D2619A Wind and Other Electricity Generation in Australia Industry Report

AU INDUSTRY (ANZSIC) REPORT D2619a
Wind and Other Electricity Generation in Australia

Winds of change: Government assistance programs have boosted industry revenue
James Philip Caldwell | May 2020
IBISWorld.com +61-3-9655-3800 [email protected]

Wind and Other Electricity Generation in Australia D2619a May 2020
Contents
About This Industry...........................................5 Competitive Landscape...................................25
Industry Definition..........................................................5 Market Share Concentration....................................... 25

Major Players................................................................. 5 Key Success Factors................................................... 25
Main Activities................................................................5 Cost Structure Benchmarks........................................ 25
Supply Chain...................................................................6 Basis of Competition................................................... 27
Similar Industries........................................................... 6 Barriers to Entry........................................................... 28
Related International Industries....................................6 Industry Globalization..................................................29
Industry at a Glance.......................................... 7 Major Companies............................................ 30
Executive Summary....................................................... 9 Major Players............................................................... 30

Other Players................................................................33
Industry Performance..................................... 10
Operating Conditions...................................... 35
Key External Drivers.....................................................10
Current Performance................................................... 11 Capital Intensity........................................................... 35
Technology And Systems........................................... 36
Industry Outlook............................................. 15 Revenue Volatility........................................................ 38
Regulation & Policy...................................................... 39
Outlook......................................................................... 15
Industry Assistance..................................................... 40
Performance Outlook Data......................................... 16
Industry Life Cycle....................................................... 16 Key Statistics.................................................. 43
Products and Markets..................................... 18 Industry Data................................................................43

Annual Change.............................................................43
Supply Chain................................................................ 18
Key Ratios.................................................................... 43
Products and Services.................................................18
Demand Determinants................................................ 20 Additional Resources...................................... 44
Major Markets..............................................................20
International Trade.......................................................23 Additional Resources.................................................. 44
Business Locations..................................................... 23 Industry Jargon............................................................ 44
Glossary Terms............................................................44
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Covid-19
Coronavirus IBISWorld's analysts constantly monitor the industry impacts of current events in
real-time – here is an update of how this industry is likely to be impacted as a result
Impact Update of the global COVID-19 pandemic:
• The downturn in global economic conditions is expected to lead to a reduction in

thermal coal prices as well as the world price of crude oil. Consequently, the
electricity service price is expected to decline, reducing industry revenue in the
current year.
• The decline in the electricity service price is expected to reduce returns on

investment for renewable electricity projects, and contribute to increased demand
for fossil fuel electricity.
• A slowdown in the domestic manufacturing sector is expected to reduce demand

for electricity, contributing to an expected decline in industry revenue.
Note: This report will be updated in due course to reflect the trends outlined above.
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About This Industry

Industry Definition Industry firms generate electricity using wind, geothermal, tidal, biomass and other
renewable energy sources. The industry excludes the use of photovoltaic systems,
also known as solar panels.
Major Players AGL Energy Limited
Infigen Energy
Pacific Hydro Pty Ltd
Main Activities The primary activities of this industry:

Wind electricity generation
Tidal electricity generation
Geothermal electricity generation
Bioenergy electricity generation
Electricity generation from other renewable energy sources
The major products and services in this industry:

Electricity generation
Renewable energy certificates
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Supply Chain
SIMILAR INDUSTRIES
Hydro-Electricity Generation Fossil Fuel Electricity Solar Electricity Generation

in Australia Generation in Australia in Australia
RELATED INTERNATIONAL INDUSTRIES
None
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Industry at a Glance
Key Statistics Key External Drivers % = 2015-2020 Annual Growth
$1.2bn 2.4%
Public concern over environmental issues
7.7%
Demand from fossil fuel electricity
Revenue generation
Annual Growth Annual Growth Annual Growth -0.3% 4.0%

Demand from electricity retailing Electricity service price
2015-2020 2020-2025 2015-2025
3.1% 3.1% Industry Structure
POSITIVE IMPACT
$262.7m
Profit Life Cycle Industry Assistance
Growth High
Annual Growth Annual Growth
2015-2020 2015-2025 Barriers to Entry Globalization
High Low
21.1%
MIXED IMPACT
21.1% Concentration
Profit Margin Medium
Annual Growth Annual Growth

2015-2020 2015-2025 NEGATIVE IMPACT
1.3% Revenue Volatility Capital Intensity

Very high High
238
Regulation Technology Change
Heavy High
Businesses
Competition
Annual Growth Annual Growth Annual Growth High
2015-2020 2020-2025 2015-2025
2.0% 2.0% Key Trends

In 2019-20, wind power is expected to provide a third of
renewable electricity production
3,784 The industry has benefited from significant assistance from
Employment state and federal governments
Annual Growth Annual Growth Annual Growth New players have been attracted to the industry as prices
2015-2020 2020-2025 2015-2025 have surged
Electricity wholesale prices are forecast to decline over the
2.7% 1.4% next five years
Investment in wind farms and other industry assets is
projected to continue rising over the period
310.5m Several renewable energy projects are anticipated to come
Wages
online in 2019-20
Annual Growth Annual Growth Annual Growth Electricity retailers were required to source 18.6% of their
2015-2020 2020-2025 2015-2025 total supply from renewable sources in 2019
2.8% 2.6%
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Products & Services Segmentation
72.8% 27.2%
Electricity generation Renewable energy

certificates
Wind and Other Electricity Generation
Source: IBISWorld
Major Players % = share of industry revenue SWOT
STRENGTHS
High & Steady Barriers to Entry
Growth Life Cycle Stage
Low Imports
High Profit vs. Sector Average
Low Customer Class Concentration
WEAKNESSES
High & Decreasing Level of Assistance
High Competition
Very high Volatility
High Product/Service Concentration
Low Revenue per Employee
High Capital Requirements
OPPORTUNITIES
High Revenue Growth (2015-2020)
High Revenue Growth (2020-2025)
Demand from fossil fuel electricity
generation
THREATS
Very Low Revenue Growth (2005-2020)
Low Performance Drivers
Electricity service price
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Executive Revenue for the Wind and Other Electricity Generation industry has
Summary grown over the past five years.
High wholesale electricity prices, favourable industry assistance programs and
increasing profitability have attracted new firms to the industry over the period.
Industry revenue is expected to increase at an annualised 3.1% over the five years
through 2019-20, to reach $1.2 billion. This includes an expected decline of 23.7% in
the current year, due to a strong drop in the South Australian wholesale price of
electricity.
Investment in wind farms has grown over the past five years, increasing total
generation to over 16,000 GWh in the current year. Wind power is expected to
provide over 7.0% of the national electricity output in 2019-20. Other industry
generation activities, such as biomass, tidal and geothermal generation, have not
performed as strongly over the past five years.
The industry has benefited from the Renewable Energy Target scheme (RET), which
has provided a secondary source of revenue through the market for large-scale
generation certificates (LGC). The price of LGCs has increased significantly over the
past five years, as RET obligations have forced electricity retailers to purchase
greater volumes of clean energy. The RET forced electricity retailers to source
18.6% of their total electricity sales from renewable sources in 2019. Wholesale
electricity sales are expected to account for almost two thirds of industry revenue
in the current year, with sales of LGCs making up the remainder.
Industry revenue is anticipated to continue rising over the next five years, as growth
in production capacity is counteracted by declining wholesale electricity and LGC
prices. Strong demand for sustainably produced energy, and relatively high
profitability, is expected to encourage growth in industry participation over the
period. Overall, industry revenue is expected to increase at an annualised 3.1% over
the five years through 2024-25, to reach $1.4 billion.
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Industry Performance
Key External Electricity service price

Drivers The electricity service price index measures the change in the price of electricity for
manufacturers. Electricity prices have a major influence on the industry, as
generators receive more revenue when prices increase. Typically, demand for
electricity is fairly inelastic, so when the price of electricity increases, demand
usually does not decline significantly. The elasticity of demand for electricity has
increased over the past five years, as households have increasingly adopted small-
scale solar systems. The electricity service price is expected to decline in 2019-20,
as prices decline from their previous peak.
Demand from electricity retailing

Electricity retailers purchase electricity from companies that generate electricity
using either fossil fuels, such as black coal, brown coal and gas, or renewable
energy, such as wind, water, sun and bioenergy. Greater demand from the Electricity
Retailing industry generally increases demand for electricity generation. Demand
from electricity retailing is expected to decline sharply in 2019-20, representing a
threat to industry revenue growth.
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Public concern over environmental issues

