overcoming barriers to the growth of ... barriers to the growth of community owned wind farms in...

OVERCOMING BARRIERS TO THE GROWTH OF COMMUNITY OWNED WIND

FARMS IN VICTORIA.

Student name: Wayne Bowers Student number: 9003094 Program: MC149 M Eng (Sustainable Energy) Course: MIET2133 Energy Design Project II Date: 10/06/11 Academic Supervisor: Dr Petros Lappas & Dr Andrea Bunting External Partners: Alternative Technology Association (ATA) & Hepburn Wind Minor thesis, submitted to fulfil the academic requirements of MC149 – Master of

Engineering, Sustainable Energy.

MIET2133 Energy Design Project II

P a g e | 2 Student #: 9003094 Student: Wayne Bowers


Student: Wayne Bowers Student #: 9003094 P a g e | 3

Table of Contents

ABSTRACT ......................................................................................................................... 5

ACKNOWLEDGEMENTS ...................................................................................................... 6

DEFINITIONS ...................................................................................................................... 6

ABBREVIATIONS ................................................................................................................ 7

1 AIM .......................................................................................................................... 9

2 CONTEXT ................................................................................................................ 11

3 WHY SUPPORT COMMUNITY OWNED WIND FARMS? .............................................. 15

3.1 INCREASED ACCEPTANCE AND SUPPORT .............................................................................................. 15

3.2 REDUCED NETWORK LOSSES ............................................................................................................. 17

3.3 NEW SOURCE OF CAPITAL ................................................................................................................. 17

3.4 BENEFITS FOR RURAL COMMUNITIES .................................................................................................. 18

3.5 ETHICAL AND ENVIRONMENTAL COMMITMENT ..................................................................................... 19

3.6 MARKET NICHE .............................................................................................................................. 20

4 TECHNICAL BARRIERS .............................................................................................. 21

4.1 VICTORIA’S RURAL DISTRIBUTION GRID .............................................................................................. 22

4.2 CONNECTION OF A WIND FARM TO THE GRID ...................................................................................... 23

4.3 WHAT IS A WEAK RURAL GRID?.......................................................................................................... 24

4.4 NETWORK VOLTAGE LEVEL ISSUES ..................................................................................................... 24

4.5 OVERCOMING VOLTAGE LEVEL ISSUES ................................................................................................ 29

4.6 NETWORK POWER QUALITY ISSUES .................................................................................................... 30

4.7 TRANSIENT SYSTEM PERFORMANCE ................................................................................................... 32

4.8 GRID PROTECTION .......................................................................................................................... 34

5 INSTITUTIONAL BARRIERS ....................................................................................... 37

5.1 INFORMATION BARRIERS .................................................................................................................. 38

5.2 SPLIT INCENTIVES ............................................................................................................................ 40

5.3 PAYBACK GAPS .............................................................................................................................. 41

5.4 INEFFICIENT PRICING (MISPRICING) .................................................................................................... 43

5.5 REGULATORY BARRIERS ................................................................................................................... 44

5.6 CULTURAL VALUES .......................................................................................................................... 45

5.7 CONFUSION ................................................................................................................................... 47



6 RECOMMENDATIONS TO SUPPORT COMMUNITY OWNED WIND FARMS .................. 49

6.1 REGULATORY BASED SUPPORT MECHANISMS ....................................................................................... 50

6.2 NON-REGULATORY BASED SUPPORT MECHANISMS ............................................................................... 63

7 CONCLUSIONS ......................................................................................................... 69

APPENDIX A – WHAT IS A COMMUNITY OWNED WIND FARM? ......................................... 73

APPENDIX B - VICTORIA’S FIRST COMMUNITY OWNED WIND FARM – HEPBURN WIND ..... 79

APPENDIX C – FIT MODELS ............................................................................................... 85

TABLE OF FIGURES ........................................................................................................... 88

REFERENCES..................................................................................................................... 89



Abstract

This paper begins with the observation that there is a growing interest in community owned

wind farms in Victoria and Australia more broadly. After providing a context for community wind

in Victoria the paper presents a case for the support of community owned wind farms and lists

the potential benefits that are available to rural communities with the courage to embrace such

an initiative. Drawing on the research of distributed generation and wind power, an examination

is conducted of the potential technical and institutional barriers faced by community owned wind

farms in Victoria. The research is combined with input from Australia’s first community owned

wind farm, Hepburn Wind, located near Daylesford in central Victoria. Recommendations are

then proposed in order that the key barriers that have been identified may be overcome.



Acknowledgements

I would like to show my gratitude to my supervisors Dr Petros Lappas and Dr Andrea Bunting

for their feedback and support. I would like to acknowledge the support of the Alternative

Technology Association (ATA), in particular Damien Moyse, Craig Memery, and Don Baston for

providing connections and guidance. Thanks are due to Kate Summers for her motivation and

help in order to understand the many aspects of the National Electricity Market (NEM). Lastly I

offer a special thanks to Embark and Hepburn Community Wind Farm for their assistance and

time, in particular the chairman of Hepburn Community Wind, Mr. Simon Holmes à Court.

Definitions

For the purposes of this paper, a community owned wind farm is defined as:

A development in which a group of like-minded individuals with a majority from the

geographical area of the development, through joint ownership and participation, erect a small

number of wind turbines for the benefit of that community.



Abbreviations

AC Alternating Current

AEMO Australian Energy Market Operator (formerly NEMMCo)

AER Australian Energy Regulator

CPRS Carbon Pollution Reduction Scheme

COWF Community Owned Wind Farm

DC Direct Current

DFIG A type of wind turbine generator know as a Doubly-Fed Induction Generator

DG Distributed Generation (also known as embedded generation)

DNSP Distribution Network Service Provider

ESC Essential Services Commission of Victoria

Feed-if Tariff (FiT) A price paid to generators of renewable energy for a guaranteed time period for electricity fed into the grid (Couture & Gagnon 2010; Prest 2008).

GHG Greenhouse Gas

Hepburn Wind Hepburn Community Wind Park Co-operative Ltd

MRET Mandatory Renewable Energy Target

NEL National Electricity Law

NEM National Electricity Market

NER National Electricity Rules

TNSP Transmission Network Service Provider

Small-scale Wind Generation Refers to a wind generators with a nameplate rating of less than 100kW (Electricity Industry (Wind Energy Development) Act 2004)

Standard FiT A price paid to owners of renewable generation which is the equivalent to the retail electricity market price for electricity fed into the grid (Electricity Industry (Wind Energy Development) Act 2004).

Premium FiT A price paid to owners of small-scale renewable generation which is set above the retail electricity market price for electricity fed into the grid (ATA 2008).

WTG Wind Turbine Generator



1 Aim

The purpose of this paper is threefold. First, to show that there are genuine benefits provided

by community owned wind farms. Second, to identify barriers that significantly impact the growth

of community owned wind farms in the state of Victorian. Third, based on the identified barriers,

recommendations to overcome these barriers will be proposed and discussed. The investigation

of these issues will be supported by drawing on the experiences from Australia’s first community

owned wind farm (COWF), Hepburn Community Wind Park Co-operative Ltd (Hepburn Wind),

located near Daylesford in Central Victoria.



2 Context

At the turn of last century, electricity supply was established around the local generation and

supply by each town or city through small local electricity networks. During the 1930’s it became

technically and economically feasible to interconnect these smaller electricity networks into

larger ones which eventually grew into our centralised electricity system of today (Burton et al.

2001). Currently, Victoria generates most of its electricity in large centralized facilities located in

the Latrobe valley. These centralized thermal generation facilities make use of locally abundant

brown coal which has provided Victoria with a low cost source of electricity for many decades.

These plants have excellent economies of scale, but usually transmit electricity long distances

with associated losses and have significant environmental effects due to their greenhouse gas

(GHG) emissions and other pollutants. The Victorian Governments Climate Change White Paper

recently highlighted that it will be a difficult challenge for Victoria to reduce its GHG emissions

because of its heavy reliance on brown coal (Victorian Government 2010).

While Victoria, and Australia more broadly, marched on predominately with large scale coal

power plants it was countries such as Denmark that took a different road. Through environmental

concerns, energy security, and government incentives, many forms of low emissions distributed

generation (DG) flourished. Distributed Generation (DG) is an approach whereby the generator is

connected to the distribution network thus allowing electricity to be generated very close to the

load with the added benefit that it reduces the amount of energy lost in transmitting electricity

long distances (Nelson 2008). DG can take many forms of low emissions technologies such as

combined heat and power (CHP), solar photovoltaic (PV) and wind turbine generators. In

combination with these changes was a new type of DG development known as the community

owned wind farm (COWF), see Appendix A – What is a community owned wind farm? for a

detailed definition of a ‘community wind farm’. This was so popular in Denmark that it was later

repeated in Germany and to a lesser extent in other European countries (Bolinger, MA 2005).

Recently other countries have followed suit including the United States and Canada, specifically

states where legislation supports community wind such as Minnesota and Ontario (Green Energy

and Green Economy Act 2009; Gipe 2010; Yarano 2008).



With the public becoming increasingly concerned by the potential impact of climate change

on Australia, both the federal and state governments have implemented schemes to promote the

development of renewable energy generation in an effort to try and reduce our GHG emissions.

The federal government introduced the renewable energy target (RET) scheme which provided a

quota system for both small and large-scale renewable generation while the Victorian state

government has favoured incentives for small-scale DG such as domestic solar PV. It should be

noted that the Victorian Government did have a quota scheme called the Victorian Renewable

Energy Target (VRET) which was later rolled into the federal governments RET scheme.

The RET scheme guarantees a market for additional renewable energy generation using a

mechanism of tradeable Renewable Energy Certificates known as RECs (backed by a legislative

quota or target). The RET scheme has changed considerably since its inception in 2001 when it

began as the Mandatory RET (MRET). Having initially set a target of 9500GWh from additional

renewable energy, larger scale wind farms where quickly established to benefit from the scheme,

however the scheme soon faulted due to the target being quickly met. The legislated target was

then increased to provide 20% of energy from renewable sources by 2020, a target of 45,000GWh

per year. However, the scheme again faulted when the REC price dropped because the market

became oversubscribed due to a significant amount of RECs entering the market from small scale

installations. Under the scheme installations involving solar water heaters, heat pumps,

photovoltaic systems, wind systems, and small hydro electric are all eligible for RECs with a

maximum deeming period of up to15 years (ORER 2011). This means that all eligible RECs are

created immediately following installation and not over the life of the system, which was most

likely conceived to simplify the scheme. Further compounding the issue was a new federal

incentive called the Solar Credits multiplier which gave households up to 5 times the number of

RECs that their system would actually produce. In addition to the federal incentive various state

governments implemented Feed-in-Tariff (FiT) legislation that has driven demand for small-scale

photovoltaic systems (Brazzale 2011).



The accumulation of these issues led to the most important change to the scheme since its

inception, known as the Enhanced RET scheme, it split the scheme into two parts beginning the

1st January 2011. The parts comprise the Small-scale Renewable Energy Scheme (SRES) with a

target of 4000GWh per year by 2020 and the Large-scale Renewable Energy Target (LRET) with a

target of 41,000GWh per year by 2020 (Australia 2011).

Small scale wind generators in Victoria can benefit from the ‘Standard Feed-in Tariff’. Feed-in

Tariffs (FiTs) have a brief history in Victoria, having only been introduced in the past decade. The

first FiT, known as the Standard FiT, was legislated by the Victorian government in 2004 with the

aim to facilitate the development of wind energy generation and ensure that wind generators are

paid for electricity generated (Electricity Industry (Wind Energy Development) Act 2004). The

Standard FiT placed an obligation on the electricity retailers to pay a FiT equivalent to the retail

market price of electricity to Victorian households and small businesses for electricity fed into the

electricity grid from small scale wind generators. This was followed by an expansion of the

Standard FiT in 2007 to include other renewable energy sources such as Solar, Hydro, and

Biomass (DPI 2010).

There is a developing interest in community owned wind farms (COWFs) in Victoria as a

means to reduce the communities GHG emissions which makes sense when you consider that the

primary advantage of wind farms is their cost effective contribution to a reduction in GHG

emissions. These savings result from wind being a renewable energy source, a mature wind

turbine industry and as a result of reduced network losses by using the generation near the point

of consumption (CSIRO 2009). However there are many barriers and no support for this segment

of the renewable electricity generation market in Victoria. For example, COWFs do not have the

scales of economy that large-scale wind farms enjoy and do not receive the support that small-

scale wind receives in the form of a FiT. See Table 1 for a comparison of the different scale wind

projects. This provides the context from which this paper will now discuss in detail both the

benefits and barriers facing COWF projects in Victoria and proposed solutions to aid COWF

development in the state.



