two countries are significant growth in wind capacity and output, and the challenges and opportunities this creates in terms of integration with markets originally designed around centrally connected, thermal power stations” Miller said. “In both markets, investment flows will rely on trying to predict volatile and largely uncontrollable revenue influencers, either in the form of power prices themselves, or regulatory factors that can influence a wind projects ability to capture them. Successful players in both GB and Australia will have common characteristics – firstly, deploying strong quantitative estimation of future cash flows and secondly, an ability to discern and link up the most significant changes emerging from detailed and dynamically changing policies and regulations.”