Public concern over environmental issues has a significant impact on demand for
renewable energy. Greater public concern regarding environmental issues generally
benefits the industry, as renewable energy is generally considered better for the
environment than other sources. In 2019-20, public concern regarding
environmental issues is expected to increase, presenting an opportunity for industry
revenue expansion.
Demand from fossil fuel electricity generation

The industry competes with rival electricity generators, particularly fossil fuel
electricity generators. As fossil fuel generation capacity increases, competitive
pressure for industry firms is likely to rise. This can force industry firms to operate
at a lower price point, and therefore generate lower revenue. Demand from fossil
fuel electricity generation is expected to decline significantly in 2019-20.
Current The Wind and Other Electricity Generation industry has performed
Performance strongly over the past five years.
A favourable regulatory environment, rising wholesale electricity prices, and
increasing demand for renewable sources have contributed to strong revenue
growth over the period. Industry operators harness wind and biomass resources to
supply electricity to the Australian wholesale market. Industry operators also
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generate large-scale generation certificates through the federal Renewable Energy

Target (RET) scheme. The sale of these certificates to electricity retailers provides a
second source of revenue for industry operators. Overall, industry revenue has risen
at an annualised 3.1% over the five years through 2019-20, to a total of $1.2 billion.
However, this includes an expected decline of 23.7% in the current year, due to a
strong decline in the South Australian wholesale price of electricity.
Demand for renewables
Rising public concern regarding environmental issues has led to

increased consumer demand for electricity produced using
sustainable methods.
Wind power is the cheapest form of renewable energy to roll out on a large scale in
Australia, due to the maturity of the technology involved. The uptake of wind power
has increased significantly over the past decade, rising from less than 4000 GWh in
2009, to over 16,000 GWh in 2019. In the current year, wind power is expected to
provide approximately one third of renewable energy production, and over 7.0% of
national electricity output. Other forms of electricity generation included in the
industry have grown more slowly over the period. For example, bioenergy is
predominantly used in Queensland and New South Wales, where collocated sugar
plantations produce bagasse as a by-product. This bagasse is used as a fuel stock
for bioenergy producers. Geothermal electricity production no longer occurs in
Australia, following the closure of the only geothermal establishment in June 2018.
This facility, which was located in Birdsville, QLD, and operated by Ergon Energy,
has since been replaced with a solar energy facility.
Industry assistance
The industry has benefited from significant assistance from state

and federal governments over the past five years.
As public awareness of environmental issues has increased, governments have
introduced several policy schemes to promote investment in renewable energy
projects. The most prominent of these policies is the RET, which was introduced in
2001 and continues to provide an increasing source of assistance for industry
firms. The RET originally mandated that 41,000 GWh of Australian electricity must
be sourced from renewable sources by 2020. However, the target was lowered to
33,000 GWh in June 2015.
This revised target has been enacted by mandating electricity retailers to purchase
a percentage of their total electricity from renewable generators. This percentage
was 18.6% in 2019, and has increased annually since 2001. The RET policy also
licenses renewable generators to produce large-scale generation certificates (LGC).
An LGC represents 1 MWh of generation from a renewable source. Electricity
retailers purchase LGCs from renewable generators and surrender them to fulfil
their renewable energy obligations from the RET. The creation and purchase of
LGCs provides a secondary source of revenue for renewable generators, such as
wind farms. By increasing revenue, the RET also increases the profitability of
renewable energy projects, and has resulted in greater investment in the industry
over the past five years.
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Other industry assistance frameworks also exist, such as the Australian Renewable
Energy Agency (ARENA) and the Clean Energy Finance Corporation (CEFC). These
government entities provide accessible funding to researchers, developers and
businesses that are developing commercial renewable energy projects. By reducing
the initial investment cost for developing projects, ARENA and CEFC have also
supported investment in the industry over the period.
Price growth
The industry has benefited from the growth in wholesale electricity

prices across the eastern states over the past five years.
Most of this growth occurred over the two years through 2016-17, when the
wholesale price jumped from $40.0 per MWh to over $90.0 per MWh. The wholesale
price of energy is expected to be approximately $70.0 per MWh in the current year.
Wholesale electricity prices increased for several reasons, including the abrupt exit
of some coal power generation capacity from the market and the rising cost of coal
and gas inputs for fossil fuel generators. This price growth resulted in an increase
in industry revenue over the same period. While revenue increased, costs remained
flat for wind farm operators. As a result, industry profitability increased significantly
over the past five years, peaking in 2017-18. In the current year, industry profitability
is expected to fall slightly, as wholesale electricity prices decline.
Industry profitability has been supported by growth in LGC prices over the period.
The price of LGCs is determined by demand, as the RET obligation for electricity
retailers rises each year, and through supply, as the total pool of LGC producers
increases. Over the past five years, the price of LGCs has increased, peaking at
more than $70.0 in 2017-18. An undersupply of LGCs has driven this price growth.
However, as the RET has neared, demand for LCGs has declined significantly over
the two years through 2019-20.
Industry participation
Rising demand for renewable energy has led to an increase in

industry participation over the past five years.
New entrants have overcome significant barriers to entry, such as regulatory
obstacles and high upfront capital costs, through various industry assistance
channels from the state and federal governments. As a result, establishment,
enterprise and employment numbers have increased over the past five years. Major
electricity retailers have invested in their own renewable facilities to secure LGCs.
For example, AGL Energy created the Powering Australian Renewables Fund in
February 2016, which has been used to fund several wind farm projects.
Industry operators have increasingly developed larger wind farm facilities, with the
record for the largest wind farm by generation capacity being surpassed multiple
times over the past five years. AGL Energy is expected to complete the Coopers
Gap wind farm in 2020, which is expected to be the largest Australian wind farm
project to date. This facility, located in Queensland, is expected to generate 1,510
GWh of electricity per year.
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Historical Performance Data

Year Revenue IVA Estab. Enterprises Employment Exports Imports Wages Domestic
Demand
($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m)
2011–12 349 354 199 181 2,550 N/A N/A 205 N/A
2012–13 1,172 742 209 188 2,870 N/A N/A 237 N/A
2013–14 1,433 892 211 187 3,300 N/A N/A 268 N/A
2014–15 1,070 740 216 191 3,305 N/A N/A 271 N/A
2015–16 1,050 744 217 189 3,310 N/A N/A 279 N/A
2016–17 1,502 961 223 194 3,503 N/A N/A 291 N/A
2017–18 1,494 974 234 202 3,616 N/A N/A 303 N/A
2018–19 1,632 1,088 233 205 3,715 N/A N/A 307 N/A
2019–20 1,245 894 238 208 3,784 N/A N/A 310 N/A
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Industry Outlook
Outlook Revenue for the Wind and Other Electricity Generation industry is
forecast to continue rising over the next five years.
However, growth is forecast to be
subdued as growing industry
capacity is offset by lower prices for
wholesale electricity and large-scale
generation certificates (LGCs).
Australia has abundant wind and
tidal resources, which can be reliably
used in conjunction with
dispatchable power sources, such as
pumped hydro or batteries.
Investment to harness these
resources is projected to continue
rising over the next five years.
Industry revenue is forecast to grow
at an annualised 3.1% over the five
years through 2024-25, to reach $1.4
billion.
Price change
Electricity wholesale prices are anticipated to decline from their

recent peak over the next five years.
Several renewable energy projects are likely to come online in 2019-20, increasing
electricity supply and exerting downward pressure on wholesale prices. The price of
LGCs is also forecast to decline as new renewable energy projects come online.
The Renewable Energy Target is projected to be met by 2020, after which the
quantity of LGCs that retailers are obligated to purchase will remain constant. As
demand remains flat and supply increases, the price of LGCs is anticipated to
gradually decline, constraining revenue growth. An expected decline in the
wholesale price of electricity, as well as the decline in the price of LGCs are
projected to place downward pressure on industry revenue growth and profitability
over the next five years.
Rising Investment
Investment in wind farms and other industry assets is projected to

continue growing over the next five years, as major electricity
retailers replace ageing coal-fired power stations with new
renewable projects.
For example, AGL Energy is forecast to decommission the Liddell coal power
station by 2022. This facility is anticipated to be replaced by a combination of wind,
solar and battery infrastructure. Wind, bioenergy and other industry generation
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activities are likely to account for a larger share of national electricity production
over the next five years compared to the current five-year period. However, wind
energy is projected to decline slightly as a share of national renewable electricity
generation, due to the faster expansion of large-scale solar generation. Further
research into developing industry technologies, such as the harnessing of natural
tidal energy to generate electricity, is forecast to continue over the period.
Industry operators are expected to increasingly expand their renewable energy

facilities, in conjunction with energy storage facilities over the next five years. This
trend is forecast to increase the reliability of wind power, and reduce the
intermittent nature of the industry. For example, industry operator RES Australia is
expected to construct a 183 MW wind farm facility in South Australia's Barossa
valley, in conjunction with a 215MW battery facility. This will ensure the facility can
continue supplying the wholesale market with electricity when wind conditions are
not adequate. This project is currently in the developmental stage, having been
approved by the State Government in October 2019.
Industry structure
Rising demand for electricity produced from sustainable resources,

and the expected growth in industry revenue, is forecast to
encourage an uptake in industry participation over the next five
years.
Additionally, current industry operators are expected to expand their own presence
in the industry, leading to an expected increase in the number of industry
establishments over the period. Industry operators are forecast to continue building
larger wind farms in prime areas. Additionally, as only small teams of technicians
are required to maintain these larger fleets of wind turbines, industry employment is
expected to rise at a slower pace than growth in industry participation. As a result,
the ratio of employees to establishments is projected to fall, leading to a decline in
industry wage costs as a share of revenue over the next five years.
Performance Outlook Data