Domestic Scale

(Small Scale)

Medium Scale

(COWFs)

Utility Scale

(Large Scale)

Generation Capacity < 100kW 100kW to 30MW > 30MW

Life of Project 15 years 20+ years 20+ years

Grid Connection Via Domestic Supply Distribution Network Transmission or Sub-

transmission Network

Sale of Electricity Standard FiT Via spot market or

Power Purchase

Agreement (PPA)

Via spot market or

Power Purchase

Agreement (PPA)

RET Scheme Small-scale

Renewable Energy

Scheme (SRES) (size <

10kW)

Large-scale

Renewable Energy

Target (LRET)

(size >= 10kW)

Large-scale

Renewable Energy

Target (LRET)

Large-scale

Renewable Energy

Target (LRET)

Economies of scale No No Yes – usually greater

than 15 turbines

(particularly

administration and

operation)

Table 1 – Comparison of different scale wind projects.



3 Why support community owned wind farms?

There are significant benefits to be gained by supporting community owned wind farm

(COWF) developments. These include but are not limited to increased acceptance of wind

generation, distributed generation loss advantages, and renewal for rural communities involved

in such projects. These benefits are discussed in detail in the following sections. As stated by the

not-for-profit group Energy4All in the UK:

Owning a wind farm increases awareness of and involvement in renewable energy

developments, maximises financial returns from local resources, and mobilises environmental

concern (Energy4All, 2010).

3.1 Increased Acceptance and Support

The community at all levels is becoming more familiar with climate change and its

consequences and thus is looking for actions that they can take to have a positive effect on their

greenhouse gas emissions. Consequently COWF projects can fill part of this need. Research in the

UK has indicated that renewable energy projects that allow for significant community input and

recognition, and which focus on the positive values of the project can facilitate support for the

promotion of renewable energy or open the door to these ideas (Walker & Devine-Wright 2008).

COWF projects with few exceptions (possibly farmer based models) involve the local

community from the inception of the project. This direct involvement in the project helps raise

public awareness and increases the number of local individuals with a stake in the success of the

project. By doing this the local community becomes involved in the siting and the orientation of

the turbines and can control the scale of the development. This has been shown to increase local

acceptance and contribute to fewer planning issues (Walker 2008).



One thing we can all relate to is the sense of ownership we have with relation to a project in

which we can express control and influence. More concisely a ‘sense of ownership’ in a

community project or development is described as “a concept through which to assess whose

voice is heard, who has influence over decisions, and who is affected by the process and outcome”

(Lachapelle 2008). Lachapelle goes on to make a case for a relationship between capacity for and

quality of trust and the potential for ownership. Although a sense of ownership can be quite

subjective as compared to legal ownership (Warren & McFadyen 2008), this needs to be taken

into account in the early stages of a project to ensure that trust and a sense of ownership are

developed otherwise this could strengthen the voice of local objectors.

This sense of ownership clearly cannot be ignored as demonstrated by research in the UK that

suggests it is possible that projects that are owned or part-owned by local communities generally

have fewer problems with obtaining planning permission (Walker 2008). Interestingly in a study

of wind farms in Scotland, support for wind power was relatively strong and it was found that it

did not impact on the ability of the region to attract tourists (Warren & McFadyen 2008). The

authors of this study go on to argue that the key finding of their study in Scotland and the UK

more broadly was the positive impact that the community-based model had on local acceptance

and increased support for wind farm development. In addition, members of the Kintyre

community in Scotland expressed concern for the over development of their region because they

felt, having supported some wind farm development, that they may be pressured into further

development due to the lack of support from other communities.



3.2 Reduced Network Losses

Nelson points out that because COWF generators are typically located close to the point of

consumption, for example the community that owns the wind farm, they use very little of the

wider electricity distribution network to deliver the electricity (Nelson 2008). Hence if all of the

electricity is consumed locally then that amount did not have to be transmitted from the

centralised generators and thus associated losses are eliminated.

3.3 New source of Capital

By utilising the community ownership model and extending it to ‘communities of interest’

(see Appendix A), such as private ethical investors, can provide a source of much needed

investment capital (Bolinger, M 2001). For example, in Germany the ‘Burgerwindparks’ (Citizens’

wind farms) make up over 5000MW of installed wind turbine capacity. These wind farms typically

have strong local participation, involve ethical investment principles and only occasionally offer

lower returns (Toke, Breukers & Wolsink 2008).



3.4 Benefits for Rural communities

The most obvious benefit from community owned wind farms (COWFs) or any renewable

energy project is the financial return on investment and sale of generated electricity (Walker

2008). This could be significant for rural communities that are in decline and want to become

more financially resilient in the face of climate change and peak oil. Furthermore, rural

communities are typically very reliant on fossil fuels which could see significant increases in the

price in the medium term. From an investigation of wind farms in 2 districts in Scotland (Warren

& McFadyen 2008), it was shown that the community-owned project returned over ₤28,000 per

turbine whereas the utility-owned project returned only ₤369 per turbine to the community. In

addition it showed that the community-owned project also created new local jobs, net

immigration and growing numbers in the local school. This is a significant indicator of how strong

a financial case exists for such projects at a community level.

Another similar project in Germany, the Galmsbull GE co-operative wind farm (which

produces enough electricity for 3600 homes) returns 33% of its profits to the local community

(Wijngaart, Pemberton & Herring 2009). A community wind farm can provide a significant

additional revenue for a local community, for example if 2 million shares are locally owned out of

a possible 9.5 million (1 share = $1) then at a very conservative 6% return per annum would result

in over $120,000 returned to the local community each year. There is also the benefit of lease

agreements with local land owners, many of whom are farmers looking for more stable incomes

to supplement their agricultural returns.

What’s more, community wind farms can also provide education and supplemental funding

for sustainability projects within the local community. For example, Hepburn Wind has

established a Community Sustainability Fund (CSF) to support local community energy programs.

The fund is allocated a portion of the project’s profit over the life of the wind farm and is paid on

an annual basis from the first year of operation. Hepburn wind forecasts the fund will provide

over $1,000,000 over the life of the wind farm (Membership and Share Offer 2010). Reduced

electricity costs through education programs to promote energy efficiency and the ability to

purchase electricity generated locally can also bring significant financial reward.



3.5 Ethical and Environmental commitment

Many local communities throughout Australia are looking for ways to have a positive impact

on climate change and boost the amount of renewable energy generated locally. For Hepburn

Wind the driving motivation for establishing a community owned wind farm (COWF) was “climate

change and the enormous benefits of renewable energy” (Hepburn Wind 2010). It must also be

noted that the lack of government action on climate change and the holdup of a carbon trading

scheme are also motivating forces for community action. Examples of community wind farm

success overseas include Germany where approximately 50% of the 20,000MW to be installed by

the end of 2006 will be locally owned (Toke, Breukers & Wolsink 2008). There is mounting

evidence that being involved with community based renewable energy projects can raise both

understanding of and support for renewable energy projects more generally (Walker & Devine-

Wright 2008). In Australia this has been demonstrated by the number of letters written in support

of rural wind projects submitted by members and supporters of the Hepburn Wind project in

response to the Senate Inquiry into The Social and Economic Impact of Rural Wind Farms (Senate

2011).



3.6 Market Niche

Typically smaller-scale wind developments are not attractive to commercial developers

because of potentially lower returns due to smaller economies of scale in the development and

management of the project. This presents an opportunity for community-based wind

developments that don’t have the corporate pressures to provide large returns to investors. This

is an advantage of ethical and local community investments that are willing to take a lower

return; however these investors still expect a return on investment that is reasonable.

Many areas where wind resources are commercially viable are either located very remotely

and thus are not close to large network connectors, or require local network connections to be

upgraded to support the peak generation from the commercial wind farm development

(Diesendorf 2010). An example in Australia is the grid-constrained South Australian wind

generators. These additional costs for providing the upgraded infrastructure often results in a

commercial project no longer being economically viable. This means smaller scale community

projects can become a viable option in these regions as the smaller size may not require any

upgrade to the electricity network.



4 Technical Barriers

As can be seen in Figure 1 the most promising wind resource available in Victoria is

distributed over a large rural area away from the capital city of Melbourne. Therefore the

Victorian rural electricity distribution networks will be the primary point of connection to collect

the energy generated from potential community owned wind farms (COWFs). Although we have

described wind farms connected in this way as being a form of distributed generation (DG), they

can be described as being embedded in the distribution network, thus are also termed embedded

generation (EG).

Figure 1 - Victorian Wind Resource Map (SV 2011)

As previously discussed, Victoria’s electricity network was constructed around centralised

brown coal fired generators, mostly located in the Latrobe Valley. As such, the transmission and

distribution networks where constructed with only unidirectional power flows in mind, from

generator to customer load. Hence the connection of wind farms to the distribution network was

not considered in the initial design and can alter the way in which they operate (Burton et al.

2001). To ensure that the distribution network continues to operate correctly some potentially

serious technical barriers regarding the connection of COWFs must be overcome.



4.1 Victoria’s Rural Distribution Grid

The rural electricity distribution grid of Victoria is supplied by the high voltage (HV)

transmission network that originates at the centralised generators. The distribution network is

composed of a sub transmission network of three phase overhead lines operating at 66kV which

supplies the ‘distribution network’, which together comprise 84,000 km of bare wire overhead

lines (The Nous Group 2010). The ‘distribution network’ comprises three and single phase lines of

22kV and Single Wire Earth Return (SWER) lines operating at 12.7kV (The Nous Group 2010). The

Victorian distribution network is divided into zones which are operated by five private

Distribution Network Service Providers (DNSPs).

Figure 2 – Victorian Electricity Transmission and Distribution Network diagram



4.2 Connection of a Wind Farm to the Grid

Until recently most utility scale wind generators operated with 3 phases at a voltage less than

1000V, typically 690V between phases (Burton et al. 2001) and required an external step-up

transformer for connection to the distribution network. The reason for the lower voltage within

the wind turbine was both to reduce cost and for simplicity as safety regulations become much

more severe for voltages higher than this. For example, higher voltages will require special

precautions and dedicated equipment to earth the systems before work can be carried out

(Burton et al. 2001). The Hepburn Wind farm generators are connected in this fashion, see Figure

3.

Recently the market has become dominated by larger turbines which make it practical to

generate higher voltages to reduce losses and thus eliminate the need for an external step-up

transformer. For example, the Acciona AW1500, 1.5MW wind turbine generates an output

voltage of 12kV (ACCIONA 2011). However, operating at higher voltages can add addition safety

requirements and thus costs both for the connection of these turbines and ongoing maintenance.

It should be noted that only balanced three phase networks of 22kV or 66kV are suitable for the

connection of utility scale wind turbines (Burton et al. 2001).

Figure 3 - Connection of Hepburn Wind's two 2.05MW turbines to the distribution grid



4.3 What is a weak rural grid?

The literature often talks about weak networks, particularly in rural areas, but what is meant

by a weak network? This refers to a weak point on a network where changes in the real and

reactive power flows into or out of the network will cause significant changes in the voltage at

that point, and at neighbouring points on the network (Tande 2000). Networks in rural areas are

generally weaker than in urban or industrial areas due primarily to the length of the distribution

feeders and sparsely connected loads. Weak networks are often referred to as having a ‘low

short-circuit level’ or ‘low fault level’ due to the associated low fault level at the customer’s point

of connection (Craig et al. 1996; Tande 2000).

4.4 Network Voltage Level Issues

Due to the design of the distribution networks in Victoria, the networks do not lend

themselves to the connection of significant generation and thus voltage control at these lower

distribution voltage levels becomes a significant issue (Ackermann, Andersson & Söder 2001; Fox

2007). These distribution networks can generally be considered as weak networks. The concern

for network voltage levels is sometimes referred to as Slow or Steady-State voltage variations.

Distribution networks are distinguished from other networks by the direct connection of

demand (customer loads) often connected through fixed-tap transformers. For example, the

transformer will step down the 22kV to 240V for single phase connections to households. The key

design criteria for these networks are therefore voltage standards to ensure that customers

located at any distance along the length of the distribution network receive voltage that is within

the limits of that standard.

In Victoria the distribution network must be capable of delivering a nominal voltage to the

customer of 230V/400V/460V within +10% and -6% at the customers’ point of connection (BCSE

2004; SP AusNet 2011). The National Electricity Rules (NERs) state that the distribution voltage

must be within +/-10% of nominal (AEMC 2011). However, as customers are connected directly to

the high voltage distribution network through fixed step down transformers this means that the

voltage throughout the distribution network must be considered carefully to ensure that the

voltage at the customer’s point of connection is within standard. The allowable voltage range is

illustrated in terms of distance along the length of the distribution circuit as shown in Figure 4.



Figure 4 – Simplified Distribution Network Voltage Profile without distributed generation

It should be noted that the transformer that connects the customer to the distribution

network will have its ratio adjusted during installation to ensure that the voltage at the

customer’s point of connection is matched to the voltage at that point on the distribution

network. Therefore a customer connected close to the distribution substation will have a

different ratio adjustment compared to a customer located at the end of the distribution

network.

