Sender: Acciona Energy Australia Global Pty Ltd – ABN 54 600 910 647
Address:
PO Box 252
South Melbourne Victoria 3205
Tel: +61 3 90271000
Fax: +61 3 90271001
Web: www.acciona.com.au
To: Victorian State Government
Address: Department of Economic Development, Jobs, Transport and Resources
By Email: renewable.energy@ecodev.vic.gov.au
ACCIONA Energy’s Submission to the
Victorian Government’s Renewable
Energy Roadmap Consultation
Who is ACCIONA?
ACCIONA Energy is one of the world’s largest renewable energy independent power producers’
with operations covering the development, construction, ownership and operation of renewable
energy assets in 16 countries. The company has over 8,500MW of renewable energy assets
covering a range of technologies including hydroelectricity, wind, solar PV, solar thermal and
biomass. ACCIONA Energy’s business is solely focused on renewable energy and we actively
participate in over 25 different schemes supporting renewable energy deployment around the
world.
In Australia, ACCIONA has built and owns three wind farms: the Waubra Wind Farm, the
Gunning Wind Farm and the Cathedral Rocks Wind Farm (in joint venture) totalling 305MW and
has an ongoing pipeline of developments with a particular interest in Victoria for our nearer
term development projects. ACCIONA has also constructed the 20MW Royalla Solar Farm in the ACT
and is now operating the plant.
The ACCIONA Group operates globally and is also active in infrastructure and water sectors
around the world. In addition to energy projects, ACCIONA has a number of other substantial
projects in Australian, including:

Legacy Way - ACCIONA was part of the Transit City Joint Venture (JV), designing and

Warrell Creek to Nambucca Heads Pacific Highway upgrade – ACCIONA is currently
constructing the landmark Legacy Way road-tunnelling project in Brisbane. The JV will also
operate and maintain the road tunnel for ten years.
undertaking $950M of upgrade works to the Warrell Creek to Nambucca Heads section
of the NSW Government’s Pacific Highway upgrade project.

East-West Link – ACCIONA was part of East West Connect, the contractor engaged to design

