AGL Energy Ltd, Australia’s No. 2 energy retailer, said on Thursday it will build a A$450 million ($338 million) wind farm in the first construction project for a new renewable energy-focused fund, backed by the government.
The move marks a small step forward in the Australian energy industry’s push to expand in renewables, while still depending heavily on coal-fired plants, as the country races to meet its global commitment to cut carbon emissions.
Lining up finance for large-scale renewable energy projects has been an obstacle, with banks reluctant to back proposals due to uncertainty over Australia’s energy policies and climate-change commitments amid a string of leadership changes in Canberra.
AGL, the country’s biggest carbon emitter, set up the $1 billion Powering Australian Renewables Fund (PARF) last year, with 80 percent of the equity provided by Australia’s sovereign wealth fund, the Future Fund, and Queensland state’s QIC.
“The momentum we’re experiencing with PARF is pleasing and proves that investor support exists for large-scale renewables development,” AGL Chief Executive Officer Andy Vesey said in a statement.
AGL transferred two solar plants into the fund. The 200-megawatt Silverton Wind Farm in outback New South Wales state will be the first new project to be built by the fund, with loans from Westpac Banking Corp, National Australia Bank, Sumitomo Mitsui Banking Corp, Mitsubishi UFJ Financial Group, Societe Generale and DBS Bank.
The Australian arm of GE said it will supply 58 massive wind turbines for the project, and will work with engineering firm CATCON to build the wind farm.
Once complete in 2018, the Silverton wind farm will generate about a fifth of the fund’s target of 1,000 megawatts of renewable energy, or 4 percent of the energy needed to meet the Australian government’s renewables target for 2020, AGL said.
It said the facility, which would be Australia’s sixth largest wind farm, will effectively cut the company’s carbon emissions by 655,000 tonnes a year, the equivalent of taking 192,000 cars off the road.
AGL plans to exit coal-fired generation only by 2050, while expanding in wind and solar power, but is quitting the coal-seam gas business as low oil prices and community opposition have hurt the economics of its projects. ($1 = 1.3316 Australian dollars)