Demand
2020–21 1,319 943 243 212 3,869 N/A N/A 318 N/A
2021–22 1,285 946 248 216 3,922 N/A N/A 330 N/A
2022–23 1,390 1,008 254 221 3,959 N/A N/A 334 N/A
2023–24 1,425 1,039 259 226 4,025 N/A N/A 341 N/A
2024–25 1,450 1,072 263 230 4,060 N/A N/A 352 N/A
Industry Life Cycle The life cycle stage of this industry is Growth
LIFE CYCLE REASONS

Industry value added is growing faster than the overall economy
The number of enterprises has increased over the past five years
The regulatory environment promotes new investment in renewable projects
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The Wind and Other Electricity Generation industry is in the growth stage of its
economic life cycle. Industry-value added, a measure of the industry's contribution
to the overall economy, is expected to rise at an annualised 3.8% over the ten years
through 2024-25. This represents an outperformance of the overall economy, with
real GDP forecast to rise at an annualised 2.0% over the same period. This
outperformance can be attributed to a range of industry assistance programs that
have been implemented by both state and federal governments.
The industry exhibits several growth characteristics. Enterprise numbers have

increased over the past five years, as firms have been attracted to the industry by
high profit margins. Profitability has been high due to growth in wholesale electricity
prices and the price of large-scale generation certificates. Technological
development has also continued over the period, with ongoing improvements in the
efficiency of wind turbine systems and the development of new generation
technologies, such as tidal systems.
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Products and Markets

Supply Chain KEY BUYING INDUSTRIES KEY SELLING INDUSTRIES
1st Tier 1st Tier
Electricity Distribution in Australia Wind Farm Construction in Australia
Power Automation Products and Other
2nd Tier Electrical Equipment Manufacturing in
Electricity Retailing in Australia Australia
Consumers in Australia Industrial Machinery Manufacturing in

Australia
Heavy Industry and Other Non-Building
Construction in Australia
Heavy Machinery Repair and Maintenance
in Australia
2nd Tier
Gravel and Sand Quarrying in Australia
Cement and Lime Manufacturing in
Australia
Construction in Australia
Automotive Electrical Component
Manufacturing in Australia
Nut, Bolt, Screw and Rivet Manufacturing
in Australia
Iron and Steel Casting in Australia
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Products and
Services
The Wind and Other Electricity Generation industry generates

revenue through the production of electricity, as well as the sale of
renewable energy certificates.
Industry operators generate electricity using turbines which convert wind into
electricity, as well as generating electricity from biogas sources. Products are
segmented based on their contribution to industry revenue in the current year.
Electricity generation
The sale of wholesale electricity is expected to account for the

majority of industry revenue in the current year.
Over 95% of this electricity is derived from wind farms, with the remainder coming
from biogas facilities. The most common fuel inputs for biogas are bagasse,
rubbish, wood and wood by-products. Wind-based generation is one of the most
developed and scalable technologies available to industry participants, while also
being one of the cheapest forms of renewable energy generation. The uptake of
wind technology under the RET scheme has demonstrated this trend. Wind-
generation capacity has expanded over the past five years, underpinning the
industry's growth. Wind generation is also expected to aid the industry's future
expansion, with a significant number of projects currently in development.
Community opposition to wind farms due to apparent noise concerns and general
amenity issues present some minor barriers to entry. Over the past five years, this
segment has risen as a share of industry revenue, largely due to an expected
decline in the price of large-scale generation certificates.
Renewable energy certificates
Large-scale renewable energy generators receive a secondary

source of revenue from creating and selling large-scale generation
certificates (LGCs).
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Certificates are traded through the Renewable Energy Certificate Registry, which is
operated by the Clean Energy Regulator. The LGC trading framework is an element
of the federal RET scheme, which is designed to encourage investment in
renewable energy to reduce greenhouse gas emissions. Industry firms receive one
LGC for every megawatt hour of electricity they produce. Electricity retailers are
obligated to purchase a given quantity of LGCs each year, based on the total volume
of electricity they sell to their customers. Failure to secure sufficient LGCs is
penalised through fines. In 2019, electricity retailers were required to purchase
LGCs equivalent to 18.6% of the total electricity they sell. This percentage is known
as the renewable power percentage (RPP) and increases each year to encourage
the market to transition to the RET by 2020. The 2020 target was originally 41,000
GWh, although this was lowered to 33,000 GWh in June 2015. The price of LGCs
has expressed considerable volatility over the past five years. The price of LGCs
spiked in 2017-18 at $71.90, but decreased drastically over the past two years, to an
estimated $23.60 in 2019-20. This decline is largely a result of increased supply of
renewable electricity over the period. Overall, this product segment has declined as
a share of industry revenue over the past five years.
Demand Demand for electricity is tied to trends in household, industrial and

Determinants commercial energy consumption.
As electricity is a homogeneous product, most end users are indifferent to various
generation methods. The major demand determinant is price, which is correlated
with the cost of production. As renewable energy sources such as wind power
become cheaper to generate, demand is expected to increase over the long term.
Industry operators generally have lower operating costs than fossil fuel generators,
which allows them to offer lower prices. Wind operators rely solely on free
resources rather than acquiring inputs such as coal or gas. However, renewable
generation assets typically have high infrastructure and development costs, which
can push up the cost of production. Some operators offer peaking power by
generating electricity and storing it in large-scale batteries. This electricity is then
released to the market in peak periods. Peak period prices allow firms to cover their
operating and capital costs, ensuring profitability. Industry operators cannot offer
baseload power for the electricity wholesale market, as they are unable to
guarantee a 24/7 supply of electricity due to the intermittency of wind.
Demand for renewable energy also comes from consumers' growing environmental
awareness. As consumer concern regarding environmental issues, they are more
likely to demand electricity from sustainable sources. Government emissions
reductions programs, such as the RET scheme, also boost demand for industry
operators. These programs have encouraged electricity retailers to source energy
from renewable generators over the past five years.
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Major Markets
Electricity generated by industry operators is sold into the same wholesale markets
as electricity from other generation industries, such as fossil fuels. Electricity
retailers are on the other side of trades in the wholesale market, making them the
industry's only direct market. Retailers onsell electricity to a range of end users,
including utility providers, businesses, households, manufacturers and other clients.
Some end users, such as mining companies or heavy industrial users, may
negotiate power purchase agreements to acquire electricity directly from a
generator. For example, the DeGrussa solar farm supplies electricity purely to the
DeGrussa copper-gold mine in Western Australia. Revenue from the sale of
electricity is classified based on the downstream market in which it is used, rather
than in the electricity retailers market. Revenue from the sale of renewable energy
certificates is included in the electricity retailers market.
Electricity retailers
This market includes revenue from the sales of large-scale renewable energy
certificates (LGCs). This market does not include revenue from the sale of
electricity to retailers. Revenue from the sale of electricity to retailers is classified in
the other major markets, based on the type of customer that buys electricity from
the retailer. The electricity retailers market has fallen as a share of industry revenue
over the past five years. While the Renewable Energy Target (RET) scheme has
mandated these companies buy a greater portion of their electricity from renewable
sources, the decline in the price of LGC's has driven this market lower as a share of
industry revenue over the period.
Commercial and services sectors
This market includes business operators in wholesaling, retailing, hospitality and

