Economic and Policy Analysis of Wind Farms

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18th May 2020 Environmental Studies Reference this

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This report will provide details of the Collgar Wind Farm in Western Australia and a feasibility study of constructing and operating wind turbines in that region. This includes but not limited to the following;

  • Describing the energy needs of Western Australia, present and projected.
  • Sharing research on the energy sources currently in use in Western Australia and the cost in cents/KW-hr.
  • Describing the wind resources available in that region and the capacity factors.
  • Discussing the economic analysis, assuming a 10% financial discount rate of the wind turbine systems(s) at Collgar Wind Farm.
  • Sharing the public policy issues important to that region (zoning, renewable portfolio standards, energy credit).


Energy Needs of Australia

The Australian population increased by 1.7% while the economy grew by 2% in 2016 -2017. Consequently, the energy consumption climbed by 1.1%; being the highest ever recorded. In recent decades, economic advancement in Australia has generally surpassed growth in energy consumption and the Australian economy has gravitated towards lower energy intensity and higher energy productivity over time. This has impacted cumulative improvements in energy efficiency as well as a drift in the Australian economy from highly energy-intensive industries.  The surge in the use renewable energy instead of fossil fuels for electric generation also impacted the energy productivity positively.

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Energy productivity rose by 0.9 percent in 2016-17, after being flat in 2015-2016. In general, Energy productivity has improved by 17 percent over the past decade. Australia generates $ 275 million in GDP for every petajoule of energy consumed. Fossil Fuels (coal, oil and gas) contributed 94 percent of Australia’s primary energy mix in 2016-2017. Some of the largest share of energy consumed in 2016-2017 are Crude Oil, Liquefied petroleum gas (LPG) and refined products, with the increased consumption of refined products, mainly for transport, partially offset by a decline in crude consumption by refineries.

To aid the expansion of LNG exports, gas usage rose by 1% between 2016-2017, with the increased utilization in mining in Queensland and Western Australia. Approximately, 37 percent of usage the usage of gas in Australia between 2016-2017 was for power generation. For the gas utilized for electricity generation in Australia, industries used approximately one-third for generation. This comprised Electricity generated at smelters, refineries and mine sites made up this fraction. Also, unprocessed natural gas was employed to generate electricity during the gas production process.

The resulting six percent of Australia’s energy usage in 2016-2017 was contributed by natural sources, composed mainly of biomass, hydro and wind energy. The use of natural sources for electricity generation as well as for direct usage; such as firewood for residential heating, bagasse usage in manufacturing and solar hot water is the composition of this percentage. Between 2016-2017, the usage of renewable energy hiked by five percent and this predominantly promoted improvement in bagasse, solar and hydro energy. The usage of bagasse, the remnant of sugar cane pulp left after crushing, increased to 29% of the total renewable energy usage in 2016-2017, indicating a rise in sugar cane production.

The utilization of hydro increased by six percent whereas wind rose three percent in 2016 – 2017. Hydro energy has been predominant constituent of Australia’s electricity mix for many years, and production varies year to year according to demand and weather conditions. Over the past ten years, wind and solar energy have displayed rapid growth. Between 2007 to 2008, the usage of wind power hiked almost around 17% per year and Solar Energy recorded tremendous growth in 2016-2017. Municipal and industrial waste used to generate electricity, provided a significant amount of energy in 2016-2017. Same can be said regarding landfill biogas, which provided boosted the overall energy produced between 2016-2017.

Electricity supply, transport and manufacturing contributed a little over half of the Australian energy utilization in 2016-2017. 28% of the energy utilized between 2016-2017 was contributed by the electricity supply sector. Energy usage in this sector (considering fuel inputs to electricity generation, individual use and losses) reduced by 2% during this time frame, besides the fact that slightly higher electricity was generated. This indicates a reduction in brown coal-fired electricity generation and an increase in the utilization of natural resources in electricity generation. When primary energy usage is being measured, a variation in coal-fired electricity generation has a greater effect than a change in some renewable generation such as wind, solar and hydro, because these renewables are only measured when converted into electricity.  28 % of Australia’s energy usage between 2016-2017, was taken up by the Transport sector. The rise in energy consumption across the various forms of transport attributed to a 3 percent raise in transport energy usage between 2016-2017. Majority of the growth was recorded in diesel usage for passenger and freight use, supported by steady economic and population increase, and the switch to diesel vehicles. Road transport contributed to a little higher than half of the transport energy utilization between 2016-2017.