Sydney Light Rail PPP - ACCIONA is part of the consortium selected by the NSW

Toowoomba Second Range Crossing PPP – ACCIONA is part of the consortium selected
and construct the multi-billion dollar East-West Link in Melbourne.
Government for the financing, design, construction, operation and maintenance of the
$2.1B Sydney Light Rail project in Sydney.
by the Qld Government for the financing, design, construction, operation and maintenance
of the 41km dual carriage way road connecting the Warrego Highway with the Gore
Highway in Qld.
To date, ACCIONA has invested more than $650 million in Australia and has employed over 500
people in the delivery of our projects.
Introduction
Renewable energy provides a great opportunity for the Victorian Government to position the state
as a leader in a growth sector supporting innovation, regional and rural employment
opportunities and regional development.
A dedicated renewable energy plan will go a long way to demonstrating the State’s
commitment to the renewable energy sector and will provide much needed support to investor
confidence in Victoria.
Through the Renewable Energy Roadmap process, the Government aims to build Victoria’s
reputation as the nation’s leader in renewable energy. ACCIONA welcomes the opportunity to
participate in the consultation on the Roadmap.
ACCIONA’s submission focuses on Priority Area 1 as outlined in the Government’s Roadmap.
For Priority Areas 2 to 4, ACCIONA supports the Renewable Energy Roadmap submission made by
the Clean Energy Council.
Priority Area 1 – Transforming the generation stock
in the wholesale electricity market towards
renewable energy
Australia’s electricity sector has developed based on a centralised generation model,
characterised by the dominance of large, emission intensive, base load coal fired generators.
Much of this generation fleet - with some facilities now over 50 years old - is approaching, at, or
beyond their economic and technological useful life. This is particularly the case for several
brown coal generators located in the Latrobe Valley.
To limit the impact of global warming, the emission intensity of the generation sector must reduce
substantially, supported by a shift to new low emission generation sources. However, in the absence
of any imposts on the environmental externalities associated with fossil fuel generation, there is
very little incentive for these aging and environmentally inefficient generators to retire and
facilitate the low emission transition.
Victoria has the most emission intensive generation fleet in the National Electricity Market
(NEM). Victoria is also home to abundant renewable energy resources. As such, the renewable
energy sector is well positioned to play a critical role facilitating the transition to a low
emission generation fleet. The sector also offers what is a relatively unique opportunity to drive
significant new investment and employment opportunities in regional and rural areas of Victoria.
The State Government has stated its commitment to sustainable development and decreasing
Victoria’s reliance on non-renewable energy sources. In this regard, ACCIONA welcomes the
Victorian Government’s proposed State target of at least 20% renewable energy by 2020. However
to ensure this ambition is achievable and sustainable, several fundamental issues must be
addressed:
1. Transitioning the Victorian electricity generation fleet
The stationary energy sector is Australia’s largest contributor to greenhouse gas emission in the
country, with the electricity sector accounting for around one third of Australia’s annual total
emissions. As noted by the Climate Change Authority1, the electricity sector also offers the
largest potential to reduce Australia’s emissions. Based on current national policy measures,
targeted emission reductions will be unattainable without clear policy to support the closure of
emission intensive generators. Moreover, based on scientific consensus, the Australian energy
sector needs to be moving toward near zero emission intensity by 2050 if global limits on
temperature rise to 2°C is to be achieved.
In the absence of a national approach to support an energy supply side transition, ACCIONA
recommends that the Victorian government evaluates opportunities to implement state based
regulatory responses to restrict and reduce the emission intensity of Victorian generators consistent
with their jurisdictional remit.
Fundamentally, a cost on the environmental externalities of fossil fuel energy generation would
provide the most effective and efficient approach to transitioning the energy sector supply side.
This is also consistent with the approaches being adopted in the international sphere. However,
based on recent experience with carbon pricing at a national level and the likely barriers and
concerns regarding the introduction of a state based carbon price, alternate regulatory
approaches should also be evaluated in the nearer term.
Borrowing from experience in other markets, a state based approach to facilitating an emission
intensity transition could be for the Victorian Environmental Protect Agency to regulate emissions
directly through emission threshold limits for Victorian electricity generation plant as part of
operational licence requirements. This approach could be similar to the approach adopted by the
Environmental Protection Agency in the United States which imposes carbon pollution standards
on new and existing generators. Furthermore, other jurisdictions (eg. China and European
nations) are evaluating or have adopted similar regulatory responses to drive emission reductions
in their energy sectors.
Clearly such an approach would require substantial policy evaluation and development. However,
ACCIONA believes that an EPA state based regulated approach would provide
more efficient and equitable outcomes as opposed to some suggested alternatives such as forced
retirements based on plant age.
2. Addressing capacity oversupply
The 2014 Electricity Statement of Opportunity (ESOO) produced by the Australian Energy
Market Operator (AEMO) identified that surplus capacity of generation in the National Electricity
1
Commonwealth of Australia (Climate Change Authority), “Reducing Australia’s Greenhouse Gas Emissions – Targets
and Review”, February 2014.
Market in 2014/15 was in the region of 7,500MW to 9,000MW. Whilst the 2015 ESOO noted
that the oversupply levels were predicted to halve by 2023/24 this still leaves a significant
oversupplied market in the interim and persistent oversupply in some regions going forward. The
oversupplied market is a function of barriers to exit (including substantial site remediation costs)
and the weak economic signal to drive environmentally inefficient plant retirements. Of itself, the
oversupplied situation is further exacerbated by the introduction of new generation sources.
An oversupplied market is to the detriment of all generators, regardless of age or emission
intensity, and in the absence of other policy measures, will discourage the entry of new, low
emission generation sources needed to transition the supply mix.
That said, fundamental changes to the Victorian energy supply base achieved through regulated
emission limits, and ultimately plant closures, as outlined above, would assist in alleviating capacity
oversupply and facilitate emission intensity transformation.
3. Targeted policies required to support Victoria’s 20% objective
Whilst renewable energy technologies, such as wind and solar PV, have enjoyed remarkable
improvements in their cost of energy in recent years, they do not compete on a level playing field
with the existing generation fleet. This is largely a function of the significant legacy benefits and
ongoing subsidisation that has been afforded to the fossil fuel industry in Australia over many
decades.
At this stage, supportive, mandated policies – such as the national Renewable Energy Target
(RET) – continue to be required to ensure renewable energy generators can compete
economically with the existing conventional generation fleet.
The Victorian Government objective of at least 20% renewable energy by 2020 and a further
target for 2025 is a good first step and indicates much needed commitment to the renewable
energy sector and stakeholders. However, targeted policy mechanisms are required to attract
investment, address specific barriers to deployment and ensure the Government’s objectives are
achieved.
Renewable energy investments are capital intensive and with over 25 year lives. As such, any
policies developed to support and sustain renewable energy investment ambitions need to be
cognisant of timing and tenor. More specifically, key requirements of any effective Victorian
Government renewable energy policies include:

Sufficient tenor to support new renewable investments – eg. 10-15 years from commercial
operation – and align with timeframes required to transition Victoria’s energy supply mix.

Reliable price signals to support the investment case for new renewable investment.

Targets expressed in measurable and transparent terms – that is, capacity or generation
as opposed to floating or percentage targets. Targets need to be ambitious but
achievable.

Targets are for large scale renewable deployment as opposed to small scale which are
thriving under current national renewable energy policy.

Mechanisms to reduce reliance on ‘liable party’ participation – that is, the prevailing
investment impasse under the 33TWh LRET largely results from renewable energy
developers being reliant on large liable retailer parties to obtain bankable power
purchase contracts. These liable parties have complex motivations and interests in the
energy market, interests which do not always align with orderly achievement of the LRET
objectives. Government initiated long term purchasing mechanisms that engage directly
with project developers (eg. competitive FiT and LGC only acquisitions) would assist in
breaking this impasse, helping to deliver to a 20% equivalent Victorian target at lowest cost.

Bankable contractual arrangements - one of the fundamental barriers preventing the
commercialisation of new renewable energy projects in Australia is the lack of available
bankable offtake structures that financers will lend against.
As indicated in the Roadmap, the Victorian Government has substantial scope to develop
appropriate policies to support the continued development of renewable energy sector in Victoria.
However to be effective in stimulating further renewable deployment, the above features must be
central to the policies designed.
Delivering a 20% Victorian Renewable Energy Target
Based on the current contribution of renewable energy to Victoria’s supply mix (at 12%), to
achieve a 20% Victorian Renewable Energy objective, the Clean Energy Council has estimated
that an additional 1,200MW of renewable energy projects would need to be delivered in Victoria
by 2020. Whilst approximately half of this capacity is forecast to be delivered by the existing
national RET, at least 600MW will need to be driven by Victorian renewable energy policy. Based
on the current portfolio of wind development projects with development consents in Victoria, this
target appears feasible within the timeframes.
As demonstrated by the ACT government, a competitive auction process for long term, government
endorsed offtake prices can provide an effective mechanism for the support of new renewable
energy projects. We note that the ACT process is the only mechanism by which new large scale
renewable energy developments have been commercialised in Australia over the last couple of years.
Key to the success of the ACT reverse auction Feed-in-Tariff (FiT) is both the term of the
arrangement (20 years from commercial operation) as well as the regulated nature of the scheme
(that is, the price is set and the arrangement gives comfort to financiers and investors that the
offtake arrangements are largely guaranteed for 20 years).
Based on the quality renewable energy resources in the State, a Victorian focused, competitive
process supporting long term offtake arrangements – like the ACT scheme – could be very effective
in meeting the Victorian Renewable Energy 20% objective. A competitive Victorian FiT (possibly
with a contract for difference mechanism on energy for pass through cost efficiency) could be
designed to ensure the objectives of Victorian regional development, local investment and
employment are achieved.
The Victorian Government has also identified the potential to leverage its purchasing power as a
large energy user to promote investment and jobs in renewable energy. This approach should
consider mandating renewable energy procurement requirements across all State departments as
well as state owned infrastructure and enterprises, statutory authorities and franchised
arrangements such as public transport.
ACCIONA fully supports a mandated Victorian Government renewable energy procurement
obligation. Whilst to be more defined in policy, we believe that an approach that requires direct
participation or clear partnership with project developers is central to the procurement
arrangements. The issues around bankable offtake contracts of sufficient term (eg. greater than
five years) and scale would still be required to commercialise new renewable energy
developments.
A further measure identified in the Roadmap is the proposed LGC auction for 100MW. Whilst
ACCIONA supports the intention of such approach, we would suggest that of itself, the 100MW
target is insufficient to support the development of new wind farms in the State. Instead we would
urge the government to increase the volume to at least 200MW for the first auction tranche and
look to commence the auction process as soon as possible to ensure a timely and cost effective
outcome.
Reforming Victoria’s Wind Farm Planning
requirements
Acciona acknowledges and welcomes planning reforms introduced by VC124 and VC125, removing
the previous onerous and unscientific 2km setback provisions. These changes now set an
appropriate balance for the orderly consideration of new applications.
However, the majority of new build wind energy projects in Victoria required to achieve the RET
will come from projects holding an existing planning consent. Many permits have restrictions on
blade length, tip height or tower height which prohibit the use of more efficient contemporary
turbine technology. Contemporary turbines are slightly larger, but individually generate more
power- allowing a project site to have fewer turbines, located further away from adjacent
dwellings, whilst generating the same amount of renewable power.
It is imperative that planning policy is flexible enough to efficiently modify these existing
consents without resort to the lengthy, full scope of a planning panel hearing. Whilst we
understand and appreciate the thoroughness of such a process, we present that more appropriate
means of assessment should be implemented to assess modifications to existing consents. This is
particularly the case where a developer is able to demonstrate no significant net detriment over
the existing consent.
By requiring permit variations to progress through a full panel hearing, the current Victorian
planning process adds substantial time and cost barriers to the efficient expansion of the
industry in the state- just at the time when broader market conditions are finally becoming more
attractive. Failure to address this issue will result in Victoria missing out on investment to other
states where less restrictive permit conditions or modification processes are in place- despite
other locations having a poorer underlying wind resource.
Concluding Points