Due to the dynamic nature of the customer loads, current will change in the distribution

network throughout the day leading to voltage change as the voltage is directly proportional to

the current in the network (Kundur, Balu & Lauby 1994). The voltage drop is also a function of the

conductor (overhead line) impedance and length (Fox 2007). In order to maintain the voltage

level within network specifications where the load varies greatly and the length impacts voltage

levels, the change in voltage is compensated for by employing transformers with on-load tap

changers (OLTC) (Burton et al. 2001). This type of transformer is also known as an Automatic

Voltage Regulator (AVR) (Fox 2007). This means that the transformers ratio (or taps) can be

altered automatically so that the voltage level is maintained within limits. The voltage profile for

such a network is shown in Figure 5.



Figure 5 - Voltage profile for network with Automatic Voltage Regulator (AVR) compensation

Now consider the addition of a wind farm generator connected to this network as shown in

Figure 6. The connection of the wind farm results in a reversal of power flow in part of the

distribution network and an increase in voltage at the wind farm point of connection. This may

result in the end customer experiencing voltages outside the specified nominal voltage. The full

impact will depend on the size of the wind farm, the impedance of the feeder and the dynamic

nature of the loads. Furthermore, there are two significant impacts that need to be considered.

The first, that the AVR’s may behave in such a way that protection equipment is tripped if not

designed for excessive voltage excursions or reverse current flows (Burton et al. 2001; Wallace,

AR & Kiprakis 2002). Second that the AVR’s may tap change more often due to variation in wind

generator output, thus resulting in flicker at the customers point of connection and possibly

maintenance issues for the AVR (Burton et al. 2001).



Figure 6 - Possible scenario with wind farm connection to distribution network



4.4.1 Case study – Hepburn Wind

A MatLab simulation was carried out to demonstrate the potential effect of the Hepburn

Wind farm on the local distribution network using the simplified feeder model as shown in Figure

7. The points shown on this model, labelled 1 through 8, are locations along the feeder of

significant load or connection points and where voltage levels were measured. It was assumed for

the simulation that the distance between each of these points was 10km. The overhead lines

were then simulated using a series Resistive-Inductive component with parameters as listed in

Table 2. Shunt capacitive effects were not considered as they are considered negligible for

overhead lines of up to approximately 100kms in length (Fox 2007). The VCR’s are shown in the

simplified model of Figure 7 to indicate location on the feeder only and were not simulated.

Figure 7 - Simplified Powercor Feeder BAN_11 that connects Hepburn Wind (Wallace, P 2009)

Overhead Line Parameter Parameter Value

Resistance, R (Ω) 0.30

Reactance, X (Ω) 0.31

X/R Ratio 1.03 Table 2 – Typical MV overhead line parameters at 50Hz (per phase, per km)(Fox 2007)

The results of the simulation are shown in Figure 8. The results show a significant increase in

voltage at the wind farm point of connection of approximately 7% when the wind turbines where

operating at maximum power output and thus an increase in voltage level along the length of the

distribution network. This indicates a reversal of current flow in the distribution network from the

wind farm back toward the zone substation.



Note that the simulation does not include dynamic load changes which can affect voltages

levels. Although the voltage level across the distribution network only varies by less than 8% this

will still have a significant effect on the VCRs which will have to tap change more often during

wind farm output variation. The other concern regards reverse current flow through the VCR

located between points 2 and 3, as this may result in incorrect behaviour and tripping of

protection equipment if the VCR has not been designed for reverse power flow.

Figure 8 – Voltage profile along feeder BAN_11

4.5 Overcoming Voltage Level Issues

There are a number of methods that can be employed to overcome voltage level issues.

Advancements in wind turbine technology and turbine manufacturers adding options to allow the

turbine to contribute reactive power can reduce the need for additional voltage level control

equipment. However, the method chosen will be based on an analysis of the distribution network

with the final decision on which solution to implement being given by the DNSP as part of the

connection approval process. It should be noted that if the DNSP demands additional devices to

control the voltage level such as STATCOMs, this could result in a significant increase in capital

expenditure as these devices can be quite expensive.



4.6 Network Power Quality Issues

Network power quality issues are those associated with noticeable effects on the end

customer’s load. For example, harmonics delivered from the network being coupled into

telephone lines or flicker in incandescent light globes.

4.6.1 Harmonics

Any device that consists of a power converter, commonly referred to as an inverter, will be

capable of creating harmonics or voltage waveform distortion. Most modern turbines use power

converters, particularly DFIG or any wind generator where the variable frequency current

produced is converted to DC and then back to AC for delivery to the electricity network, also

known as a full power AC-DC-AC inverter. Modern power electronic converters are able to apply

filtering to the output current and thus are able to reduce the harmonics injected into the

network (Coster et al. 2011).

In general, the DNSP will seek to ensure that any new generation does not worsen harmonics

on the power system as they are responsible for guaranteeing that the distribution network

complies with the National Electricity Rules (AEMC 2011). Chapter 5 of the National Electricity

Rules specifies the criteria that new generation will need to meet in order to connect to the

electricity network, including the requirements for voltage waveform distortion and relevant

standards such as Australian Standard AS/NZS 61000.3.6:2001.

However this is only part of the story as a DFIG turbine can meet standards but still cause

harmonic voltage distortion when a resonant condition exits. Resonant frequencies are hard to

predict and depend on the connected reactive load devices, network topology, and the

connected wind generator(s) (Fox 2007). As such, the DNSP will require that monitoring

equipment be installed at the site so that the site is measured both during and after

commissioning to ensure that there are no resonant conditions and that harmonics are kept

within standards. Wind turbines that convert all power generated by the turbine will, in theory,

emit more harmonics than wind turbines that convert only a portion of the power generated such

as DFIG devices (Fox 2007).



4.6.2 Flicker

Although there are no firm definitions for Flicker, it is generally considered as a voltage

fluctuation of less than 10Hz that results in a discernible flicker in the visual output of

incandescent globes (Fox 2007; Kundur, Balu & Lauby 1994). Flicker can be caused be either rapid

and regular load current variation or a phenomenon exhibited by some wind turbines, particularly

fixed speed turbines, called the tower effect or 3P (Coster et al. 2011; Fox 2007). It is called 3P

because an oscillation in power can occur at 3 times the blade turning speed or once every time a

blade passes the tower (typical frequency is about 1Hz). When the blade passes the tower, the

tower can shield the blade and this can result in a partial loss of electrical power caused by a

partial loss of torque input. Usually large wind farms don’t exhibit this issue as many turbines

together will reduce the impact of these oscillations on customers (Fox 2007). Fox indicates that

measurements made of both DFIG and fixed speed WTG show that DFIG have a smaller impact

and tend to smooth the 3P oscillations whereas fixed speed WTG may require additional

equipment to reduce the 3P effect (Fox 2007).

The 3P effect may be more significant with earlier designs in which the turbine blades were

downwind of the tower, hence the air flow must first pass around the tower potentially causing

turbulence which then enters the swept area of the turbine blades (Memery 2011).

Contemporary turbine designs typically have the blades upwind of the tower.



4.7 Transient System Performance

Transient system performance is concerned with the response of the wind farm to changes or

faults in the electricity network that are outside standard operating conditions. For example,

frequency changes in the grid due to peak summer demand and short circuit conditions that may

occur on the distribution network.

4.7.1 Frequency Performance & dynamic response

Any generation equipment connected to the electricity network must work within a set of

frequency limits. Conditions may arise that result in an imbalance between supply and demand

which in turn causes the network frequency to deviate from the specified frequency of 50Hz

(Pepermans et al. 2005). Therefore generation connected to the distribution network must be

equipped with a control mechanism capable of responding to the frequency change. Wind

generators are typically not capable of providing frequency support in small numbers so can be

considered to free ride on the efforts of the TNSP and large scale generators to maintain network

frequency (Pepermans et al. 2005). The AMEC publishes frequency operating standards which

outline the frequency range and endurance time of which the wind turbine will be expected to

operate without tripping (AEMC 2011). As the frequency range over which the network must be

maintained in Australia is much narrower than most overseas countries, it would be expected

that imported turbines would easily be able to meet the frequency operating standards.

As noted by Fox, many turbine manufacturers have indicated that there are no significant

issues associate with meeting these frequency limits (2007). Although their control systems can

handle the change in frequency, some wind turbine generators are affected mechanically through

induced mechanical loads at higher system frequencies. This is more prevalent with fixed-speed

WTGs than with DFIG units as the speed of the generator in a DFIG machine is partly isolated

from the network frequency.



4.7.2 Transient Response

Transient response relates to the way in which a distributed generator responds to various

kinds of three-phase faults on the network. These faults include (Fox 2007):

Single line shorted to ground

Line to line short

Double line shorted to ground

Three lines shorted to ground

These types of faults are typically well understood, however it is important that when the

turbine is subjected to the most severe fault type, a three-phase-to-ground fault, that the turbine

is capable of handling such a fault and the resulting behaviour is predictable (Fox 2007). The DNSP

will expect the generator to be able to ‘ride through faults’, which means that the wind generator

control system must be able to detect faults and not trip (shut down) in order to be available to

contribute to the restoration of the network, through supplying customer load, immediately the

fault is cleared.

The worst case for the wind generator is when the fault occurs very close to it so that the

voltage seen by the generator is virtually zero. There have been many advances in wind turbine

ride-through capability since 2003 with some advanced DFIG turbines now capable of ride-

through when voltages at the wind farm connection drop to 30% of nominal voltage. Some recent

advances indicate that this may be go as low as 15% of nominal voltage for a short period (Fox

2007).



4.8 Grid Protection

This section looks at the effect of DG on fault level, fault detection and grid protection

schemes.

4.8.1 Fault Level

When DG is added to a distribution network, fault current levels will be impacted. An example

is shown in Figure 9 where a short has occurred along the distribution line. This fault will now

have fault current contributed from both the grid and the local generator. The amount

contributed from each source will be dependent on things such as the networks impedance,

configuration, and amount of power generated by the DG. However, due to the addition of the

DG the networks total fault current will increase.

Figure 9 - Example distribution network with DG showing fault currents (Coster et al. 2011)

4.8.2 Blinding of Protection

Blinding of protection, also known as underreach, can occur when the protection relay in a

distribution network fails to trip. As shown in the example in Figure 9, a fault has occurred on a

distribution network which has DG added. Instead of the grid supplying all of the fault current the

generator will also contribute fault current and depending on the size of the DG this will cause

fault current contribution from the grid to fall. If the grid contribution falls below the level to trip

the protection relay the fault may continue undetected (Coster et al. 2011). Coster indicated that

if the distribution network, such as what was typical in The Netherlands, was of ‘sufficient

strength’ and ‘moderate length’, then blinding of protection was not likely to occur (2011).

However, many rural distribution networks in Victoria are considered weak in comparison and

their length is also much greater when compared to the Dutch network. Therefore it would be

considered prudent of the DNSP to investigate fault current requirements for any proposed

COWF and that the COWF ensures that such a study has occurred.



4.8.3 Automatic Recloser Problems

Automatic reclosers have commonly been used for overhead lines in Australia and globally.

The recloser works by first detecting a fault and then de-energising the overhead line leading to

the fault. After a preset time to allow any arcing to stop at the fault location, for example, from

overhead lines that have touched in strong wind, the recloser will re-energise the line. Problems

can occur however if there is distributed generation on the overhead line where the fault has

occurred. Once the overhead line has been de-energised, the generator can keep supplying the

fault and when the recloser re-energises the line the generator could be out of phase with the

electricity network with the potential to cause significant generator plant damage (Coster et al.

2011). Therefore the National Electricity Rules (NERs) state that to prevent a distribution line

being energised from sources that are not in synchronism, check or blocking facilities must be

applied to the automatic reclose equipment (AEMC 2011). It would therefore be wise for the

potential community wind generator to confirm whether this has been taken into account with

the DNSP prior to plant commissioning.



4.8.4 False Tripping

In distribution networks where there are multiple feeders originating from a substation, there

is a possibility for false tripping to occur, also known as sympathetic tripping (Coster et al. 2011).

When a fault on an adjacent feeder to the DG occurs as shown in Figure 10, there will be an

additional fault current contribution from the DG. The additional fault current will depend on the

size of the DG, network impedance and network configuration. If the additional fault current is

large enough it can trip the relay on the same feeder as the DG before the fault has had time to

clear on the faulty feeder. Thus a healthy feeder is tripped for no reason making the feeder less

reliable and could result in repercussions for the DNSP responsible for the network. Once again it

would be prudent for the potential COWF to check that such a study has been carried out prior to

plant commissioning.