Furthermore, Air transportation contributed to 20 percent of the energy consumed by transport sector between 2016-2017. The usage of aviation fuels increased by 5 percent between 2016-2017, mostly because of the advancement in international air transport. Between 2016-2017, energy utilization in the manufacturing sector dived by 2 percent, aiding the decline trend in recently. Chemicals manufacturing experienced the largest dive in energy consumption, in accordance with the reduced activity. In Western Australia, a rise in energy utilization in non-ferrous metals was more than offset by reductions in energy consumption in Queensland and Victoria attributable to the closure of the Queensland Nickel refinery and to output at the Portland Aluminium refinery being reduced for an extended period by a power fault.

Between 2016-2017, the most improvement in energy utilization was recorded in Queensland and Western Australia, whereas energy use in South Australia and Victoria. Energy utilization in Western Australia increased by 5 percent between 2016-2017 and mostly 100% of this growth was in the mining sector whereas usage in other sectors being nearly flat. Queensland energy consumption rose by 4 percent, with the most increase recorded in energy usage in mining, manufacturing, electricity generation and transport. In Victoria, energy usage dived 2 percent in 2016-2017, indicating a reduction in brown coal consumption for electricity generation capacity in South Australia. In New South Wales, Energy consumption increased by 1 percent between 2016-17 New South Wales. This growth was centered mainly in the transport sector, with aviation turbine fuel accounting for almost half of total growth.

In general, electricity generation in Australia was estimated to be 261,405 gigawatt hours (GWh) in fiscal year 2018. Fossil fuel sources accounted for 212,066 GWh (81 percent) of total electricity generation in 2018, a reduction of 3% compared with 2017. Coal accounted for 60 per cent of the total electricity generation in 2018. Renewable sources contributed 49,339GWh (19 percent) of total electricity generation in 2018, a raise of 25 percent in comparison with 2017. The largest source of renewable generation was hydro (7 percent of total generation) followed by wind (6 percent) and solar (5 percent). These statistics cover all electricity generation in Australia, including generation by power plants, by businesses and households for their own use.

Energy Sources in Australia

Power Generation is the conversion of a fuel source into electricity. Electricity is mainly generated with gas and coal, with smaller amounts coming from renewable sources and diesel in Western Australia.

Approximately, 86 per cent of electricity in Australia is produced from these fuel types, comprising 73 percent coal and 13 percent gas. This ratio is usually the same everywhere, with fossil fuels utilized for electricity, powering vehicles and heating. Coal fired electricity generation is globally employed since it is mostly the cheapest form of power generation. Besides, it is reliable and abundant. For these reasons, it is tough for renewable options like solar and wind to compete in purely financial terms. In a whole, the resulting 14 percent of Australia’s electricity mix is composed of Renewable energy sources.

The employment of Hydropower for power generation in Australia commenced in the 1050s. Being, the largest sources of renewable energy, it contributed 60 percent of all renewable generation and 7 percent of the total electricity. Australia has over 98 (ninety-eight) operating hydroelectric power stations with a total installed capacity of nearly 7790 megawatts (MW). These are situated in the areas of highest rainfall and elevation and are mainly in New South Wales and Tasmania. The Snowy Mountains Hydro-electric Scheme is the largest hydro scheme in Australia with a capacity of 3800MW and it is one of the most intricately integrated water and hydroelectricity schemes in the world. With this mechanism, water that would normally flow east to the coast is collected, stored and diverted through the trans-mountain tunnels and power stations. Consequently, the water is deposited into the Murray and Murrumbidgee Rivers for irrigation. Sixteen major dams, seven power stations, a pumping station, 145km of inter-connected trans-mountain tunnels and 80kn of aqueducts makes up the Snowy Mountains Scheme. The generates approximately 50% of Australia’s total hydroelectric generation capacity is obtained from the Snowy Mountains Hydro-Electric Scheme. The base load and peak load power are supplied to the eastern mainland grid of Australia.

Hydro energy is of particular importance in Tasmania because it provides much of the state’s electricity. Hydro energy from six (6) major water retention basins are utilized by the Tasmanian integrated hydropower scheme which is made up of 50 huge dams, a number of lakes and 29 power stations, totaling to a capacity of over 2590MW. Per the schemes operating mechanism, base and peak load power is first supplied to the National Electricity Market in Tasmania, and later to the Australian network through Bass-link. The Bass-link is an interconnector in the sea that runs under Bass Strait. Also, there are hydroelectricity programs in Western Australia, north-east Victoria, Queensland and a small hydroelectricity project in South Australia.