communications industries. These firms require electricity to light, heat and cool
their facilities. Retailers are key users of electricity, as they need to heat and light
large display rooms and power point-of-sale systems. This market has grown as a
share of industry revenue over the past five years due to declines in some of the
other industry markets. Commercial and service businesses consumed 235.6
petajoules of electricity in 2016-17 (latest available data).
Households
Households use electricity for purposes such as heating, cooling, lighting and
cooking. These activities allow consumers to meet basic needs, and therefore
demand from households tends to remain largely stable. More recently, this has
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changed due to the growing household adoption of small-scale photovoltaic

systems, known as solar panels, and a range of energy-efficiency measures. This
trend has grown over the past five years, driven by several state and federal
government incentives for increased energy efficiency and solar generation. These
programs provide rebates to consumers for solar panel installation either through
the Federal Government's RET scheme or state-based legislation. This market's
share of revenue has therefore fallen over the period. Households consumed 213.2
petajoules of electricity in 2016-17.
Manufacturers
Manufacturers use electricity in a variety of processes, and operators in many

industries rely on electricity to transform raw materials. Aluminium smelting is an
example of a particularly energy-intensive industry. Other substantial users of
electricity include food, paper, chemical and steel manufacturers. Australia's
manufacturing sector has struggled over the past five years, due to strong and
rising competition from cheaper imports. Many manufacturers have transitioned
production activities to overseas locations with lower production costs. As a result,
this market has declined as a share of revenue over the period. Manufacturers
consumed 207.4 petajoules of energy in 2016-17.
Mining firms
Mining requires significant input of electricity to power extraction and refining

equipment. Over the past five years, electricity consumption from the mining sector
has slightly risen, due to expansions at existing mining projects. Some mining firms
own and operate their own electricity generation facilities to supply power to
remote mining operations. Where these facilities are not connected to the national
grid network, they are excluded from the industry. In 2016-17, the mining sector
consumed 129.5 petajoules of electricity.
Utility providers
Utility providers include companies that operate in gas, water and waste disposal
industries. Electricity suppliers are also included in this market, as electricity is used
as an input into electricity supply processes. For example, electricity generation
industries consumed 114.1 petajoules of electricity and created 796.1 petajoules in
2016-17.
Companies that provide water or process waste require energy to process their
products to meet strict regulations. Gas is compressed and cooled for transport
and use in industrial applications. Waste industries also require electricity to
remediate or dispose of waste. Demand for utility services tends to grow over time,
in line with population growth. This market has slightly increased as share of
industry revenue over the past five years.
Other sectors
Other users of electricity include the transport, agriculture and construction sectors.
Transport use accounts for the majority of demand from this market. A range of
agricultural activities, including dairy farming and sheep shearing, require electricity
inputs. This market has increased as a share of revenue over the past five years due
to rising demand from the transport sector.
22 IBISWorld.com
International Exports in this industry are Low and Steady

Trade
Imports in this industry are Low and Steady
Electricity that is generated in the industry is only sold domestically and is not
tradable due to the absence of large-scale commercial electricity transport and
storage technology. Industry players therefore do not engage in imports and
exports, and this trend has remained steady over the past five years. In the absence
of international trade, industry revenue is equivalent to domestic demand.
Business
Locations Business Concentration in Australia
NT
QLD
WA
SA
NSW
ACT
VIC
Establishments (%)
TAS
0 9 18 27
Wind and Other Electricity Generation in Australia
Source: IBISWorld
The distribution of industry establishments is largely correlated with access to

renewable resources, and energy infrastructure required to transport electricity to
wholesale and retail markets. Electricity volume losses can occur when electricity is
transported over long distances, but wind and other electricity generators are not
always located close to population and business centres. Due to the time that it
23 IBISWorld.com
takes to build new generation capacity, changes in electricity generation levels and
business locations tend to occur slowly in the industry.
The business locations of operators in South Australia and Victoria are typically
close to renewable energy sources, and population centres and major markets. This
maximises the amount of energy participants in these states can deliver to the
wholesale and retail markets using existing transmission and distribution networks.
Both of these states are also connected to the National Energy Market (NEM),
which facilitates electricity trading among other operators in the NEM. In addition,
both states have reliable wind resources, which increases the use of installed
capacity. Tasmania's share of electricity generation also outweighs its share of
population and energy consumption. Like Victoria and South Australia, Tasmania
has strong wind resources due to being located near the roaring forties.
24 IBISWorld.com
Competitive Landscape
Market Share Concentration in this industry is Medium
Concentration
The Wind and Other Electricity Generation
industry exhibits a moderate level of
market share concentration, with the four
largest operators expected to account for
approximately 60% of total revenue in the
current year. Due to the current regulation
and policy, which provide significant
assistance to industry firms, many players
active in other areas of the electricity
sector have been investing in renewable
generation. This trend has resulted in more
operators entering the industry through
small-scale projects and joint ventures
over the past five years. There has also
been a trend towards larger projects over
the period, particularly as operating,
construction and storage costs have continued to decline, boosting the feasibility of
large-scale generation facilities. As a result, an increasing number of industry
participants has reduced the industry's market share concentration over the past
five years.
Key Success IBISWorld identifies 250 Key Success Factors for a business. The most important for this
Factors industry are:
Availability of resource: Successful industry firms require access to viable, naturally
occurring wind or geothermal resources.
Ability to negotiate successfully with regulator: Successful industry players must

competently handle a range of regulatory issues and oversight bodies relating to renewable
electricity generation.
Ability to educate the wider community: Wind farm proposals and other renewable
energy generation can generate community opposition. Firms are more likely to succeed if
they can educate the wider community about the technology used and the effects of
particular projects.
Ability to control total supply on market: Firms that can store electrical energy for
transmission to the market in peak periods are likely to benefit from higher market prices.
Ability to take advantage of government subsidies and other grants: Significant

funding assistance is available for firms that can demonstrate commercially viable projects.
25 IBISWorld.com
Cost Structure
Benchmarks
Profit
Industry profitability has risen over the past five

years due to an increase in wholesale electricity
prices, and greater demand for renewable
electricity. Additionally, the Renewable Energy
Target Scheme has continued providing a
lucrative source of profit for industry firms,
particularly as the price of large-scale
generation certificates has increased. Industry
firms typically benefit from relying on freely
available resources (such as wind and sunlight),
rather than having to consume purchased fuel.
This provides an ongoing competitive advantage
for industry players over other electricity
generators. Previously, the profitability of wind
generation was limited by prohibitive initial
capital costs, which need to be recouped over
the operating life of an asset. However, this
obstacle has been gradually removed as the
manufacturing costs of wind farm equipment
have decreased.
Wages
Industry wage costs represent a significant

expense for industry operators. While the
industry is highly capital intensive, employees
are required to construct and maintain industry
establishments. These jobs are generally highly
skilled, and command high average wages.
Industry wage costs have declined as a share of
revenue over the past five years, as wholesale
prices have risen at a faster rate than firms have
increased their employment base.
26 IBISWorld.com
Depreciation
Depreciation is a significant expense for

industry operators due to the significant amount
of capital required to invest in generation
facilities. The industry is therefore similar to
other electricity generation industries, which are
also highly capital-intensive. The industry's
capital investment requirements are more
heavily skewed towards construction than
operation. Once installed, industry facilities
generally operate with low variable costs.
Depreciation has increased as a share of
revenue over the past five years, as industry
operators have invested in new wind farm
facilities.
Other Costs
Significant other costs include subcontracting,

insurance, purchases of replacement parts,
communications, advertising and professional
service expenses. Industry operators often
outsource non-core industry functions to
subcontracted staff. Other costs have declined
as a share of industry revenue over the past five
years.
Basis of Competition in this industry is High and Increasing

Competition
The Wind and Other Electricity Generation industry exhibits a high
level of competition.
Industry operators compete internally on the basis of cost, reliability and scalability.
Externally, operators compete with fossil fuel, solar and hydro-powered electricity
generators. Operators also compete with small-scale solar systems that are
installed in homes and businesses, which provide an alternative source of electricity
for final consumers.
Internal competition
The primary basis of internal competition is price.