Figure 10 - Example of how False Tripping can occur (Coster et al. 2011)



5 Institutional Barriers

Apart from the technical barriers discussed, there are legal, regulatory and cultural barriers

that may also hamper the progress of community wind projects. These barriers can be described

as “Institutional” barriers. An in-depth look at Market Barriers and the theory behind them is

beyond the scope of this paper, however this paper will use an adapted version of Dunstan’s

simplified classification system to provide a basis from which to discuss the institutional barriers

facing COWF projects in Victoria (Dunstan & Daly 2009). An adapted version of Dunstan’s

proposed simplified classification system for institutional barriers comprising seven types is

shown in Table 3. Although originally developed for distributed energy and energy efficiency,

these barriers can be equally applied to renewable energy generators such as COWFs.

Barrier Type Description

Information Lack of available and accurate information

Split Incentives The challenge of capturing the benefits spread across numerous

stakeholders

Payback Gap The gap in acceptable payback periods for renewable energy

Inefficient Pricing Failure to reflect costs (including environmental costs) properly in energy

prices

Regulatory The biasing of regulation against distributed generation (DG)

Cultural Values Low priority and/or opposition to energy issues (BAU)

Confusion The additional barriers created by the interaction between the six types

of barriers listed above.

Table 3 - List of Institutional barriers adapted from Dunstan & Daly (Dunstan & Daly 2009)



5.1 Information Barriers

An Information Barrier refers to a lack of available and accurate information that would have

been freely available in an ideal market. The ideal market can be described as being truly efficient

and information is both perfect and freely available (Brown 2001). However the reality is that our

markets are far from being truly efficient and thus information is usually expensive and often

difficult to obtain. In a study of the Market failures inhibiting energy efficiency measures in the

US, Brown refers to this type of barrier occurring as a result of ‘insufficient and inaccurate

information’ (2001) and notes that it is not only the energy sector that is prone to this type of

barrier. Clearly a lack of information in any endeavour is going to be a barrier and although no

information can be perfect, there should be sufficient and accurate information available to make

good decisions (Garnaut 2008).

5.1.1 Information Barriers between Stakeholders

As can be seen in Figure 11 there are a number of key stakeholders for which any community

owned wind farm (COFW) organisation will have to contend to ensure a successful outcome. The

solid arrows indicate information flows between the COWF and the other stakeholders while the

dotted arrows indicate the additional information flows that result from the flow of restricted or

proprietary information.

Community

Wind Farm

DNSPWind Turbine

Manufacturer

Third

Parties

Figure 11 - Community owned wind farm potential stakeholders



For example, the DNSP will need to assess the impact of the wind turbine(s) on the network.

To do this they will require the turbine model from the wind turbine manufacturer to analyse the

impact using simulation software. This turbine model is considered strictly confidential by the

manufacturer. In turn, the DNSP may have a conflict of interest should they own or be associated

with any wind farms, therefore they may require a third party to carry out such an analysis on

behalf of both the DNSP and wind turbine manufacturer further complicating the management of

information for the COWF.

5.1.2 Information asymmetry

Garnaut notes that information asymmetry “occurs when two parties to a transaction do not

have equal access to relevant information” (2008). An example of this would be the agreement

that both the COWF and DNSP enter into in order to connect the wind farm to the distribution

network. Snow indicates that the operation of the market can be influenced by the DNSP because

the information required to facilitate a sound design for connection approval of distributed

generation is under the DNSP’s control and is often treated as confidential (2009).

Further complicating this barrier is that fact that even when the distribution network

information is provided there may be a challenge for the COWF to successfully interpret the data

as they may lack the expertise to do so (Dunstan & Daly 2009). This often requires the COWF to

contract third parties to interpret the data for them which can be time consuming and expensive

and requires the community organisation to have additional skills in managing third party

contracts.

During the Inquiry into the Approvals Process for Renewable Energy Projects in Victoria (ENRC

2009) it was noted that the DNSP’s are natural monopolies within the NEM and do create

obstacles for renewable energy projects trying to negotiate a connection to the grid. During the

inquiry the Clean Energy Council noted that there existed a perception amongst generators that

the requirements for connection of renewable energy projects where ‘excessive for purpose’.

These additional requirements were referred to by Garnaut as ‘gold plating’ (2011). Considering

that many of these observations during the inquiry came from large corporations such as AGL and

Acciona Energy which indicated that an imbalance of power existed, one can deduce that the

process is going to be even more difficult for a resource constrained COWF organisation.



5.2 Split Incentives

There exist circumstances where a course of action is obstructed between two parties

because one of the parties concludes that it is not in their best interest (Dunstan & Daly 2009). A

commonly cited example of such a barrier is the circumstances which exist between a landlord

and tenant while the course of action involves upgrading the energy efficiency of the rental

property. There will typically be no incentive for a landlord to make the upgrade if there is little

ability for the landlord to charge a higher rent while all the benefits are obtained by the tenant

through lower energy bills.

A similar situation can occur between a DNSP and a distributed generator. A DNSP will need

to allocate resources for both accessing an application to connect a COWF, and if approved,

provide further resources to establish the physical network connection. Although the DNSP will

be able to incorporate charges into the connection fee to cover this work there is no incentive for

the DNSP to provide the resources when there is no advantage for them to do so. Furthermore,

as most companies run learn businesses these resources can be considered as scarce resources

which could be more efficiently allocated to network augmentation issues, for example, as these

can have a direct impact on the DNSPs income.

5.2.1 Principle-agent problem

A variation of the split incentive is called the principle-agent problem. This occurs when an

agent, acting on behalf of a client, does not take into consideration the client’s best interest

(Dunstan & Daly 2009). An example would be the financial investment industry where agents

have been found to be selling products to clients that gave the agent better commissions while

not necessary giving the client the best return on investment. This could occur between the

COWF, the client, and third party contractors, the agents. The selection of turbine technology,

switch gear, voltage compensation equipment, line upgrades are examples where complex

decisions are usually made, at least in part, on behalf of the COWF as the agent is considered the

expert.



5.3 Payback Gaps

The payback gap refers to the acceptable payback and/or rate of return for community

owned wind farms (COWFs) verses commercial wind farms and the associated impact on any debt

financing that may be required. There are two issues of concern regarding payback gaps for

COWFs. They are:

1. Establishment of a viable income stream to support debt financing,

2. Rate of return to investors of the wind farm

5.3.1 Establishment of a viable income stream

The establishment of a viable income stream begins with building a case for the wind

resource itself and concludes with a decision on a method for the sale of the generated

electricity, both to ensure that a sufficiently strong business case is built in order to obtain loans

and investor financing.

Site Evaluation and Feasibility Study

Substantial Wind resource evaluation is needed for any wind farm project in order to

establish a viable business case. This normally includes hiring a third party, someone with proven

knowledge in the area of wind resource evaluation, to carry out site measurements over a

minimum period of time. This will prove the first of many barriers for the COWF to overcome as it

requires a significant upfront cost, in the tens of thousands, and will provide the key data as to

whether the project is viable or not.

Sale of Electricity

As is typical for many renewable energy generation projects, COWFs will have higher capital

costs but lower ongoing or operating costs as no fuel purchases are required (Dunstan & Daly

2009). Hence a potential barrier for COWFs and distributed generation in general, is a potential

inability for these projects to access finance to cover the higher up-front capital costs.



There are three ways in which a COWF is likely to sell their generated electricity in Victoria.

First, through a power purchase agreement (PPA) where a contract is established with an

electricity retailer for the purchase of all electricity generated for a set period of time. In addition

this may include purchasing RECs generated by the COWF. The second method is to establish an

off-take agreement with a retailer where the retailer agrees to purchase all the electricity

generated based on the spot market price. Third, the wind farm can elect to sell its electricity via

the NEM which is managed by the Australian Energy Market Operator (AEMO). The market works

in the following way (AEMO 2011a):

AEMO calculates the financial liability of all market participants on a daily basis and settles

transactions for all trade in the NEM weekly. This involves AEMO collecting all money due for

electricity purchased from the pool from market customers, and paying generators for the

electricity they have produced.

As the option to sell electricity via the NEM is inherently risky and does not provide a

guaranteed income stream on which to build a business case in order to obtain financing.

Therefore most COWF organisations would consider a PPA as a first option. However the PPA is

arguably the most difficult business agreement for a community wind development to deal with

because they have no leverage with the electricity retailers, many of which are also generators

themselves. As a typical PPA covers a period of one to three years it effectively makes the

business case just as difficult to build as trading on the NEM. At the time of writing Hepburn Wind

had negotiated an off-take agreement with Red Energy Pty Ltd (Holmes à Court 2011). The report

for the Southern Councils Group (Wijngaart, Pemberton & Herring 2009), reported that:

...some utilities are trading on this control and acting as cartels in the energy market by buying

wind farms and giving only themselves 10 year PPAs (they are referred to as ‘gen-tailers’). While

this could be regarded as restrictive trade practice, State Governments have not acted on this

strong discouragement to renewable energy diversification.



5.3.2 Rate of Return

Due to a number of issues such as reduced economies of scale and connection costs, the rate

of return will potentially be lower than what may be demanded in some business sectors. For

example, many industries look for relatively short payback periods of only a few years to recover

their initial investment. The Stern Review noted that this can imply an average discount rate of

30% or more (2006, cited in Dunstan & Daly 2009, p. 26). This is clearly an unrealistic situation for

a COWF as the initial capital costs would make such a return impossible. Further impacting the

rate of return is the amount of debt financing sort by the COWF. If the debt is too high the wind

farm could run at a loss or be forced to pay very low rates of return during the early years of

operation. Getting this balance right will require extensive work by the COWF and the financial

bodies it engages.

5.4 Inefficient Pricing (mispricing)

Inefficient pricing is concerned with the failure to properly reflect the full cost of energy

production in the electricity price structure. This is primarily concerned with the unpriced

external costs often associated with social and environmental impacts of energy production,

known as externalities.

5.4.1 Externalities

Unpriced external costs are the result of producing a good or service but are not included in

the final price of that good or service (Dunstan & Daly 2009). For example, electricity is produced

and priced based on the cost of production and transmission but does not include any price for

the pollution that is released as a result. The most obvious external cost results from both the

health and climate impacts of this pollution. In Victoria the electricity sector produces over 50%

of the states net GHG emissions (CES 2006). The burning of coal has been cited as one of the

leading causes of smog, acid rain, global warming, and other airborne toxic substances (UCS

2010). A carbon tax is a method to include the external costs associated with GHG pollution into

the cost of producing a good or service, thus reducing the inefficient pricing barrier facing

renewable energy generators.



5.5 Regulatory Barriers

Regulatory barriers refer to the biasing of regulation against distributed energy resources such as

wind farms.

5.5.1 Lack of Feed-in-Tariff (FiT)

A feed-in tariff (FiT) is a price paid to generators of renewable energy for a guaranteed period

of time for electricity fed into the grid (Couture & Gagnon 2010; Prest 2008). FiTs have become

increasingly popular in the past couple of decades by encouraging investment, stimulating rapid

development, and creating a more diverse range of clean electricity options (Prest 2008). There

are now more than 64 jurisdictions worldwide implementing FiT laws (Klein et al.; Ernst and

Young; Mendonça; IEA; European Commission; REN21, cited in Couture & Gagnon 2010).

Although it can be argued that there is the beginning of a widespread public acceptance that

we need to reduce our GHG emissions, there have been no signals from government in Australia

to stimulate medium-scale distributed generation. The federal government has had some limited

success in stimulating large-scale technology, specifically large-scale wind, through the MRET

scheme. At the state level, the Victorian government has had recent success in targeting small-

scale solar PV and had past success through a scheme established during the 1980’s by the SECV

to promote medium-scale co-generation technologies (Snow 2009). Advocates for FiTs as a

regulatory signal argue that experience, particularly in other countries, including community

owned generation in Denmark and Germany, has shown that they are a better way of stimulating

growth in the renewable energy sector than other methods such as quota systems similar to

Australia’s MRET scheme (Meyer, 2003 cited Walker 2008).



5.6 Cultural Values

Cultural values refer to the barriers that exist due to society’s expectations and norms. These

values have resulted in both a low priority for and opposition to wind technology.

5.6.1 Opposition and Scepticism of Wind Technology

When working with a geographically local community, there are essentially two key groups

that are likely to oppose a wind development. First, the citizens who have a long-term

relationship with the area, this type of relationship is often described as “place identity” (Pearce

2008). The second group are the lifestyle-changers or “blow-ins” as described by Pearce. Involving

these groups in the planning and sitting can help to reduce opposition, however the people that

oppose such a development because they are ingrained sceptics of wind technology (typically

believe that the technology is flawed) will not be swayed by involvement with the local

community.

Hepburn Wind encountered such a group when their planning permit was challenged

through the Victorian Civil and Administrative Tribunal (VCAT) (Pearce 2008). The group that

launched the action was the Daylesford and District Landscape Guardians. At the time of the

VCAT challenge the rules stated that any individual could take an appeal to VCAT with an appeal

cost of $300. The VCAT process can be costly and time consuming for the COWF organisation.

Although Hepburn Wind won the appeal the decision handed down resulted in additional

obligations being placed on the wind farm. These included an extensive Landscaping and Visual

Screening Plan which added extra on-going costs throughout the life of the wind farm project

(Holmes à Court 2011; VCAT 2007).