Wind, bioenergy and rooftop solar constitutes the other seven (7) percent. Solar and wind power are known as sporadic energy sources since they rely on natural sources and can’t be depended on for constant baseload power supply. Wind generates almost 40% of electricity in several countries linked to large grids and a similar share in several Western Australian towns on the fringes of, or off, the grid by rotating turbine blades that drive an electrical generator. By the end of 2013, Western Australia has constructed 470 MW of wind plant. In general, Australia has about 3200 MW and there are about 500,000 sq km in Western Australia’s South-West that have average winds speeds above 6 m/s at 60m height. Just 3,000 sq km in this area would provide the equivalent energy of the Southwest Interconnected System at its peak demand regularly.

Majority of the Western Australia’s electricity generated by natural sources comes from wind. The state has 12 farms, with a total of 198 megawatts of installed generation capacity. Thus, a total of 63% of Western Australia’s electricity is produced from natural sources and approximately 80 percent of renewable energy produced on the SWIS (Southwest Interconnected System) is from wind.

The bioenergy industry in Australia produces renewable electricity, liquid fuels and heat. With revenues higher than $ 400 million per year, bioenergy is already a valued contributor to businesses in cities and rural locations across the country. Bioenergy for liquid fuels, power & heat is the subject of considerable interest globally. The underlying factors for bioenergy include: The CO2 emissions reduction through the substitution of bioenergy for fossil fuels, Security of energy supplies, Regional development, especially through new rural industries and Potential health benefits such as reduced particulate emissions. The Australian Bioenergy Program indicates that bioenergy currently provides 0.9 percent of power generation in Australia. The Program foretells that by 2050, 31% of Australia’s energy demand could potentially be supplied from bioenergy.

Considering that a number of new biofuel technologies are commercialized, biofuels could potentially constitute an important part of Australia’s future fuels for air transport, road and sea. This could include synthetic diesel and ethanol biodiesel for use in blends. In addition to current production via grains, sugar, tallow, vegetable oils and used cooking oil, additional fuel production could come from algae, new tree crops and woody residues. New tree crops could be combined with current agricultural systems and/or be developed as separate crops. In the whole, future policy direction will determine the long- term opportunities for bioenergy production.

Wind Resources in Australia

Some of the world’s best wind resources can be found in Australia. The wind energy resources in Australia are mainly situated in the Southern parts of the continent. The largest wind resources are created by the motion of low pressure and its associated anterior system whose northward extent and impact depends on the expanse of the anterior system. Northern Australia’s winds are mainly generated by trade wind systems and the monsoon. The Great Dividing Range in Eastern Australia, which is a Large-scale topography, applies significant navigating impact on the winds, directing them through huge gorges and diverting or hindering them from other areas.

Winds with meridional components along the east coast are created by diverting weaker foregrounds from anterior refractions around the mountainous divide in South Eastern Australia. To add to heat lows over the northern Australia and the refractions by topography, periodical and daily variations in wind speed are other notable elements affecting wind resources. Although, during winter and spring in Western and Southern Australia winds are impenetrable, this cyclic phenomenon differs from region to region. Variations are not uncommon in average monthly wind speed of up to 15-12 percent over the long-term annual average. There may be daily similar changes at separate locations, with high wind speeds recorded in the afternoon.

Meso-scale maps indicate that Australia’s greatest wind potential lies in the littoral regions of Western, South-western, Southern and South-eastern Australia. The west coast south of Shark Bay to Cape Leeuwin, to western Victoria and the west coast of Tasmania, along the Eyre Peninsula in South Australia and the Great Australian Bight constitute the coastline regions with high speed resources (wind speeds above 7.5 m/s). Many of Australia’s wind farms are located not too far from the cost and good wind resources extend hundreds of Kilometers inland. Good wind resources are also located at South Australia, Western Victoria and the interior regions of Western Australia. Along the higher exposed parts of the Great Dividing Range in South-eastern Australia, such as New England areas and the Southern Highlands lies high wind potential regions.

Shown on the New South Wales Wind Atlas are the areas with the highest wind energy potential that are very close to the coastline except areas where there is significant local sheltering by the ridge and lie along the most exposed parts of the Great Dividing Mountain. A combination of elevation, local topography and orientation to the prevailing wind form the best sites. Notably, shown on the map are some interior sites that have normal wind speeds in comparison with southern Australia’s coastal areas.