The Australian Energy Market Operator (AEMO) uses price competition to
determine which electricity generators are active at any given time. Industry
operators compete against one another by declaring to the AEMO the minimum
price at which they are willing to provide electricity. The AEMO ranks these price
27 IBISWorld.com
bids from cheapest to most expensive, and then activates the cheapest generators
to satisfy demand. Hence, operators seek to offer the lowest price bid to ensure
that their generators are used as often as possible. Furthermore, the price
generators receive for their electricity is not their price bid, but rather the price bid of
the most expensive active generator. Hence, operators that are able to supply
electricity at a low price point while more expensive generators are in use derive
greater profit margins.
External competition
Industry operators face external competition from companies in the

Hydro-Electricity Generation industry, the Solar Electricity
Generation industry and the Fossil Fuel Electricity Generation
industry.
The primary points of external competition among these industries are price,
dispatchability and reliability. On the basis of price, industry operators typically have
an advantage over fossil fuel competitors due to their ability to submit price bids to
the AEMO that are near zero. Wind farms can be profitable at virtually any
wholesale price, as the marginal cost of generating power from wind farms is
extremely low (as there is no need to recoup fuel cost).
On reliability, industry operators typically have a competitive disadvantage

compared to external players. Wind farm operators can only provide electricity
intermittently when the wind is blowing. When the wind is not blowing, the AEMO
activates other energy sources. On dispatchability, the AEMO often requires power
to be quickly generated to meet spikes in demand, such as on hot days. Quickly
dispatchable generators, such as batteries or hydro power, are activated by the
AEMO during demand spikes when prices are high. When the wind is not blowing
during peak periods, industry firms miss out on the benefit of high prices.
Barriers to Entry Barriers to entry in this industry are High and Steady
The Wind and Other Electricity

Generation industry is characterised by Barriers to entry checklist
high barriers to entry. Over the past Competition High
decade, policy interventions such as the
Concentration Medium
Renewable Energy Target (RET) have
boosted investment in the industry by Life Cycle Stage Growth
improving the viability of renewable
Technology Change High
energy projects. The technologies used
in the industry range from mature and Regulation & Policy Heavy
commercial to unproven. As research
Industry Assistance High
and development activity is high,
developing technology to an economic
and viable scale is a barrier for the establishment of new generation facilities.
Federal Government assistance is channelled through bodies such as the Australian
Renewable Energy Agency.
28 IBISWorld.com
The construction of any new electricity generation facility is highly capital-intensive.

The hurdles to obtaining private sector funding are even higher when using new,
innovative or unproven technology. Bodies such as the Clean Energy Finance
Corporation have been established to assist developers of new generation facilities,
but establishing large-scale renewable electricity generation facilities is still
difficult. However, current policies such as the RET can help to convince investors
of a project's commercial viability. An additional barrier to entry is the political
uncertainty in Australian energy and climate policy. Ongoing upheavals in this area
have undermined business confidence in new industry projects, as the possibility
for unfavourable policy change remains a clear threat to future business viability.
Industry Globalization in this industry Low and Steady

Globalization
The industry is characterised by a low level of globalisation. An industry's level of
globalisation is determined by its exposure to international trade, as well as its level
of foreign ownership. International trade does not occur in the industry due to the
lack of technological ability to store and transport electricity overseas. Additionally,
only one major company, Pacific Hydro Pty Ltd, is owned by a foreign entity.
29 IBISWorld.com
Major Companies
Major Players AGL ENERGY LIMITED
Market Share: 31.7%

AGL Energy Limited is an ASX-listed energy
generator and retailer, with extensive power
generation assets and retailing activities
nationally. AGL operates several wind farms
throughout Australia, including the Macarthur
and Oaklands Hill facilities in Victoria, and the
Wattlepoint and Hallett facilities in South
Australia. AGL also operates the Silverton
facility in New South Wales, which was
activated in May 2018. The company is also
currently developing the Coopers Gap facility
in Queensland, which is expected to be the largest wind farm in Australia when it
comes online in 2020.
In February 2016, AGL announced that it had established an independent, unlisted

fund called Powering Australian Renewables Fund (PARF) to own a portfolio of
renewable assets and provide an opportunity for investment in renewable energy
projects. For example, the Silverton and Coopers Gap wind farms were funded
through the PARF. While AGL has retained partial ownership of the fund and is
responsible for operating the energy assets, the fund will eventually operate as an
30 IBISWorld.com
independent entity. Queensland Investment Corporation (QIC) is AGL's major

investment partner in establishing the fund, acting on behalf of its clients, the
Future Fund and the QIC Global Infrastructure Fund.
Previously, AGL also operated in the industry through a collection of small

generation facilities known as the National Assets portfolio. This portfolio
consisted of 18 small generators located throughout Australia that used landfill gas,
biogas and biomass fuel. These facilities were sold to Sustainable Energy
Infrastructure in April 2018.
Financial performance
AGL Energy Limited's industry-specific revenue is expected to increase at an

annualised 30.0% over the five years through 2019-20, to $394.6 million. This
growth represents a significant outperformance of the industry. This
outperformance is attributable to AGL's investment in new facilities, particularly the
large Silverton and Coopers Gap projects. However, AGL's industry specific
profitability has declined over the past five years, as the company has made
substantial investments in increasing its generating capacity.
AGL Energy Limited - industry segment performance*

Year Revenue Growth
($m) (% change)
2009-10 55.0 N/C
2010-11 47.9 -12.9
2011-12 50.3 5.0
2012-13 195.2 288.1
2013-14 173.8 -11.0
2014-15 106.2 -38.9
2015-16 165.1 55.5
2016-17 267.3 61.9
2017-18 357.4 33.7
2018-19 407.6 14.0
2019-20 394.6 -3.2
Source: IBISWorld
Note: *Estimate
INFIGEN ENERGY
Market Share: 16.2%

Infigen Energy is an ASX-listed renewable
energy asset owner and operator. Infigen
Energy is a stapled security consisting of one
share in Infigen Energy Limited, one share in
Infigen Energy Trust and one share in Infigen
Energy (Bermuda) Limited. Infigen Energy
Limited is the entity that operates the group's
wind and solar assets in Australia. The group
is headquartered in Sydney.
Infigen Energy operates seven wind farms

across Western Australia, South Australia and New South Wales. Lake Bonney is
Infigen Energy's most significant wind farm, located near Millicent, SA. It was
31 IBISWorld.com
completed in stages between March 2005 and July 2010, and operates 112 turbines
with a total installed capacity of 278.5 MW. Infigen Energy also maintains the Alinta
wind farm in Western Australia, and the Capital wind farm and Woodlawn wind farm
in New South Wales. Infigen also owns the Bodangora wind farm in New South
Wales, which recently finished construction and delivered its first power to the
market in August 2018. The Bodangora wind farm has a power purchase agreement
with EnergyAustralia. The firm has also indicated its intent to develop over 1,000
MW of wind and solar generation capacity across Australia over the next decade.
The declining cost of constructing and operating new renewable generation assets
has increased the benefits of investing in new infrastructure, along with subsidies
afforded through the large-scale RET scheme.
Infigen Energy's industry-specific revenue is expected to rise at an annualised 7.1%

over the five years through 2019-20, to $201.6 million. This represented an
outperformance of the overall industry over the period. This outperformance is
largely due to an expansion in generating capacity over the period. The firm has
reported strong profit margins for its Australian operations over the past five years,
as prices have risen while operating costs have remained steady.
Infigen Energy - industry segment performance

Year Revenue Growth
($m) (% change)
2009-10 41.0 N/C
2010-11 45.6 11.2
2011-12 46.6 2.2
2012-13 104.6 124.5
2013-14 148.8 42.3
2014-15 143.0 -3.9
2015-16 174.0 21.7
2016-17 209.3 20.3
2017-18 230.1 9.9
2018-19 266.8 15.9
2019-20* 201.6 -24.4
Source: Annual Report and IBISWorld
Note: *Estimate
PACIFIC HYDRO PTY LTD
Market Share: 7.3%

Pacific Hydro Pty Ltd is a global developer,
operator and owner of renewable energy
assets. Founded in 1992, the company
operates a portfolio with an installed capacity
of 880 MW across Chile, Australia and Brazil.
Pacific Hydro was originally listed on the ASX,
but was delisted following its acquisition by
IFM Australian Infrastructure Fund in July
2005. In Australia, the company operates over
480 MW of installed wind and hydro capacity.
In 2012, the company expanded into the
32 IBISWorld.com
Electricity Retailing industry through a new subsidiary, Tango Energy Pty Ltd. In
January 2016, Pacific Hydro was acquired by the State Power Investment
Corporation (SPIC), which is one of the largest power generation groups in China.
The acquisition changed Pacific Hydro from a locally owned private company to a
foreign-owned private company. Total consideration for the acquisition was over
$3.0 billion.
Pacific Hydro operates in the industry through size wind farms. The company owns
the Codrington, Challicum Hills, Portland and Yaloak wind farms in Victoria. The
Yaloak facility was completed in June 2018. The Portland wind farm comprises five
separate sites with a total installed capacity of 179 MW, making it the largest
Australian wind project in the company's portfolio. The Portland projects were
completed during 2015. The company also owns the Taralga wind farm in New
South Wales, and the Clements Gap wind farm in South Australia.
Pacific Hydro Pty Ltd's industry-specific revenue is expected to increase at an

annualised 23.5% over the five years through 2019-20, to $90.9 million. This growth
represents an outperformance of the wider industry. This outperformance is
attributable to the company's investment in new wind farms, prompting significant
growth in industry-specific revenue. Pacific Hydro's industry-related profit has also
increased over the past five years, due to rising wholesale electricity prices.
Pacific Hydro Pty Ltd - industry segment performance*