Furthermore, the VCAT decision removed the ability of the wind farm to micro-site the

turbines, a process that utilises fluid dynamics and other methods to fine tune the position of the

turbines to minimise turbulent effects from nearby objects and maximise power generation. The

ruling stated that “No turbine shall be closer to the closest wall of any existing residence” and as

residents where located effectively on all sides of the wind farm there was no possibility to adjust

the tower locations without moving slightly closer to a residence (Holmes à Court 2011; VCAT

2007).



5.6.2 Business Culture

It may be assumed that a responsible DNSP would operate their business to account for

future changes in the market and embrace distributed generation, especially considering the

government’s announcement of a carbon price and the benefits that can be obtained from some

distributed generation in terms of demand management. However, a business’s main priority is to

maximise profits within the bounds of the current market regulations. Therefore any risk imposed

on that business will influence the business culture and can result in poor responses and low

priority given to renewable generation wishing to connect to the network. This is further

complicated by the 5 year price reset that focuses the DNSP business on the next five year period

and associated network augmentation.



5.7 Confusion

Obviously the above mentioned barriers don’t exist in isolation, in reality there can be many

interactions between each barrier with some interactions being quite complex in nature. A few

examples will be presented of the types of interactions that can take place between barriers

resulting in further confusion.

5.7.1 Interaction between split incentives and information asymmetry

One of the split incentives previously noted was that of the landlord and tenant problem,

meaning there was little incentive for the DNSP to cooperate with distributed generators. A

further complication of this problem may occur due to the interaction with information

asymmetry. This may result in the distributed generators being lumped with the costs associated

with distribution network upgrades regardless of whether the upgrade was required due to the

addition of generation or not. As noted in section 5.1.2, the DNSP often considers network

information confidential, hence it may be difficult to prove whether the distributed generator is

paying an excessive amount or not to connect their generation assets.



5.7.2 Connection Approval Process

There is little incentive for the DNSP to cooperate with distributed generators in a timely

fashion beyond the specified regulatory requirements in regard to the connection process. This is

due to a combination of barriers including information asymmetry, split incentives, and business

culture. This may result in the COWF being forced to endure unnecessarily long delays between

the initial application for connection of generator assets and the offer to connect being made by

the DNSP. The National Electricity Rules (NERs) specify that the DNSP must use its “reasonable

endeavours” when making an offer to connect, and although the rules specify time frames for

responding to connection enquiries and initial responses to the application for connection there is

no maximum time frame specified for the DNSP to respond with an offer to connect (AEMC

2011).

Several companies have indicated during a recent inquiry that the connection process is

complex, costly and leads to time frames that are excessive (ENRC 2009). Hepburn Wind has

experienced similar approval delays with the process from start to finish taking over 3 years

(Holmes à Court 2011). A similar situation has been reported for the connection of cogeneration

plants within the city of Melbourne, with the approval process taking over 18 months (Snow

2009).



6 Recommendations to support Community Owned Wind Farms

Having examined both the Technical and Institutional barriers faced by community owned

wind farms (COWFs), the following section will detail proposed recommendations to reduce or

eliminate the impact of these barriers. The recommendations are divided into two groups,

regulatory and non-regulatory based support mechanisms. Regulatory based support

mechanisms are those which require state, federal or an industry regulatory body to implement,

these are summarised in Table 4. Non-regulatory based support mechanisms are those that can

be implemented directly, and are summarised in Table 5. Both groups of recommendations are

discussed in further detail below.

Recommendation Barrier type Description of recommendation

Establish a FiT Regulatory Establish a FiT to provide a pricing signal in order to promote renewable energy generation.

Incentivise DNSPs Information

Split incentives

Regulatory

Cultural Values

Technical

Provide an incentive program for DNSPs to connect renewable energy generators.

Connection priority Confusion Establish time limits for DNSPs to both respond to a connection application and provide the final connection approval.

Carbon Price Inefficient Pricing Implement a price on carbon in order to level the playing field between polluting industries and renewable energy.

Establishment fund Payback gap

Regulatory

Provide a fund that can be used to help finance prospective community energy projects.

Table 4- Summary of regulatory based support mechanisms.

Recommendation Barrier type Description of recommendation

Support Groups Information Join, share and talk with like minded groups and organisations.

Community focused financial institutions

Information

Payback gap

Form a relationship with a financial institution such as Bendigo Bank who has community-owned business experience.

Ethical Investors Payback gap Target ethical investors which are more willing to accept a lower rate-of-return if there are social and environmental benefits.

Ethical Business Culture

Cultural Values Encouraging DNSP’s to partner with community owned wind farms (COWFs) in order to promote an ethical business culture.

Understand Connection Risks

Technical Obtain as much technical knowledge as possible to reduce project and financial risks during connection and operation of the wind farm.

Table 5- Summary of non-regulatory based support mechanisms.



6.1 Regulatory Based Support Mechanisms

Regulatory based recommendations are those which require regulatory changes or

government intervention to implement. This means that the COWF has little control or influence

over these mechanisms other than to provide support and lobby the government for action in

these areas. It should be noted that for these recommendations to be implemented it will involve

coordination and cooperation between both the state and federal governments, the Australian

Energy Market Operator (AEMO) and the Australian Energy Regulator (AER).

6.1.1 Establish a FiT

On assessing FiT policy implementation in jurisdictions in Australia and overseas, we find that

they all use ‘legislation and regulation’ as the primary policy instrument (Prest 2008). As noted by

Howlett, Ramesh & Solomon, regulations often govern such things such as the price and

standards of consumer goods and services, energy prices, as well as the quality of our water and

air (2003). Hence legislation is necessary as the existing electricity industry to which a FiT

regulation would apply, is a regulated service and energy industry (AEMO 2010; ESC 2010b). The

target groups for compliance under a FiT Act are:

Distribution Network Service Providers (DNSPs)

Electricity retailers

Renewable electricity generators

One benefit of regulation is that it can be less costly to implement when compared to other

instruments such as taxes or subsidies (Howlett, Ramesh & Solomon 2003). Excluding the costs

associated with drafting the legislation and putting it into law, the FiT costs are entirely met by

the electricity consumers within the state of Victoria as occurs with the Standard & Premium FiT

legislation (DPI 2009). Apart from on-going funding for the Essential Services Commission (ESC),

the cost to ensure compliance with the regulation is very low. Another advantage of regulation

over other instruments is its predictability and in particular it is well suited to cases where action

is needed to be seen to be done in relation to an urgent matter such as climate change (Howlett,

Ramesh & Solomon 2003).



A feed-in tariff (FiT) is essentially a ‘pricing law’ established by government legislation to

ensure that Renewable Energy (RE) producers are paid an equitable tariff for the electricity they

generate. A FiT can be differentiated by technology and size of installation (i.e. in terms of power

output). In addition it would be recommended that the proposed FiT is restricted to COWFs of

medium size, say 100kW to 20MW nameplate capacity.

The cost of a FiT has typically been passed onto the residential consumer base in Australia.

There are issues surrounding the equity of passing on the cost to consumers which may be

unfairly affected and unable to pay. However, the proposed FiT scheme will be kept modest in

order to reduce such impacts.

Design

A review of the literature reveals that there are two primary types of FiT deployed globally

(Couture & Gagnon 2010; Mendonca 2009). Those types are the market-independent and

market-dependent FiT models, see Appendix C – FiT Models for further details. As the name of

the models suggests, the FiT scheme is either linked with the electricity market wholesale price or

not. Initially FiT models were predominantly market-dependent, however there proved to be

problems associated with this model that has resulted in the market-independent model

becoming dominant.

For example, Germany initially implemented a market-dependent FiT which provided a tariff

rate in proportion to the wholesale electricity price. The idea was that as the price for electricity

went up the tariff rate paid to renewable energy generators would be reduced. However the

scheme did not anticipate a drop in the electricity price and was not designed to increase the

tariff sufficiently to compensate generators below a particular electricity price threshold. The

price dropped below the threshold and resulted in renewable generators being under

compensated by the scheme. The German scheme was later changed to the highly successful

market-independent model whereby the FiT rate was set independently of the wholesale price of

electricity allowing the scheme to be decoupled from potential market volatilities (Couture &

Gagnon 2010).



This recommendation comprises a modest FiT for COWFs based on a market-independent FiT

model. This model type is arguably the most successful model deployed worldwide for increasing

the amount of electricity generated from renewable energy sources (Couture & Gagnon 2010;

Mendonca 2009). The key advantage of the market-independent model is the greater stability of

revenue it provides resulting in greater investment security, potentially lower cost of financing,

and a reduction in the coupling of revenue with market volatilities (Couture & Gagnon 2010).

There are many ways in which a market-independent FiT model can be deployed. This paper

proposes a simple fixed tariff that is paid per MWh generated for a period of 10 years. It is

combined with a regression rate that reduces the fixed tariff amount based on the year that a

wind farm joins the FiT scheme. For example, if joining the scheme in year 1 then the full tariff

amount will be paid for a 10 year period. If joining the scheme in year 5, a reduced tariff rate,

although still fixed, will be paid for a 10 year period. This ensures that early adopters will be

better compensated based on their higher risk profiles and the current low electricity prices. The

tariff is paid in addition to the wholesale price that the COWF can receive from the market and

the revenue from the sale of RECs, hence its independence.

Setting the Tariff rate

A key component of any FiT scheme is setting the tariff rate so that there is a clear pricing

signal to encourage COWFs without over or under compensation occurring. Simon Holmes à

Court, the chairman of Hepburn Wind, indicated during discussions that a long term income of at

least $120 per MWh was required for a sustainable community wind sector (2011, pers. comm.,

20 May). Financial modelling by the author based on an estimated 25 year life for an equivalent

COWF to that of Hepburn Wind with an income of $80/MWh indicates that investor returns of

approximately 2.9% can be expected along with a net loss during the first 8 years of operation.

Further modelling was carried out for income levels of $100, $115, $120 and $140 per MWh and

the results are presented in Table 6.



Income per MWh Rate of Return Net Profit or Loss

$80 2.9% Net Loss of first 8 years

$100 5.9% Net Loss for first year

$120 8.9% Net Profit each year

$140 11.9% Net Profit each year

$115* 8.2% Net Loss for first 3 years

*Modelling of REC & Electricity pricing provided by Hepburn Wind based on 5% CPRS (Holmes à Court 2010)

Table 6 - Modelling results for a COWF with varying income levels (in 2010 AUS dollars)

It was concluded from these results that $120 per MWh would be the target income level for

the proposed FiT scheme to ensure an adequate pricing signal without overcompensating. This

compares with other accounts in the industry that state that for large-scale wind to be

sustainable in Australia an income of $120 per MWh is required (EMN 2009). The current income

per MWh based on the wholesale electricity price plus the sale price of RECs is approximately $75

at the time of writing (AEMO 2011b; GET 2010), see both Table 7 and Figure 12. This is

considerably short of $120 per MWh which is making it very difficult for large-scale wind farms let

alone community based projects.

Year Average Victorian Electricity Price ($/MWh)

2010 $34.73

Table 7 - Average Annual Wholesale Electricity Prices (AEMO 2011b)

Figure 12 - LGC Spot price from May 2010 to May 2011 (NextGen 2011)



As previous stated, FiT schemes for large scale renewable generators are in operation in many

countries around the world today. Table 8 lists the income per MWh that results from a selection

of these schemes. Clearly other schemes are considerable more generous than the one proposed

here. The reasons for such a high pricing signal may including boosting the generation and

deployment of these sources quickly and for countries such as Spain it may be to boost their local

renewable energy industries (Mendonca 2009).

Country Renewable Electricity Price with FiT ($/MWh)

Spain AUS$270

Ireland AUS$350

State of Vermont (US) AUS$140-$350

South Africa AUS$160 (Wind)

Table 8 - Example of other countries renewable electricity prices with FiT (EMN 2009)



Operation

FiTs are typically longer term support mechanisms that are reduced slowly over time to

prevent potential boom and bust cycles (Mendonca 2009). However, modelling provided by

Hepburn Wind suggests that Australian electricity prices within the NEM will rise quite

considerably in the short to medium term, therefore the proposed FiT scheme would only need to

run for a period of 10 years instead of say 15 or 20 (Holmes à Court [Hepburn Wind], 2010, pers.

comm., 20 May). It is also assumed that a price will be placed on carbon by the federal

government within this period. It is expected that turbine costs will decrease over the next 10

years, particularly with the increased competition from turbine manufacturers in China and India.

The FiT scheme will include a degression rate that will be applied to the tariff each year of the

scheme, see Table 10. The key scheme parameters are given in Table 9. A COWF that joins the

scheme in year 1 will receive a tariff of $30 per MWh for a period of 10 years, while a COWF that

joins the scheme in the final year will receive a tariff of $3 per MWh for a period of 10 years. The

scheme would only be in effect in Victoria and would be limited to 250MW of installed capacity, if

this capacity is reach before the end date of the scheme the scheme would be stopped early.