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Also shown on the Victorian Wind Atlas is a patterned normal wind speed of 6.5m/s athwart the state with the highest wind speeds located in central, coastal and alpine regions of Victoria. The atlas also presents a patterned average wind speed data related to land title, land use and proximity to the electricity network. Wind resources located within a marketable distance from the electricity network are considered efficient. Corridors within 10 and 30km of the network are portrayed on the Atlas and it shows wind resource charts the various local government areas connected to the electricity grid in according with the land title.

The local landscape and other changes in the local territory such as surface coarseness wields a major influence on wind speed and wind changes. Wind speed differs with height, the shape and roughness of the terrain. Decreasing wind speeds results with increasing surface coarseness, but can be increased across steep hills, getting to a maximum at the pinnacle and then dispersing into sections of tumultuous air flow. When assessing wind resources, it is expedient to consider thermal impacts and channeling. All these factors affect capacity factors. Australia’s high capacity factors indicates the large development potential available.

Energy Economic Analysis of Collgar Wind Farm

Global warming is the greatest threat facing the world today and ocean pollution far off. Both are mainly caused by burning fossil fuels: oil, gas and coal to run transportation and generate energy. Power generation by wind turbines is one of the numerous ways the dependence on fossil fuel-generated power can be reduced and consequently reducing greenhouse gas production, limiting climate change and slowing the rate of ocean soaked up. Wind farms in Western Australia are generally along the southern and western coasts. Without doubt, Western Australia’s biggest wind farm and one of the largest in Australia is the Collgar Wind Fram in the Wheat belt.

Collgar Wind Farm renewable power project is constructed with a $750 million at Merredin in Western Australia’s central wheatbelt. Merredin farmers rented sections of their land to Collgar Wind Farm, which is the largest single stage wind farm in the southern hemisphere till date. The giant Collar project was put up by the international investment bank UBS, the Retail Employees Superannuation Trust (REST) and Australia’s largest superannuation fund by membership with 2 million members. 60 percent ownership of the project is kept by the International Infrastructure Fund keeps, while the remaining 40 percent is held by REST.

The Collgar Wind Farm which is built on a land envelop of 18000 Hectres, is composed of 111 Vestas V90 turbines with a total power generating capacity of 206 MW, producing between 650 GWh per year. Which is adequate to supply electricity for a small city of approximately 120000.

Assuming a financial discount rate of 10 percent (of the cost of the project) is to be paid to the international investment bank UBS and the Retail Employees Superannuation Trust (REST), and the wind farm operates only 30% of the time, the energy cost for this wind farm in cents/KW-hr is calculated as shown below;

$750 000 000*100 cents24hrs*365 days in a year*0.3*1000kW=28.54 cents per kWh

With the construction of the Collgar Wind Farm, the level of renewable energy in the South West Interconnected System (SWIS) from has almost doubled. Clean, renewable electricity is generated and delivered into the SWIS each year, thus making contribution to Western Australia’s greenhouse gas reductions. These undertakings are tantamount to taking 120,000 cars off the road or planting approximately 1 million trees.

Important Public Policy Issues in Australia

Electricity is generated from coal, gas fired power stations, a number of natural sources including large-scale hydropower facilities, scaled down solar hot water and solar ceiling panels in most homes and businesses in Australia and wind farms,

One of the notable Australian Government schemes designed to reduce greenhouse gas emissions in the electricity sector and encourage the production of electricity from sustainable and natural sources, is the target of the Renewable Energy Program. This scheme works by enabling both extensive power stations and owners of scaled down technology certificates for every megawatt hour of power they generate. Certificates are then purchased by electricity retailers and submitted to the Clean Energy Regulator to meet the retailer’s legal commitments under the Renewable Energy Target. Thus, creating a market which provides financial benefits to both extensive renewable energy power stations and the owners of mini renewable energy systems. To create Small-scale technology certificates, eligible systems are installed and calculation are carried out based on the amount of electricity a system produces or replaces.

In general, houseowners who patronize these systems assign the certificates creating rights to trustee in exchange for a reduced purchase price. The lever of this benefit varies across the country depending on the level of renewable energy. By installing an eligible system, Small -scale Technology Certificates (STCs) can be created with a value that can be redeemed by selling or assigning them. The amount of renewable electricity the system produces or the amount of electricity consumption it reduces and the climate region where it is installed determines the quantity of STCs created. The amount obtained from the STC scheme is based on three factors, namely; zoning (where the power generation station is situated), Small -scale Technology Certificates (STCs) dollar value and the deeming period. Australia is divided into various zones based on how much renewable energy can be generated in a given area and it works by postcode. This imperative to locate the rating number associate to the zone where the power station is located and the number of STCs are calculated using the formula below;

Number of STCs=Power System Size kWx Postcode Zone Rating x Deeming Period (years)

The deeming period set by the scheme, progressively decreases every year until 2030 because the scheme was designed to totally terminate in 2030.

