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Landmark wind farm set the scene for Australia’s renewables century

08:00am December 12 2023

Challicum Hills wind farm in western Victoria has a special place in the history of renewable energy in Australia.

It was the largest wind farm in the country when it began operating in 2003, but more significantly it was the first commercially funded renewables project, with Westpac one of the lead financiers on the deal. 

“We were at the very forefront of the renewable energy revolution,” says Domenic Capomolla, CEO of Pacific Blue, formerly Pacific Hydro, which built the facility and continues to own and operate it. 

The company was a pioneer in establishing the techniques to build a large-scale wind facility, Capomolla says. It also set the standard in terms of putting engagement with the local community at the heart of the project, he adds.  

Challicum Hills is still going strong after twenty years of operation, and Capomolla is optimistic that the facility can extend its lifespan beyond 2030. Wind farms generally have an operational life of around 25 years. 

“Challicum Hills was important because it opened up avenues for companies such as Pacific Blue to finance and develop new projects in a manner that wasn’t there previously,” says James Sanguinetti, Director, Project Finance at Westpac. 

“It essentially set the benchmark for a number of aspects of project financing for renewables projects, including debt sizing, due diligence and documentation. While the market has evolved a lot since that time, a lot of that framework remains relevant today.”   

Battery focus

Pacific Blue is one of Australia’s biggest renewable energy developers, with several wind and solar projects in the pipeline. Yet while wind power makes up around 70 per cent of its portfolio, Capomolla says battery storage will be an increasing focus for the company in the years ahead. 

“Our future is still wind, but the country needs batteries, because if the wind doesn’t blow or the sun doesn’t shine, where will you get your energy?” The $120 million Clements Gap battery in South Australia is expected to start construction in 2024 and is Pacific Blue’s first big battery project. 

Capomolla says Australia needs to accelerate its build out of renewable power in order to meet the country’s 2030 climate targets, and he welcomes the federal government’s recently announced proposal to underwrite 32 gigawatts of new clean energy generation capacity. 

“That’s very positive for the sector because it underwrites a revenue stream for the developers, but importantly it also underwrites a revenue stream on which banks can lend against,” he says, while adding that the industry still needs to see more detail on the government’s plans.  

Renewables future

Wind power technology hasn’t changed radically since Challicum Hills started operation, but things are done on a much larger scale these days, Sanguinetti says. A modern turbine can generate up to four times as much power as those deployed at Challicum Hills, while project sizes typically run to several hundred megawatts, compared to Challicum’s 52.5 megawatts.  

The advent of large-scale solar plants and more recently battery storage have further transformed Australia’s renewables landscape, while the next wave of development is likely to include offshore wind and hydrogen projects.    

“Coal-fired power is retiring out of the market,” Sanguinetti says. ‘We’re now seeing renewable energy being the dominant force of generation in the Australian market.” Renewables accounted for 35 per cent of total power generation in the National Electricity Market in 2022, according to the Clean Energy Regulator, and their contribution is growing every year. 

Westpac is Australia’s top financier to greenfield renewables projects and the bank’s long-standing partnership with Pacific Blue demonstrates its commitment to supporting the climate transition, says Nell Hutton, Chief Executive, Westpac Institutional Bank.

“Westpac signed up to the Net-Zero Banking Alliance last year and we've set targets for our own emissions reduction. As part of that, we're going to be investing more in renewable energy, including wind, solar, battery power and even hydrogen,” Hutton says.

“It's going to be a very important focus for us in the years ahead, and it's important that we're doing this to help Australia generate sustainable economic growth and make sure that no one is left behind.” 

James Thornhill was appointed as editor of Westpac Wire in May 2022. Prior to joining the bank, he was a business and financial journalist with more than two decades of experience with international newswires. Most recently, he was a resources correspondent for Bloomberg, covering the mining and energy sectors, and previously reported on a broad range of topics from economics and politics to currency and bond markets. Originally from the UK, he’s had stints working in London, New York and Singapore, but is now happily settled in Sydney.

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