Modelling by the author was then conducted based on these parameters and limits.

Scheme Parameter Value Description

Life of FiT Scheme 10 years Period in which a community owned wind farm can join the scheme

Period Tariff is payable 10 years The period the tariff is paid after joining the scheme

Active Period of Scheme 20 years This is the total period in which the FiT scheme is active

Degression rate 10% Rate at which the FiT is reduced each year of the scheme

Tariff $30/MWh Tariff paid in the first year of the scheme

Table 9 - Proposed FiT scheme key parameters

Year Wind Farm starts operation (joins scheme)

Scheme Year

1 2 3 4 5 6 7 8 9 10

Tariff Rate $30 $27 $24 $21 $18 $15 $12 $9 $6 $3

Table 10 - Tariff rates based on year in which wind farm joins FiT scheme



Summary

Modelling conducted by the author indicates that the proposed FiT scheme would have a very

modest impact on domestic households with an average increase in yearly bills of just over half a

percent between years seven and eleven, see Figure 13. This is based on the average Victorian

household electricity use of 5.84MWh per year. As of 2010 there were 2,272,082 residential

electricity customers in Victoria (ESC 2010a).

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

0 5 10 15 20 25 30

Household Costs (per Year)

Cost Per Household ($)

Electricity Bill Increase (%)

Figure 13 - FiT effect of Residential Electricity Bill per annum

Modelling indicates that a wind farm that joins the scheme in year 1 should not make any net

losses and will be able to provide an average rate of return of approximately 10%. The full list of

results is given in Table 11.

Year Joined Rate of Return Net Profit or Loss

1 10.0% Net Profit each year




Table 11 - List of results for Wind Farm versus year of joining FiT scheme



It should be noted that during the early years of establishing a community wind sector the

associated costs for the wind farm such as connection costs and third party consultation will be

higher. However, these costs are expected to decrease as the information barriers are reduced by

some of the non-regulatory based recommendations. Hence in Figure 14 it can be seen that the

FiT results in higher income for wind farms that join the scheme in the first year while at the same

time these wind farms have to contend with substantially lower REC and Electricity prices during

this period. Therefore it can be concluded that the introduction of the FiT as presented here will

not only provide a modest scheme but will be able to provide the financial stability to drive the

community wind sector without over compensation occurring.

$40

$60

$80

$100

$120

$140

$160

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Inco

me

($/M

Wh

)

Year of Scheme

Yearly Income per MWh inc FiT

Commenced Year 1 Commenced Year 2 Commenced Year 5

Commenced Year 10 Combined REC & Elect.

Figure 14 - Effect of FiT on yearly income versus combined REC & electricity price



6.1.2 Levelised Cost

Having modelled the financial outcome for a community owned wind farm (COWF) including

the FiT it may be convenient to compare the costs associated with this type of electricity

generation to other forms. As part of the financial analysis of a medium-scale COWF based on the

Hepburn Wind farm, the levelised cost of the electricity generated by the wind farm was

calculated to be $105 per MWh using a discount rate of 5%. This compares favourably to small-

scale PV with a range of $150 to $200 per MWh and CSP using parabolic troughs at $120 to $150

per MWh (ABARE 2007). Commercial scale on-shore wind in the US in 2009 US$ has been

calculated at $97/MWh with a discount rate of 7.4%, see Table 12 (EIA 2011). Due to the variation

of the Australian dollar with the US dollar it is difficult to do a direct comparison, however if a

comparison of a range from US$1-US$0.8 to one Australian dollar is used then the levelised cost

for on-shore wind in the US is in the range of AUS$97 to AUS$121. This compares very favourably

with the levelised cost calculated for the modelled community based wind farm at $120/MWh

with a discount rate of 7.5%, see Figure 15.

$105

$120

$143

Levelised Cost

Levelised Cost of Electricity for a Community Wind Farm

5%

7.50%

10%

Discount Rates

Figure 15 - Levelised cost of generating electricity from a COWF

It should be noted that the levelised cost calculated for the COWF includes the connection

and network upgrades required to connect the wind farm to the electricity grid. This is why we

can do a comparison with the US figures given in Table 12 as these also include connection and

network costs, labelled transmission investment. However many studies provide levelised costs

and do not include the connection costs and thus give much lower levelised costs than provided

here.



Table 12 - US average Levelised Costs for plants entering service in 2016 (in 2009 US$/MWh, 7.4% discount rate)

(EIA 2011).



6.1.3 Incentivise DNSPs

To remove the confusion surrounding the connection process for renewable energy

generators and to demonstrate that regulators are serious about increasing generation from

renewable sources a program needs to be established to provide DNSPs with an incentive to

connect generators. A similar program already exists for providing DNSPs with an incentive for

demand management called the Demand Management Incentive Scheme (DMIS). The DMIS

program was established in Victoria by the Essential Services Commission Victoria (ESCV),

regulation of which has since transferred to the Australian Energy Regulator (AER). This program

provides a DNSP with an allowance of up to $600,000 to undertake approved demand

management projects. However, these programs can be difficult to implement and regulate

effectively.

The Victorian demand management program can be considered ineffective due to the failure

of the program to facilitate demand management projects (Dunstan, Abeysuriya & Shirley 2008).

In a 2008 survey questioning DNSPs about the DMIS program offered in Victoria, all five DNSPs

indicated that they had no active programs in place and make very little investment in demand

management (Dunstan, Abeysuriya & Shirley 2008). Therefore an education program needs to be

considered in parallel with such a scheme to inform not just the DNSPs but more importantly to

notify renewable energy projects to ensure they lobby the DNSPs to take advantage of the

incentives on offer.



6.1.4 Connection Priority

Currently the excessive time period from a wind farm submitting a connection application

until the final connection approval is obtained is unsatisfactory. Therefore it is recommended that

the National Electricity Rules (NERs) be altered to define a regulated time period for responding

with a connection approval for all distributed generators (DGs). In addition to the regulated time

period the alteration should also include a provision that ensures that a reasonable priority level

is given to the connection of DG. Further, the Australia Electricity Regulatory (AER) should request

the DNSPs provide information regarding their connection approval times in their yearly updates

and include the approval times within the GSL component of the Service Target Performance

Incentive Scheme (STPIS) (AER 2010). The GSL component of this scheme sets service level

thresholds for the DNSP to achieve and when customers experience levels below these thresholds

the DNSP is required to make direct payments to the customers affected.

6.1.5 Establish a carbon price

Establishing a price on carbon can take many forms, however, the primary object is to ensure

that an appropriate price is applied to externalities and is included in such services as electricity

produced from fossil fuels. This ensures that renewable energy generation can compete on a

more level field with highly polluting industries that have traditionally not had to account for the

cost of their pollution and emissions. Recently the federal government proposed a carbon tax to

begin from July 2012 followed by a carbon trading scheme in 2015-16 (Maher & Shanahan 2011).



6.1.6 Establishment Fund

Wind resource evaluation of the proposed site for a community owned wind farm (COWF) is

the single most important step as it provides the likely feasibility of the project and allows for

financial and project planning to continue. However this information is required prior to the

establishment of the formal community wind organisation at a time when there is typically no

financing available. The wind resource study requires significant upfront expenditure, potentially

in the tens of thousands of dollars. One potential COWFs in Victoria, Westgate Wind, was

fortunate to have the feasibility study initiated and paid for by the Maribyrnong City Council

(Mountjoy 2010). For Hepburn Wind, Australia’s first community owned wind farm (COWF), a

partnership was established with Future Energy, a wind farm consultancy. Future Energy then

provided the very early funding but also helped prepare and co-ordinate the preliminary site

investigations. This left Hepburn with an outstanding future debt while Future Energy bore the

early project risks. Simon Holmes à Court, the chairman of Hepburn Wind, indicated there needs

to be a way to support the start up costs as this is the largest hurdle in successfully launching a

COWF (2010, pers. comm., 22 December).

This recommendation proposes that a fund be established by the Victorian Government to

provide an interest free loan to potential community wind projects. The loan would then be

repaid when the wind farm becomes operational. For example, it could be set up in a similar

fashion to the Renewable Energy Support Fund that was operated by Sustainability Victoria,

although this fund was not a loan and thus was not expected to be repaid (Membership and Share

Offer 2010). Obviously there would be some risk involved that the government would have to

bare in this case as some funds may not be repaid if the feasibility study or other issues result in

the wind farm not being established. Hence there would need to be reasonable oversight and

program management, perhaps shared with relevant community organisations such as Embark.



6.2 Non-regulatory Based Support Mechanisms

As previously discussed, non-regulatory recommendations are those which do not require

regulatory changes or government intervention to implement and can usually be implemented

directly by the community owned wind farm (COWF).

6.2.1 Support Groups

There are several ways in which information barriers can be reduced, one of the primary ways

is through information exchange. Some community organisations in the UK where shown to be

more successful than others in the field of renewable energy (Walker 2008). The successful

projects where shown to have either ‘key committed individuals or entrepreneurs’ or a

‘supportive local institution’ (Walker et al., 2007 cited in Walker 2008, p. 4403). Examples where

provided from the UK community energy sector showing that a ‘supportive local institution’ can

help by providing the distinctive expertise that is not normally readily available to a community

group (Walker 2008). An example of this type of organisation in Australia is Embark, a not-for-

profit organisation established in Melbourne, Victoria to aid community groups that are seeking

to establish a community owned renewable energy project (Embark 2011).

Walker extends his argument about ‘supportive local institutions’ by indicating that there is

now evidence for a ‘process of replication’ whereby organisations such as Embark and a similar

entity in the UK called Energy4All, see Figure 16, allow successful community ownership models

to be easily reproduced. Thus this can save a new community organisation the time and expense

of obtaining information by adopting successful models from others.



Figure 16 - Description of the not-for-profit group Energy4All

6.2.2 Community focused financial institutions

This recommendation is similar to the first and is based on the concept that one of the best

ways to overcome information barriers is through information exchange. By seeking out and

establishing a partnership with a financial institution with a community focus, information and

support can be obtained. The Bendigo Bank is an example of a financial institution that can

provide a financial model for the establishment of a community owned wind farm based on a co-

operative business model. Bendigo Bank utilises pledge drives as part of the pre-feasibility study

for the establishment of community owned Bendigo Bank branches (InfoChoice 2011). Hepburn

Wind used the pledge model as part of their pre-feasibility study and later formed a partnership

with Bendigo Bank to finance a portion of the wind farm (Membership and Share Offer 2010).

The pledge drive asks local community members to indicate via a non-binding response if they are

willing to become members by investing in the co-operative. This allows a community group to

gauge the interest in establishing a community owned co-operative business, for more

information on co-operatives see Appendix A – What is a community owned wind farm?

Energy4All

Energy4all is a community wind farm project management not-for-profit company owned by

the wind farm cooperatives it supports. It builds and manages the wind farms on the behalf of the

cooperatives.

One-stop shop for any community group

One entity for the electricity network/retailers to deal with as opposed to each

individual community wind farm.

Pay an annual fee for the services provided

The UK is one of the countries hardest hit by Landscape issues. Not-for-profit groups like

Energy4all are changing this by engaging directly with the local community.



A community wind development may choose to sell their electricity via a power purchase

agreement (PPA). As discussed in section 5.3.1, the PPA is arguably the most difficult business

component for a community wind development to manage because they have no leverage with

the electricity retailers. A report for the Southern Councils Group discusses a solution as proposed

by the Bendigo Bank (Wijngaart, Pemberton & Herring 2009). The Bank had stated that from their

experience electricity retailers are more willing to deal with a Bank especially if they are a holder

of a portfolio of power products within that market space. This allows a separation between the

retailer and the customer with the bank providing a brokerage role for the COWF, thus helping to

overcome information and payback gap barriers.

6.2.3 Target Ethical Investors

By targeting ethical investors, community owned wind farms (COWFs) can gain significant

equity in place of finance to establish the wind farm. Ethical investors are typically more

comfortable with lower rates of return verses other investors. Although market expectations for a

high rate of return may turn some potential investors away from a COWF, the return potential

needs to be viewed within the context of typical investments versus ethical investments. The

reality for private investors is that they often receive the equivalent rate of return of that from a

money market fund or superannuation, not double digit rates of return as demanded in the

commercial sector. APRA released figures showing that the average rate of return for large

superannuation funds in the ten years to 30 June 2010 was 3.3% per annum (APRA 2011). As

demonstrated by Hepburn wind and the financial study carried out as part of this project, see

Table 6, the rate of return for a COWF can be expected to be in the order of 6-12% per annum

(Membership and Share Offer 2010). This is significantly better than the current performance of

Australian superannuation funds. Furthermore, it has been shown that some private investors are

willing to accept a return that will be below the commercial rate because they are supporting an

ethical cause they believe in (Bolinger, M 2001).