For renewable energy in Australia to develop, it is crucial to address concerns about climate change and energy security. A conclusion drawn from the state of the Climate 2012 report indicates that increasing CO2 discharge from the flaming of fossil fuels have impacted global climate much more than natural climate changes during the past hundred years. The utilization of fossil fuels in Australia has largely risen due to copious gas and coal resources. However, international and national distress regarding the environmental effects of fossil fuel usage has triggered government commitment to increase the amount of natural energy employment for electricity generation.

Gas, fuels and electricity are Australia’s three main energy markets that deal with transmission, production, distribution, retailing of energy products and services and wholesale. Australia’s Northern, Eastern, Western form the three energy markets are separated by geography. Fossil fuels contributed approximately 90 percent of electricity generated in 2012 and 96 percent of Australia’s primary energy consumption in 2011. Uranium, black and brown coal, and gas forms Australia’s extensive energy resources and this has been demonstrated economically. Furthermore, it has been estimated that an additional that coal-seam gas, shale gas and tight gas may be economically recoverable. Renewable resources are also extensive with substantial areas of Australia having an average speed of greater than 7m/s, annual wave energy of almost 0.5 TJ/m2, tidal energy equivalent to 1 GJ/m2 and geothermic energy more than 3 km of sediment and higher than 200 degree Celsius at 5km, and a huge amount of solar radiation each year.

The governance of energy shows the government scheme with a mixture of federal and state duties, combined with arrangements between governments, organized primarily between the State/Territory government and Federal government through the standing council of Australian Governments (COAG) regarding Resources and Energy. Regulation is mainly divided into two categories. The regulation of energy markets by the Australian Energy Market Scheme, which comprises the National Electricity Legislation, National Gas Legislation and National Energy Retail Legislation is covered by the first regulation whereas the regulation of fuel oils which encompasses the National Competition Legislation and other business legislations and fuel standards are covered by the second category

Energy regulation and governance for inland resources and those out to 3 miles on-shore from the territorial sea are regulated by the Territory and State and governments. Energy resources outside those zones are covered by the federal government. Intergovernmental arrangements have been established as a result of the interconnected energy markets on the east coast of Australia and energy is also extensively regulated the federal government

The Australian Energy Market Commission (AEMC) is in charge of market development and rules for the national electricity and gas markets whereas Retail markets Electricity, gas wholesale and electricity everywhere except Western Australia and the Northern Territory is covered by the Australian Energy Market Operator (AEMO). The gas transmission, distribution networks in the national electricity market and wholesale electricity market electricity are regulated by the Australian Energy Regulator. Furthermore, the behavior of energy market partakers, including competitiveness, balance of trade, protection of consumer and climate change issues are regulated by a number of federal government agencies.

Environmental costs such as emissions, both from the production chain, the generators themselves and also from land use being externalized is due to the proven low cost of electricity from non-renewable sources. This has resulted in the high social costs and low private costs associated to non-renewables and comparatively, renewables having high private costs but low social costs. Australia will be exploiting some of the world’s best natural resources which includes the highest normal solar radiation of any continent, optimum wind resources on the southern coast, and significant amount of hot-rock geothermic resources when she transitions to renewably sourced electricity.


Human activity has heavily resulted in the release of large amounts of greenhouse gases and consequently heightened global warming. These emitted gases trap the sun’s heat in the atmosphere and interferes with the delicate balance of the Earth’s climate. Gradual changes in the temperature of the atmosphere accelerates the melting of the polar ice caps, raises the ocean levels, changes the rainfall patterns, destroys delicate ecosystems such as coral reefs and increased extreme events such as droughts, hurricanes and cyclones. Electricity generation is a major contributing factor of greenhouse gas emissions. Approximately 49.91% of Australia’s greenhouse emissions come from the burning of fossil fuels to produce electricity. One of the notable ways to reduce greenhouse gas emissions is to replace fossil fuels with a natural renewable source of energy such as wind. Wind energy is a renewable source that can be used forever, as long as there is wind. It doesn’t release any harmful emissions or pollutants. In all respects, the benefits (both economically and environmentally) of wind energy is predominant and it is the best alternative to the traditional methods of generating power.



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