Year** Revenue Growth
($m) (% change)
2009-10 8.5 N/C
2010-11 12.5 47.1
2011-12 12.2 -2.4
2012-13 26.7 118.9
2013-14 23.8 -10.9
2014-15 31.7 33.2
2015-16 50.1 58
2016-17 76.0 51.7
2017-18 104.2 37.1
2018-19 122.7 17.8
2019-20 90.9 -25.9
Source: IBISWorld
Note: *Estimate **Year end December
Other Players Several other significant companies operate in the industry. Many of these farms
are partly owned by downstream electricity retailers or large industrial consumers.
Many of these companies are undertaking capacity expansion.
NEOEN AUSTRALIA PTY LTD
Neoen Australia Pty Ltd's parent company is Neoen, a French multinational

developer and operator of renewable energy projects. In Australia, Neoen owns the
Hornsdale and Bulgana wind farms. The Hornsdale project, located in South
Australia, was completed in three stages over 2016-17 and has a total generation
33 IBISWorld.com
capacity of 315 MW. The Hornsdale wind farm is also collocated with the Hornsdale
Power Reserve, the largest lithium-ion battery in the world. The battery was built by
Tesla and enables wind power to be stored and dispatched as necessary. The
battery was completed in December 2017. The company is also developing the
Bulgana wind farm, which is expected to be completed by January 2019. The
Bulgana wind farm has a capacity of 194 MW.
RENEWABLE ENERGY SYSTEMS LTD
Renewable Energy Systems Ltd (RES) has operated in the industry since 2004, and
currently has over 350 MW of renewable energy installed or in development. RES
operates in the industry through the Ararat wind farm, which is one of the largest
wind farms in the southern hemisphere. The facility started producing energy in
August 2016 and was completed in 2017. The wind farm employs 13 permanent
staff. RES Group is a global developer and owner of renewable energy assets, with
operations in Australia, Canada, the United States and Europe.
WOOLNORTH WIND FARM HOLDING PTY LTD
Woolnorth Wind Farm Holding Pty Ltd, which trades as Woolnorth Wind Farms, is an
owner and operator of three wind farms in Tasmania. These facilities are the
Musselroe, Bluff Point and Studland Bay wind farms. These facilities have a
combined capacity of 300 MW and supply close to 9% of Tasmania's needs. In total,
these wind farms employ over 40 staff. The company is also currently developing a
fourth wind farm at Mt Fyans in western Victoria. The project is awaiting approval
from state regulators. Woolnorth Wind Farms is a joint venture between Hydro
Tasmania and Shenua Clean Energy Holding Pty Ltd (SCE). Hydro-Electric
Corporation, which trades as Hydro Tasmania, is owned by the Tasmanian
Government. The company is the largest generator of renewable energy in Australia,
and is the largest player in the Hydro-Electricity Generation industry. The company
also owns an electricity and gas retailer, Momentum Energy.
34 IBISWorld.com
Operating Conditions
35 IBISWorld.com
Capital Intensity The level of capital intensity is High
The Wind and Other Electricity Generation

industry exhibits a high level of capital
intensity. For every dollar spent on labour,
industry operators are expected to spend an
estimated $1.01 on capital investment in the
current year. A Significant capital outlay is
required to establish facilities that generate
electricity using renewable energy sources.
The industry's major operators own assets
worth several times their net annual revenue,
which is indicative of the investment required
to establish basic operating infrastructure.
The necessary capacity that has to be
installed to generate an economic output of
electricity and ensure that operations are
viable further increases the industry's capital
intensity. Installed capacity refers to the total
capacity that a plant can generate in
megawatts.
Renewable energy has received the vast bulk

of funding for new generation assets over the
past five years. The Federal Government's
push for more renewable energy output
capacity, the closure of baseload coal-fired power stations and other changes
across the Electricity Supply subdivision have created an incentive for firms to
construct new generation assets. Increased capital expenditure requirements have
boosted depreciation costs, contributing to rising industry capital intensity over the
past five years.
Technology And Potential Disruptive Innovation: Factors Driving Threat of Change

Systems Level Factor Disruption Description
Annualized growth in the number of

enterprises in the industry, ranked against
Very High Rate of Entry Very Likely all other industries. A greater intensity of
companies entering an industry increases
the pool of potential disruptors.
A ranked measure of the largest core

Market market for the industry. Concentrated core
Moderate Potential markets present a low-end market or new
Concentration market entry point for disruptive
technologies to capture market share.
A ranked measure for the number of

Rate of patents assigned to an industry. A faster
Low Unlikely rate of new patent additions to the
Innovation industry increases the likelihood of a
disruptive innovation occurring.
A qualitative measure of barriers to entry.

Low Ease of Entry Unlikely Fewer barriers to entry increases the
36 IBISWorld.com
Level Factor Disruption Description
likelihood that new entrants can disrupt

incumbents by putting new technologies
to use.
A measure for the mix of patent classes

Innovation assigned to the industry. A greater
Very Low Very Unlikely concentration of patents in one area
Concentration increases the likelihood of technological
disruption of incumbent operators.
The industry is experiencing a low level of both the rate of new patents and the
concentration of patents in the industry. This creates an environment where the
threat of new technologies driving disruption is low.
Additionally, this industry's structure makes it difficult for new operators to enter
and succeed. These barriers have the potential to disincentivize potential
disruptors. Despite these barriers, the industry is experiencing a rapid growth in the
number of companies. A difficult operating environment for new entrants combined
with a large cohort of them may create a situation where these companies may
take on a disruptive trajectory in non-traditional markets.
Wind electricity generation has significantly increased over the past

five years.
Furthermore, investment in renewable energy-generating technologies has
disrupted the energy market over the period. Within the industry, technological
disruption has largely focused on improving store capacities and researching newer
forms of energy generation.
An important area of technological advancement is the ability to store electricity for

later use. Advancements in battery capability can significantly improve industry
firms' commercial applications. For example, wind farms currently rely on
intermittent wind energy to produce power. If these farms gained the ability to store
energy for use in peak periods, the performance of firms would significantly
increase, further disrupting the energy market. As battery storage technology
develops, it facilitates the ability for large scale adoption of solar and electric
vehicles, which currently account for a small share of the total vehicles in Australia.
Newer energy generating technologies have the ability to disrupt the industry.
Bioenergy is a form of renewable energy that uses organic renewable materials,
which are known as biomass. Bioenergy energy generation is low in Australia,
although there is the potential for it to grow as a share of the energy market,
following similar trends in Europe. Tidal energy is also being increasingly
researched and tested as a new mode of clean energy generation, highlighting
another way that the industry could be disrupted in the future.
The level of technology change is High
37 IBISWorld.com
Industry firms use energy from sources such as wind, biogas and
geothermal heat to generate electricity, usually by powering
turbines.
The maturity of industry technologies that are designed to harness different fuel
types varies. Wind, biogas and geothermal technologies are commercially proven,
as projects both overseas and domestically have been deployed. However, research
and development to improve the efficiency of these technologies is ongoing and
significant. New industry projects consistently use technological advancements to
gain a competitive edge in the market.
Other technologies that are included in the industry, such as some bioenergy and
tidal energy, are still being researched domestically and internationally, with some
yet to be proven commercially viable. Technological developments are also
influenced and driven by government policy, overseas developments and domestic
energy trends. The rate of technological change in all areas of the industry's
activities has been high over the past five years.
The way particular generation methods and renewable resources interact can be
described by the capacity factor. For example, the capacity factor for wind turbines
accounts for the actual electrical output of the turbine as a ratio of potential output
or installed capacity. Renewable energy generators included in the industry have
lower capacity factors than fossil fuel generators, which reflects the variations in
the strength of supply of renewable energy sources such as wind and ocean
currents.
An important area of technological advancement is the ability to store electricity for

later use. Advancements in battery capability can significantly improve industry
firms' commercial applications. For example, wind farms rely on intermittent wind
energy to produce power. If these farms gained the ability to store energy for use in
peak periods, the performance of these firms would significantly increase.
38 IBISWorld.com
Revenue Volatility The level of volatility is Very high
Note: Revenue growth and decline reflective of 5-year annualized trend. Y-axis is in
logarithmic scale. Y-axis crosses at long-run GDP. X-axis crosses at high volatility
threshold.
The Wind and Other Electricity Generation industry exhibits a very

high level of revenue volatility.
spikes and troughs largely depend on fluctuations in wholesale electricity prices.
These can vary from region to region, and can be affected by shortages in
transmission network capacity, generation output, input costs and other variables.
Large-scale investment and expansion projects also contribute to revenue volatility,
particularly as new assets come online and boost the industry's total gigawatt hour
output per year. Revenue volatility can be mitigated through industry operators
entering power purchase agreements with downstream users, as these are typically
set at a fixed or more stable price per megawatt hour of use.
Regulation & The level of regulation is Heavy and is Increasing