Based on the emission intensity of the Victorian energy sector and the abundance of
quality, renewable resources in the State, it is imperative that the Victorian Government
takes a leadership role to reduce Victoria’s electricity sector emissions.

To transition the emission intensity of Victoria’s energy supply, whilst supporting the
introduction of new, low emission generation sources, policy measures are required to
address the State’s prevailing generation capacity oversupply in an orderly and timely
manner. ACCIONA advocates that generator emission standards regulated under generation
licence conditions by the EPA would be an effective approach to facilitate the retirement
of the current aging, emission intensive generation fleet. Similar approaches are being
evaluated and implemented in other jurisdictions.

ACCIONA is encouraged by the Government’s initiatives identified in the Roadmap aimed at
supporting new renewable energy in Victoria. Based on experience both in Australia and
with over 25 other renewable energy support schemes around the world, ACCIONA
recommends a competitive feed-in tariff arrangement (similar to that adopted in the ACT)
will be most effective in achieving the Government’s objectives.

Whilst ACCIONA welcomes the Government’s proposed LGC competitive auction process,
the proposed 100MW target is insufficient to stimulate new renewable energy
deployment, even for an initial target. ACCIONA would suggest the first auction target
at least 200MW, be long term in nature and the scheme to be initiated as soon as
possible to reinvigorate renewable energy investor confidence in the State and ensure the
most cost efficient outcome.

It is imperative that renewable energy development planning policy is flexible in
considering permit variations sought on the basis of contemporary turbine technology
improvements, particularly where no significant net detriment over existing consents is
demonstrable.

ACCIONA recognises the significant challenges involved in transitioning Victoria’s
generation fleet and particularly, the impacts and considerations for the regional
communities dependent upon the Victorian based fossil fuel industries. However
ACCIONA is committed to working with the Victorian Government and other stakeholders to
assist in facilitating this transition in the most optimal way.
If you have any questions in relation to our response, please contact Melanie Sutton on
melanie.sutton@acciona.com.au to discuss further.
Yours sincerely,
Melanie Sutton
Senior Manager – Energy Sales and Policy