6.2.4 Ethical Business Culture

There is also the opportunity for the DNSP to actively partner with community owned wind

farm (COWF) organisations. With the outcome of the Bush Fire royal commission and inquiry into

approvals process for Renewable Energy Projects in Victoria (2009) placing Victorian DNSP’s in a

negative light, there is a real opportunity to be more open and supportive of COWF developments

as it has the potential to connect them with the local communities that they serve. A little bit of

“good will” can go a long way and help market the organisations to the broader community.

Therefore it may be desirable for the COWF to seek out the marketing or public relations

departments of the DNSP in parallel with any connection application in order to facilitate such

opportunities.

6.2.5 Understand Connection Risks

A review of the literature reveals that the dominant technical issue to be considered when

connecting wind farms to a weak rural grid is the effect the generator will have on the voltage

levels of the local network (Craig et al. 1996; Holdsworth et al. 2003; Jenkins & Strbac 1997;

Wallace, AR & Kiprakis 2002). A simulation of the potential effects of adding wind generation to a

weak distribution grid was demonstrated, see section 0. The simulation showed significant

changes to the voltage level in relation to the output from the wind farm at the point of

connection. This resulted in reverse current flow in the distribution network which has the

potential to result in incorrect operation and to increase the maintenance of VCR’s located on the

distribution feeder. Older wind turbines were not capable of supplying reactive power to support

the voltage level on the distribution network. However, advancements in wind turbine

technology and turbine manufacturers adding options to allow the turbine to contribute reactive

power have changed the impact that these wind turbines have on the local grid.



After reviewing the effects that wind turbine generators can have on the distribution

network, it is recommended that potential COWF’s avoid older technology turbines such as fixed

speed and refurbished turbines. These types of wind turbine can have a potentially greater

impact on the distribution network due issues associated with flicker and frequency performance.

Conditions on the network such as short circuits can have an adverse impact on the wind turbine

and may result in the wind farm shutting down more frequently. It has also been shown that fixed

speed turbines generate considerable less energy when compared to equivalent variable-speed

generators (Datta & Ranganathan 2002).

It is important for any potential COWF to discuss these potential connection issues with the

DNSP as part of the connection negotiations otherwise the DNSP may request additional works at

the cost of the COWF to overcome these issues should they arise, even if not the direct result of

the wind farm. However, it may be difficult for the COWF to challenge such claims, even when

they occur after the commissioning of the wind farm and the connection has been given approval

as the DNSP can simply respond that the cause is directly contributable to the additional

generation added to the network. Furthermore, COWFs should ensure that DNSPs perform data

collection and background studies prior to installation of turbines to help avoid such situations

and allow possible claims to be challenged.



7 Conclusions

There is a growing interest in community owned wind farms in Victoria in order to have a

positive impact on climate change by reducing GHG emissions. There are significant benefits

associated with community owned wind farms and therefore a case to provide this sector with

support. Benefits include an increase in the awareness of and support for renewable energy

projects especially when the local community are able to become stakeholders through co-

operative ownership models allowing them a ‘sense of ownership’ in the project. Having the

generation close to the community where the electricity is consumed reduces network losses and

provides the local community with a significant reduction in GHG emissions.

There are significant financial benefits for rural communities that are willing to accept the

challenge of establishing a community owned wind farm. This can help a rural community to

become more resilient by providing an alternative income stream. Overseas experience has

demonstrated that community owned wind turbines can provide financial returns to a local

community that are many times that provided through community funds set up by utility based

wind farms.

Community owned wind farms can access new sources of investment capital by targeting

ethical investors which has shown to be particularly successful in countries such as Germany.

There is also an opportunity to develop community owned wind farms at sites that are not

favourable for utility scale wind farms and which may not have been exploited otherwise.

Any wind farm can encounter significant technical barriers. However the dominant technical

barrier identified when connecting smaller community owned projects to the distribution

network is that of voltage level concerns. These concerns are often referred to as Slow or Steady-

State voltage variations and relate to the voltage level that customers experience at their point of

connection to the distribution network. The DNSP with take this very seriously as voltage

variations outside of specification can result in penalties.



The author was able to demonstrate the significant impact voltage levels can have on a

distribution grid with no voltage compensation by modelling the Hepburn Wind farm using the

MatLab simulation package. Results indicated that voltage could increase by up to 8% when the

wind farm is operating at maximum output. Potential community owned wind farms need to be

aware that voltage compensation equipment as specified by the DNSP to meet connection

requirements may result in significant addition capital costs.

A number of significant institutional barriers where identified and categorised based on the

type of barrier. The dominant institutional barriers centred on information and its availability, and

the general lack of support for the renewable energy sector in Australia. Establishing a viable

income stream in order for community owned wind farms to obtain loans and seek investors is

very difficult within the current environment, particularly with the uncertainty surrounding

electricity prices and carbon price legislation.

Recommendations were made in order to overcome both the technical and institutional

barriers identified by splitting the recommendations into two groups, see page 49. The first group

of recommendations requires some type of regulatory changes to enact whereas the second

group are recommendations that the community wind farm organisation can implement directly.

The critical regulatory recommendations included the establishment of a FiT scheme, a method to

ensure the DNSPs are encouraged to prioritise the connection of distributed generation,

alteration of the National Electricity Rules (NERs) to establish a time period in which the DNSP

must respond with a connection approval, and finally to implement a price on carbon to ensure a

more level playing field between polluting forms of energy generation and renewable energy.



The essential non-regulatory recommendations included seeking out support groups in order

to share and disseminate information between community based renewable energy projects,

forming a relationship with a financial institution with a community focus and experience with co-

operative business models. Finally, it cannot be emphasised enough the requirement for the

community owned wind farm organisation to obtain as much technical knowledge as possible,

whether taking on the challenge to self-educate or by obtaining third party expertise to advise

them. This can significantly reduce project risks and can potentially reduce both capital and on-

going costs.

The recommendations included an examination and proposal for a modest FiT scheme. This

included modelling the scheme from which the results indicated that this modest scheme could

provide the necessary income in order to establish the community owned wind farm sector in the

state of Victoria while only imposing a modest cost on Victoria households. This financial analysis

also demonstrated that community owned wind farms are very cost competitive when compared

with other renewable energy generation based on their levelised cost. Furthermore, community

owned wind farms are significantly more economically efficient in producing renewable energy

compared to small scale systems such as Solar PV which is currently supported in Victoria through

a premium FiT.

It was demonstrated that there is potential for significant benefits to be provided by the

community owned wind farm sector. However this sector will remain insignificant unless support

is provided at both the State and Federal levels of government. The fact that community owned

wind farms have the potential to produce renewable energy which is more cost competitive than

small-scale solar PV and competitive with other large scale forms of renewable energy is a

significant advantage. Furthermore, they have the ability to provide an additional income streams

for rural communities many of which are currently struggling.



Appendix A – What is a community owned wind farm?

A review of the literature shows that there are many differing ideas as to what constitutes a

community owned wind farm (COWF). For example Mark Bolinger (Bolinger, MA 2005) writes

that there are a wide variety of definitions and includes some criteria such as the development

size, purpose, ownership and type of grid connection. I would argue that such criteria as the

development size in terms of the number of turbines does not really apply as the local

community will be constrained by what it can afford and that usually is not more that a small

number of turbines. The reality is that there are many different views and definitions;

consequently I believe it is important to outline a definition for a COWF.

If we look at the definition of community in the Merriam-Webster Collegiate Dictionary

(Merriam-Webster Inc. 2003) it states several definitions of which two are particularly relevant to

our discussion:

A unified body of individuals: as the people with common interests living in a particular

area, and

Joint ownership or participation

In addition Bolinger breaks down community into (Bolinger, M 2001) “communities of

locality” and “communities of interest”. Country townships, an area bounded by a shire or council

all constitute communities of locality. Communities of interest may not be bound by geographic

location but are bound by shared interests such as the promotion of renewable energy. Bolinger

goes on to make the point that these two communities often overlap and can work closely with

each other in such wind farm developments.

Another approach is to evaluate the process and outcome dimensions of such projects. One

paper plots these dimensions to show the differences between commercial scale and community

renewable energy projects (Walker & Devine-Wright 2008). This is appealing because it provides

an easily-understood graphical illustration to present these differences. The area bounded by

both A and B is the ideal COWF resulting in maximum local outcomes with an open and

participatory process. Most COWFs would exit somewhere in the area shaded by C. Utility or

corporate wind farm developments are typically distant, that is they have no relationship with the

local community, and are closed because of the corporate nature of the development institution.



Figure 17 - Understanding of community renewable energy in relation to project process and outcome

dimensions (Walker & Devine-Wright 2008)

Recently there has been an emergence of COWFs being established in the US. Although in its

infancy, it has gained significant attention and thus has also grappled with the definition of what

is community wind. In a paper discussing policy support for community wind in the US, Patrick

Mazza (2008) states very concisely that “Community wind in its most essential definition is wind

development in which local ownership plays a major role”.

Finally, by analysing the above definitions I conclude that a COWF is:

A development in which a group of like-minded individuals with a majority from the

geographical area of the development, through joint ownership and participation, erect a small

number of wind turbines for the benefit of that community.



Ownership models

David Toke (Elliott 2007) suggests 3 typical community ownership models have developed

globally:

Local co-operatives

o The local co-operative model is typically formed with the local residents owning

the entire wind farm assets. The best example of this form of wind farm comes

from Denmark, in which the entire funding comes from equity capital, thus

negating the need for bank credit resulting in increased income security.

Non-local & non-commercial co-operatives

o Under the non-local & non-commercial co-operative model the shareholders are

not confined to the local area of the wind farm itself and may include ethical

investors. Hepburn Wind follows this particular model although priority is given

to local investors (Membership and Share Offer 2010).

Farmer ownership

o Farmer ownership is a commonly used in both Denmark and Germany. Financing

can be more difficult as the farmer(s) usually finance via a bank loan for the

majority of the capital to set up the wind farm. Because the farmer requires the

motivation to acquire additional knowledge to establish a wind farm, this is seen

as the key barrier to this form of ownership

There are other possible community models however there do not seem to be any operating

in any notable fashion in the wind farm sector. In the UK other models that have been used in

non-wind renewable energy projects include community charities and development trusts

(Walker 2008). These typically are of a smaller scale than a community owned wind farm (COWF)

in terms of capital costs. Another model of relevance was gifting of shares or a wind turbine to a

local community organization such as at the Earlsburn Wind farm in Scotland (Walker 2008). A

similar model has been used by an Australian commercial wind farm development, the Challium

Wind farm near Ararat in Victoria, where $30,000 is given to the local council annually to be used

specifically for community projects (Wijngaart, Pemberton & Herring 2009).



A note on Co-operatives

Community wind ownership structures based on the co-operative model can vary from

country to country but are essentially all based on the same principles. The modern co-operative

model dates back to 1844 when the Rochdale Society of Equitable Pioneers in Rochdale, England

set out a series of principles which have formed the basis on which co-operatives around the

world operate to this day (The Birthplace of the Modern Co-operative Movement 2010). Today

the international co-operative movement has more than 800 million members located in over 100

countries. The International Co-operative Alliance (ICA) formed in 1895, today represents co-

operatives around the world (ICA 2010).

The 7 main principles by which co-operatives are run (Co-operatives 2010):

1. voluntary and open membership

2. democratic member control

3. member economic participation

4. autonomy and independence

5. education, training and information for members and others

6. co-operation among cooperatives

7. concern for the community

In Australia there is at present separate legislation governing co-operatives in each state and

territory. In 2009 there was a proposed Cooperatives National Law being put forward by

Australia's Ministerial Council on Consumer Affairs (A New Cooperatives National Law 2010). As

this proposal is still in the planning stages it is unclear what time frame any legislative changes

will take if pursued.



What laws regulate co-operatives in Victoria?

A co-operative in Victoria can be (although it does not have to be) incorporated under the Co-

operatives Act 1996 (Vic). If not incorporated it is essentially treated like any other

unincorporated group. The department of Consumer Affairs Victoria (CAV) administers this

legislation which includes provisions to provide for the 7 main principles by which a co-operative

is run. An incorporated co-operative is a legal entity in its own right that is separate of that of its

members meaning the members have limited liability and the co-operative can outlive its

members. Therefore the co-operative has rights, responsibilities, and liabilities that can continue

even if members die or leave as long as there are at least five members. The Co-operative Act also

sets out which provisions of the Commonwealth Corporations Act 2001 (Cth) may apply to some

co-operatives under particular situations (Co-operatives 2010).



Appendix B - Victoria’s First Community Owned Wind Farm – Hepburn Wind

The following is a brief overview of the Hepburn Community Wind Park also known as

Hepburn Wind (Hepburn Wind 2010):

Located near Leonard’s Hill approximately 10km south of Daylesford, Victoria

Will consist of 2 Turbines, each of 2.05 MW peak generating capacity

Expected to generate 12,200MWh/year – enough electricity to supply 2300 average

homes

Connection to the electricity grid is via 22kV powerlines that run through the site where

the turbines will be located

Order for the turbines was placed in April 2010 with Repower Systems AG

Project is expected to commence operation by mid-2011

Wind turbines were erected in April 2011

Project uses a Co-operative Model (established under the Victoria Co-operatives Act of

1996)

Hepburn Shire has a population of approximately 15,000 and an annual growth rate of

0.5%.