Policy
The Wind and Other Electricity Generation industry is heavily
regulated, as players operate under legislation that targets
environmental outcomes, governance and the energy market.
The four primary regulators are the Australian Energy Market Operator (AEMO), the
Australian Energy Market Commission (AEMC), the Australian Energy Regulator
(AER) and the Australian Competition and Consumer Commission (ACCC). The
industry is also influenced by environmental schemes and subsidies, which provide
significant assistance to industry firms. Additional regulation has been attempted
over the past five years, such as the defunct federal National Energy Guarantee.
Several regulation attempts have failed due to political opposition.
39 IBISWorld.com
Wholesale market regulation
Industry players are regulated by energy market regulators.

There is a multitude of regulatory bodies and acts involved in overseeing the
different levels of the Australian energy supply chain, which includes electricity
generation, transmission, distribution and retailing. Since 1998, all of these
activities on the eastern seaboard have been included in the National Electricity
Market (NEM). The NEM is a wholesale market where generators and energy
retailers trade. Significant electricity price growth in the NEM caused the ACCC to
launch an inquiry into the electricity supply chain in March 2017. The ACCC
released the final report in July 2018.
Three main bodies oversee the NEM. The AEMO acts as an intermediary to
aggregate and dispatch supply to meet demand in the market. The market's rules
are set out in the National Electricity Rules, which are overseen by the AEMC. The
AER is mandated to monitor bidding behaviour in the NEM and determine the
maximum amount of revenue that can be generated in transmission and
distribution networks.
Western Australia is home to several different energy systems, separated

geographically from one another and the NEM. The South West Interconnected
System (SWIS) and the North West Interconnected System (NWIS) are the two main
systems. The Independent Market Operator administered and monitored the SWIS's
Wholesale Electricity Market (WEM) from 2006 onwards. In October 2015, AEMO
took over all operations of the WEM. The Northern Territory operates a separate
wholesale electricity market from the WEM, which is operated by the Interim
Northern Territory Electricity Market.
Modern Slavery
In November 2018, the Federal Government passed the Modern

Slavery Act 2018.
The act, which came into force on 1 January 2019, is a new reporting requirement
for larger Australian businesses. Companies that generate an annual consolidated
revenue of at least $100.0 million will have to report on how they act to mitigate the
risks of modern slavery in their operations and supply chains. The first reports will
relate to 2018-19, with most reports being released in 2020. The New South Wales
Government is also considering its own state-based version of the report, which
would make businesses with consolidated annual revenue of at least $50.0 million
have to report. The NSW Modern Slavery Act 2018 was due to come into force on 1
July 2019, but was delayed for further consultation on the day it was set to be
implemented.
The Modern Slavey Act is expected to have a minimal impact on the Wind and Other
Electricity Generation industry. The industry generates electricity for the Australian
wholesale market, is not exposed to international trade. However, some industry
operators source products from countries with poor records on human rights, and
modern slavery, such as China. Industry operators must take significant action to
ensure modern slavery is not found in their supply chain.
40 IBISWorld.com
Industry The level of industry assistance is High and is Decreasing

Assistance
Industry operators receive significant assistance from various
renewable energy policies and subsidy schemes at both the state
and federal levels.
Firms that generate electricity from renewable energy sources receive high industry
assistance, but this trend has decreased slightly over the past five years. Industry
players receive significant direct assistance for the development, deployment and
commercialisation of renewable energy generation technologies.
Renewable energy policy
Australian renewable energy policy is influenced by the global Paris

Agreement on climate.
Australia joined the Paris Agreement in April 2016, committing to cut greenhouse
gas emissions by 26% to 28% below 2005 levels by 2030. Electricity generation
accounts for close to 31% of total Australian greenhouse gas emissions. Reducing
emissions in other parts of the economy is more expensive than reducing
emissions in the electricity sector. For example, emissions could potentially be
lowered by reducing Australian livestock production. However, this is likely to have a
stronger negative impact on the economy than phasing out fossil fuel electricity
generation. Hence, meeting the Paris Agreement requires significant adjustments to
the electricity generation mix in Australia. These adjustments are achieved through
various policy instruments.
Industry operators have access to significant government funding for research,

development, commercialisation and finance. This assistance is provided by the
Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance
Corporation (CEFC). Some state governments also provide similar assistance
through their own agencies.
The RET has been crucial in driving investment in the industry since its introduction
in 2001. In 2001, the RET mandated that 41,000 GWh of renewable energy must be
generated by 2020, which at the time was projected to be 20% of Australia's energy
needs. The Renewable Energy Target scheme's target was reduced from 41,000
GWh to 33,000 GWh in June 2015. The Clean Energy Regulator (CER) is responsible
for overseeing the operation of the RET. To participate in the market for large-scale
generation certificates, operators need to satisfy the CER's eligibility criteria and
report to the agency regularly.
The RET is split into two policies, the large-scale RET and the small-scale renewable
energy scheme. The large-scale RET creates demand for renewable energy
generation, as liable entities such as electricity retailers and some generators are
required to purchase a certain quantity of renewable energy each year. Under the
system, renewable energy is traded and certificates issued by the CER are
exchanged. Most of the investment in the industry over the past decade has been
designed to meet the criteria for this target.
41 IBISWorld.com
The small-scale renewable energy scheme is aimed at households and small

businesses. It allows these groups to recover some of the initial set-up costs of
renewable energy systems, such as solar water heaters and solar panels. When
these systems are installed, small-scale technology certificates are issued,
reflecting the amount of fossil fuel energy that is displaced. Households are
unlikely to install small-scale wind generation systems, due to noisiness, lack of
space, intermittency of power generation, cost and other limiting factors.
42 IBISWorld.com
Key Statistics
Industry Data
Demand
2011–12 349 354 199 181 2,550 N/A N/A 205 N/A
2012–13 1,172 742 209 188 2,870 N/A N/A 237 N/A
2013–14 1,433 892 211 187 3,300 N/A N/A 268 N/A
2014–15 1,070 740 216 191 3,305 N/A N/A 271 N/A
2015–16 1,050 744 217 189 3,310 N/A N/A 279 N/A
2016–17 1,502 961 223 194 3,503 N/A N/A 291 N/A
2017–18 1,494 974 234 202 3,616 N/A N/A 303 N/A
2018–19 1,632 1,088 233 205 3,715 N/A N/A 307 N/A
2019–20 1,245 894 238 208 3,784 N/A N/A 310 N/A
2020–21 1,319 943 243 212 3,869 N/A N/A 318 N/A
2021–22 1,285 946 248 216 3,922 N/A N/A 330 N/A
2022–23 1,390 1,008 254 221 3,959 N/A N/A 334 N/A
2023–24 1,425 1,039 259 226 4,025 N/A N/A 341 N/A
2024–25 1,450 1,072 263 230 4,060 N/A N/A 352 N/A
Annual Change
Demand
(%) (%) (%) (%) (%) (%) (%) (%) (%)
2011–12 4.05 0.02 5 4 -2 N/A N/A -3.44 N/A
2012–13 236 110 5 4 13 N/A N/A 15.4 N/A
2013–14 22.4 20.3 1 -1 15 N/A N/A 13.3 N/A
2014–15 -25.4 -17.0 2 2 0 N/A N/A 0.89 N/A
2015–16 -1.81 0.54 0 -1 0 N/A N/A 3.21 N/A
2016–17 43.0 29.1 3 3 6 N/A N/A 4.29 N/A
2017–18 -0.51 1.35 5 4 3 N/A N/A 3.91 N/A
2018–19 9.25 11.6 -0 2 3 N/A N/A 1.55 N/A
2019–20 -23.7 -17.8 2 1 2 N/A N/A 1.00 N/A
2020–21 5.94 5.51 2 2 2 N/A N/A 2.28 N/A
2021–22 -2.63 0.27 2 2 1 N/A N/A 3.90 N/A
2022–23 8.23 6.54 2 2 1 N/A N/A 1.06 N/A
2023–24 2.45 3.13 2 2 2 N/A N/A 2.18 N/A
2024–25 1.74 3.12 2 2 1 N/A N/A 3.40 N/A
Key Ratios
Year IVA/Revenue Imports/Demand Exports/Revenue Revenue per Wages/Revenue Employees per Average Wage
Employee estab.
(%) (%) (%) ($'000) (%)
2011–12 101 N/A N/A 137 58.8 12.8 80,431
2012–13 63.3 N/A N/A 408 20.2 13.7 82,474
2013–14 62.3 N/A N/A 434 18.7 15.6 81,273
2014–15 69.2 N/A N/A 324 25.3 15.3 81,876
2015–16 70.9 N/A N/A 317 26.6 15.3 84,381
2016–17 64.0 N/A N/A 429 19.4 15.7 83,157
2017–18 65.2 N/A N/A 413 20.3 15.5 83,711
2018–19 66.6 N/A N/A 439 18.8 15.9 82,746
2019–20 71.8 N/A N/A 329 24.9 15.9 82,056
2020–21 71.5 N/A N/A 341 24.1 15.9 82,088
2021–22 73.6 N/A N/A 328 25.7 15.8 84,141
2022–23 72.5 N/A N/A 351 24.0 15.6 84,238
2023–24 73.0 N/A N/A 354 23.9 15.5 84,671
2024–25 73.9 N/A N/A 357 24.3 15.4 86,798
43 IBISWorld.com
Additional Resources
Additional www.industry.gov.au
Resources http://department of industry, science, energy and resources
www.aemo.com.au
http://australian energy market operator
www.cleanenergycouncil.org.au
http://clean energy council
Industry Jargon BAGASSE

