An 11GW transcontinental hybrid? Are they for real?!


October 15, 2018

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Australian financial giant Macquarie last week agreed to invest an undisclosed sum in the 11GW Asian Renewable Energy Hub hybrid project in Western Australia.

I’ll be honest, I spent a few minutes double-checking the project size because… 11GW?! That’s almost as much as the total installed wind capacity of Brazil!

But the figure is correct and the idea for the project has been around for a while. A consortium that includes Australian developers Intercontinental Energy and CWP Energy, as well as Danish turbine maker Vestas, started work in 2014 on the idea for a 6GW wind and solar project in the huge Australian state.

The partners spent three years working on the proposal and assessing its viability, with a plan to export its full output to Southeast Asian countries, including Singapore and Indonesia. Last year, the companies agreed to add a further 3GW, with the aim of supplying to the local market too, and submitted it for environmental review.

And now, following more analysis of wind speeds in the area and with the newly-won support of Macquarie, the planned capacity of the scheme has been further increased to 11GW. This would include 7.5GW of wind turbines and 3.5GW of solar panels, located on more than 7,000 square kilometres of land. That’s somewhere between the total size of Trinidad & Tobago and Cyprus.

The partners plan to allocate 5GW of the total electricity produced to large local consumers including miners, who currently rely mainly on gas, diesel and hydrogen projects; and 6GW is set to be exported to countries in Southeast Asia, and in particular to Indonesia.

The Asian Renewable Energy Hub is also set to require a whopping investment of A$22bn ($16bn), with a first financial investment decision due in 2021. The group then aims to start construction of its 1,400 wind turbines and 10 million solar panels in 2023, with first power to be produced in 2024.

But while the hub is still at a very early stage of its development, it is too significant for us not to address the challenges that a project of that size might bring.

First, the Australian electricity system is very fragmented. Western Australia and the Northern Territory are not currently connected to the National Electricity Market, which feeds all other Australian states. This means that Western Australia’s neighbouring states are unlikely to benefit from the project.

Paradoxically, it would be easier to export energy produced by the scheme to countries in Southeast Asia than to Western Australia’s neighbouring states. The partners are also likely to find it easier to attract private capital to fund undersea interconnectors from investors in Asia, rather than getting the national government to commit to major infrastructure investments and changes to the electricity system. This would also mean fewer objections from landowners over the construction of transmission lines.

We also need to consider existing policy uncertainty. We are all well aware that recent Australian governments haven’t been renewable energy’s biggest fans, and this largely holds true for the current one as well. Responding to a United Nations climate change report last week, deputy prime minister Michael McCormack said that Australia would continue to use its coal reserves and that they could not be replaced by renewable energy.

While local governments have been the real drivers of renewables development in Australia, this is not an ideal environment to support a 11GW project. And that could have negative effects on long-term investor confidence, which will be required to make a project like this feasible.

Last year the country attracted $9bn of investment in renewables, but this project alone would require more than $15bn – albeit split over many years.

And finally, the permitting process; planning and construction of interconnectors; and opposition by local communities are just a few variables that could raise significant obstacles for the development of big schemes. We must take them into account.

We like huge projects that bring big investment (and attention-grabbing headlines!) but, in this case, we’ll remain cautious until

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