A local member is defined as living within the boundary of the Hepburn Shire

A non-local member can typically be described as person or entity based outside of the

Hepburn Shire but within the state of Victoria (although the co-operative can accept

applications from other states and overseas as long as they meet the criteria of the Co-

operatives Act 1996 (Vic)).

The seeds for Hepburn Wind were sown back in early 2005 when the Hepburn Renewable

Energy Association (HREA) approached a renewable energy consulting company called Future

Energy and the idea for a community owned wind farm (COWF) to provide enough electricity for

the local community was established (Membership and Share Offer 2010). This meeting

consisted of two people that would be the key drivers to getting this project off the ground, Per

Bernard and David Shapero (Pearce 2008) and would later be joined by Simon Holmes à Court the

current chairman of Hepburn Wind.



Per Bernard is the former President of HREA which is now known as SHARE (Sustainable

Hepburn Association) and although the organisation helped start Hepburn Wind it has no legal

relationship with Hepburn Wind but co-operates on sustainability and education programs. David

Shapero is the Managing Director of Future Energy (Future Energy Pty Ltd 2010).

Hepburn Wind became a formally-incorporated entity in 2007 when it registered as a co-

operative under the Victorian state Co-operative Act of 1996, its core purpose being the

development and ownership of the Hepburn Community Wind Farm located at Leonards Hill just

south of Daylesford, Victoria. The co-operative had 1112 members registered as of the 22nd April

2010 (Membership and Share Offer 2010). The co-operative act limits members to Victorian

residents (except under special circumstances) and prevents any member from owning more than

20% of the co-operatives shares. Any co-operative must formalise a set of ‘Rules of the Co-

operative’ which lay out how the co-operative will be run and what to do in the case of being

wound up as well as any other requirements as per the co-operative act. For example, Hepburn

has opened membership to the whole of Victoria but favours local investors that are located

geographically close to the wind farm and reside within the Hepburn shire. These investors can

participate in the scheme for as little as $100 whereas non-local investors must provide a

minimum of $1000 (Hepburn Wind 2010).

From the set of rules defined for the Hepburn Wind co-operative, the primary activities are to

(Membership and Share Offer 2010):

Develop, own, operate and manage a wind farm or farms

Generate and supply energy from the co-operative wind farm or farms

Provide advice and assistance to its members to reduce energy usage and increase

members’ energy efficiency

Raise community awareness of the benefits of sustainable and renewable energy



Project Development and Financing

The following 7 project development stages are typical of a wind farm project (Bolinger, MA

2005):

1. Project conceptualisation and site identification,

2. Wind measurement and monitoring,

3. Feasibility analysis (both technical and economic),

4. Public outreach and feedback,

5. Project financing,

6. Project construction, and

7. Project operation and maintenance.

Hepburn Wind has progressed through many of the stages cited above during the past 5 years

since the first meeting between Bernard and Shapero and is currently in the final three stages.

Starting from step 5, Hepburn Wind is currently hoping to finalise financing this year and begin

operation of the wind farm in mid 2011. The erection of the turbines was completed in April

2011. Some contract negotiations are still underway with regard to sale of electricity and

connection to the grid (Hepburn Wind 2010).

The most difficult phases for any community based project are the first 3 phases in which a

business case must be established for the project (see the project development stages above).

For community wind a large portion of this effort is dedicated to locating a site and establishing

that a good wind resource exists. At these early phases funds are limited or non-existent and

there are limited resources and skills available within the team. Hepburn Wind (through the help

of Future Energy) was able to overcome these significant barriers. Future Energy not only

provided the early funding but also helped prepare and co-ordinate the preliminary site

investigations. Future Energy then went on to co-ordinate the overall project in partnership with

Hepburn Wind. Due to this partnership there exist two contracts which establish the roles and

responsibilities of the two parties through to the completion of the project including the financial

compensation for services and financial risk undertaken by Future Energy during the early stages

of the project.



These contracts are (Membership and Share Offer 2009):

Project Transfer Agreement (PTA), and

o Includes such things as transfer of assets from Future Energy to Hepburn Wind

and instalment payments to Future Energy based on project milestones achieved.

These fees include the project establishment fee ($127,717) and project

development fee ($240,000 and 160,000 shares).

Project Management Services Agreement (PMSA)

o This agreement contracts Future Energy to provide project management services

until the commissioning of the project is complete. Future Energy will receive

reimbursement for the services rendered and costs incurred in these activities.

This is a considerable liability for a community based project. On the other hand the project

may not have got off the ground in the first place without these contracts in place with Future

Energy. For both Hepburn Wind and Future Energy there was a significant learning curve in

developing the business skills to establish the community co-operative to operate the wind farm.

Towards the latter part of the project Bendigo Bank was able to help in this regard. This has been

cited as a major barrier/risk in the project that if done again would use an existing co-operative

business model as opposed to developing one from scratch (Mountjoy 2010). Hence West Gate

Wind have already engaged Bendigo Bank to provide the co-operative business model, in fact

Bendigo Bank has even offered to drop associated fees to help them establish the wind farm.



As of April 2010 the total cost for the development of the Hepburn Wind farm sat at an

estimated maximum of $12,940,210 (Membership and Share Offer 2010). Originally the share

offer from July 2008 quoted a total project cost of $10,654,000 (Membership and Share Offer

2009) which was revised during 2009 when capital raising became difficult due to the Global

Financial Crisis. The current breakdown of financing is as follows (Membership and Share Offer

2010):

Grant from Sustainability Victoria for $975,000

Regional Infrastructure Development Fund (RIDF) grant for $750,000

A loan of up to $3.1 million from Bendigo Bank

Possible share memberships totalling $9,507,441 which consists of

o 7,525,421 through share applications received prior to 22nd April 2010

o 1,822,020 via the latest share offering in 2010 which closes end of June.

o 160,000 from Future Energy (to be issued to Future Energy on project completion)

The financial model used by Hepburn Wind is similar to that used successfully by the Gigha

COWF in Scotland. Their capital was comprised of a three-way mix with one portion coming from

a grant, another from a commercial loan and the rest from equity finance (Warren & McFadyen

2008).

Generally speaking the members of a co-operative are also its customers. This has been a

significant difficulty for Hepburn Wind because it is not an electricity retailer and the expense to

become one does not make financial sense. Therefore members can only become a customer of

Hepburn Wind through an arrangement with a third party electricity retailer. This has been a

lengthy negotiation for Hepburn Wind as it has always been their intention to ensure that

members could purchase electricity generated by the wind farm through an electricity retailer,

yet at the same time they must ensure that they get a fair price from the retailer.



Appendix C – FiT Models

In a survey of FiTs schemes used worldwide, Couture & Gagnon (2010) discovered that there

are many differing types employed, however, these where able to be grouped based on whether

they were market-dependent or independent. This means that the scheme is based on whether

the FiT offers remuneration that is dependent or independent from the actual market electricity

price. It is important to note that the design aspects of these FiT models can overlap (i.e. are not

mutually exclusive) and can be tailored to the specific needs or context of the jurisdiction where it

is to be implemented.

Market-independent FiT policies based on a fixed-price option are the most commonly

employed model and are generally accompanied by a purchase guarantee. Market-dependent

models are also known as feed-in premiums as they are usually designed to pay a premium above

the market rate of electricity to the generator (Couture & Gagnon 2010).

Model Description

Premium Price Model Offers a constant premium or bonus over and above the

average retail price.

Variable Premium Price Model Similar to the premium price model but adds both caps

and floors effectively allowing the premium to vary as a

function of the market price. The premium amount

declines in a graduated way until the retail price reaches

a certain level, at which point the premium declines to

zero and the generators receives the spot market price.

Percentage of Retail Price Model Establishes a fixed percentage of the market retail price

to be paid to the generator.

Table 13 - Summary of Market-dependent FiT Models (Couture & Gagnon 2010)



Model Description

Fixed Price Model Establishes a fixed minimum price at which the

electricity generated will be bought for a fixed time

period, irrespective of the retail price of electricity.

Fixed Price Model with full or partial

inflation adjustment

Similar to the Fixed price model but adds inflation

adjustment to guard against a decline in the real value

of project revenues by tracking changes with the

broader economy.

Front-end loaded model Similar to the Fixed Price model but pays a higher

remuneration in the earlier years than the later years of

the project, effectively skewing the cash flows in favour

of the earlier years of the project’s life.

Spot Market gap model The actual FiT payment is comprised of the gap between

the spot market and the required FiT price. As a result,

the total remuneration is the fixed price consisting of

the sum of the spot market price and the variable FiT

premium, which when combined make up the total FiT

payment.

Table 14 - Summary of Market-independent FiT Models (Couture & Gagnon 2010)

Summary

Due to the fact that the retail price of electricity cannot be predicted reliably over a 15 to 20

year period, market-dependent models create greater uncertainty for investors and developers

because the future payment levels are not known. This presents significant problems for COWF

projects as they require a stable and predictable revenue stream to obtain financing and attract

investors.

Due to the added transaction costs of participating in selling one’s electricity via the spot

market, Couture & Gagnon (2010) note that the market dependent option may arguably be

better suited to larger scale market participants than community owned generators. Market-

dependent FiT models can also suffer from both over and under compensation as long as the

premium offered remains fixed.



Lesser and Su (cited in Couture & Gagnon, 2010) have argued that fixed price FiTs in which

the FiT payment remains completely independent from the electricity market prices can distort

the wider electricity price. The distortion arises from the fixed-price FiT remaining the same over

time regardless of the electricity market price trends such as a development that leads to overall

lower costs to deploy renewable energy and may lead to lower electricity prices. However

because the FiT is fixed the consumer will continue to pay a higher cost than what the market

would really pay otherwise. This could be possible for a FiT that is applied to a large sector of the

Renewable Energy market, however the recommendations of this paper is for the medium scale

wind sector only which is not large enough or expected to be large enough to cause such a

distortion (also see future financial analysis).



Table of Figures

FIGURE 1 - VICTORIAN WIND RESOURCE MAP (SV 2011) ........................................................................................... 21

FIGURE 2 – VICTORIAN ELECTRICITY TRANSMISSION AND DISTRIBUTION NETWORK DIAGRAM.............................................. 22

FIGURE 3 - CONNECTION OF HEPBURN WIND'S TWO 2.05MW TURBINES TO THE DISTRIBUTION GRID .................................. 23

FIGURE 4 – SIMPLIFIED DISTRIBUTION NETWORK VOLTAGE PROFILE WITHOUT DISTRIBUTED GENERATION ............................. 25

FIGURE 5 - VOLTAGE PROFILE FOR NETWORK WITH AUTOMATIC VOLTAGE REGULATOR (AVR) COMPENSATION ...................... 26

FIGURE 6 - POSSIBLE SCENARIO WITH WIND FARM CONNECTION TO DISTRIBUTION NETWORK .............................................. 27

FIGURE 7 - SIMPLIFIED POWERCOR FEEDER BAN_11 THAT CONNECTS HEPBURN WIND (WALLACE, P 2009) ....................... 28

FIGURE 8 – VOLTAGE PROFILE ALONG FEEDER BAN_11 ............................................................................................... 29

FIGURE 9 - EXAMPLE DISTRIBUTION NETWORK WITH DG SHOWING FAULT CURRENTS (COSTER ET AL. 2011) .......................... 34

FIGURE 10 - EXAMPLE OF HOW FALSE TRIPPING CAN OCCUR (COSTER ET AL. 2011) .......................................................... 36

FIGURE 11 - COMMUNITY OWNED WIND FARM POTENTIAL STAKEHOLDERS ...................................................................... 38

FIGURE 12 - LGC SPOT PRICE FROM MAY 2010 TO MAY 2011 (NEXTGEN 2011) .......................................................... 53

FIGURE 13 - FIT EFFECT OF RESIDENTIAL ELECTRICITY BILL PER ANNUM ........................................................................... 56

FIGURE 14 - EFFECT OF FIT ON YEARLY INCOME VERSUS COMBINED REC & ELECTRICITY PRICE ............................................. 57

FIGURE 15 - LEVELISED COST OF GENERATING ELECTRICITY FROM A COWF ...................................................................... 58

FIGURE 16 - DESCRIPTION OF THE NOT-FOR-PROFIT GROUP ENERGY4ALL ........................................................................ 64

FIGURE 17 - UNDERSTANDING OF COMMUNITY RENEWABLE ENERGY IN RELATION TO PROJECT PROCESS AND OUTCOME

DIMENSIONS (WALKER & DEVINE-WRIGHT 2008) ............................................................................................. 74



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