A waste product from sugar cane processing that can be used to generate energy.
GIGAWATT
A unit equal to 1,000 MW.
GIGAWATT HOUR (GWH)

The energy that is required to power 10 million 100-watt units, such as light globes, for an
hour.
LARGE-SCALE GENERATION CERTIFICATE (LGC)

Certificates that allow electricity retailers to meet their RET responsibilities.
MEGAWATT (MW)
A unit equivalent to one million watts.
RENEWABLE ENERGY TARGET (RET)

Regulation designed to increase the share of renewable generation in Australia. The current
target is 33,000 GWh by 2020.
ROARING FORTIES
Stormy ocean tracts between latitudes 40 and 50 degrees south.
Glossary Terms BARRIERS TO ENTRY

High barriers to entry mean that new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an industry.
44 IBISWorld.com
CAPITAL INTENSITY
Compares the amount of money spent on capital (plant, machinery and equipment) with
that spent on labour. IBISWorld uses the ratio of depreciation to wages as a proxy for capital
intensity. High capital intensity is more than $0.333 of capital to $1 of labour; medium is
$0.125 to $0.333 of capital to $1 of labour; low is less than $0.125 of capital for every $1 of
labour.
CONSTANT PRICES
The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation
using the current year (i.e. year published) as the base year. This removes the impact of
changes in the purchasing power of the dollar, leaving only the 'real' growth or decline in
industry metrics. The inflation adjustments in IBISWorld’s reports are made using the
Australian Bureau of Statistics' implicit GDP price deflator.
DOMESTIC DEMAND
Spending on industry goods and services within Australia, regardless of their country of
origin. It is derived by adding imports to industry revenue, and then subtracting exports.
EMPLOYMENT
The number of permanent, part-time, temporary and casual employees, working proprietors,
partners, managers and executives within the industry.
ENTERPRISE
A division that is separately managed and keeps management accounts. Each enterprise
consists of one or more establishments that are under common ownership or control.
ESTABLISHMENT
The smallest type of accounting unit within an enterprise, an establishment is a single
physical location where business is conducted or where services or industrial operations are
performed. Multiple establishments under common control make up an enterprise.
EXPORTS
Total value of industry goods and services sold by Australian companies to customers
abroad.
IMPORTS
Total value of industry goods and services brought in from foreign countries to be sold in
Australia.
INDUSTRY CONCENTRATION
An indicator of the dominance of the top four players in an industry. Concentration is
considered high if the top players account for more than 70% of industry revenue. Medium
is 40% to 70% of industry revenue. Low is less than 40%.
45 IBISWorld.com
INDUSTRY REVENUE
The total sales of industry goods and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside the firm (such as commission
income, repair and service income, and rent, leasing and hiring income); and capital work
done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed
tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA)

The market value of goods and services produced by the industry minus the cost of goods
and services used in production. IVA is also described as the industry's contribution to GDP,
or profit plus wages and depreciation.
INTERNATIONAL TRADE
The level of international trade is determined by ratios of exports to revenue and imports to
domestic demand. For exports/revenue: low is less than 5%; medium is 5% to 20%; and high
is more than 20%. Imports/domestic demand: low is less than 5%; medium is 5% to 35%;
and high is more than 35%.
LIFE CYCLE
All industries go through periods of growth, maturity and decline. IBISWorld determines an
industry's life cycle by considering its growth rate (measured by IVA) compared with GDP;
the growth rate of the number of establishments; the amount of change the industry's
products are undergoing; the rate of technological change; and the level of customer
acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENT
Businesses with no paid employment or payroll, also known as nonemployers. These are
mostly set up by self-employed individuals.
PROFIT
IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s
profitability. It is calculated as revenue minus expenses, excluding interest and tax.
VOLATILITY
The level of volatility is determined by averaging the absolute change in revenue in each of
the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to
±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.
WAGES
The gross total wages and salaries of all employees in the industry. Benefits and on-costs
are included in this figure.
46 IBISWorld.com
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AU INDUSTRY (ANZSIC) REPORT D2619a

Wind and Other Electricity Generation in Australia

IBISWorld.com +61-3-9655-3800 [email protected]

About This Industry...........................................5 Competitive Landscape...................................25

Industry Definition..........................................................5 Market Share Concentration....................................... 25

Industry at a Glance.......................................... 7 Major Companies............................................ 30

Executive Summary....................................................... 9 Major Players............................................................... 30

Products and Markets..................................... 18 Industry Data................................................................43

• The downturn in global economic conditions is expected to lead to a reduction in

• The decline in the electricity service price is expected to reduce returns on

• A slowdown in the domestic manufacturing sector is expected to reduce demand

About This Industry

Major Players AGL Energy Limited

Pacific Hydro Pty Ltd

Main Activities The primary activities of this industry:

Tidal electricity generation

Geothermal electricity generation

Bioenergy electricity generation

Electricity generation from other renewable energy sources

The major products and services in this industry:

Renewable energy certificates

Hydro-Electricity Generation Fossil Fuel Electricity Solar Electricity Generation

RELATED INTERNATIONAL INDUSTRIES

Annual Growth Annual Growth Annual Growth -0.3% 4.0%

3.1% 3.1% Industry Structure

Annual Growth Annual Growth

1.3% Revenue Volatility Capital Intensity

2.0% 2.0% Key Trends

Products & Services Segmentation

Electricity generation Renewable energy

Major Players % = share of industry revenue SWOT

Key External Electricity service price

Demand from electricity retailing

Public concern over environmental issues

Demand from fossil fuel electricity generation

generate large-scale generation certificates through the federal Renewable Energy

Demand for renewables

Rising public concern regarding environmental issues has led to

The industry has benefited from significant assistance from state

The industry has benefited from the growth in wholesale electricity

Rising demand for renewable energy has led to an increase in

Historical Performance Data

Electricity wholesale prices are anticipated to decline from their

Investment in wind farms and other industry assets is projected to

Industry operators are expected to increasingly expand their renewable energy

Rising demand for electricity produced from sustainable resources,

Performance Outlook Data

LIFE CYCLE REASONS

The regulatory environment promotes new investment in renewable projects

The industry exhibits several growth characteristics. Enterprise numbers have

Products and Markets

Consumers in Australia Industrial Machinery Manufacturing in

The Wind and Other Electricity Generation industry generates

The sale of wholesale electricity is expected to account for the

Renewable energy certificates

Large-scale renewable energy generators receive a secondary

Demand Demand for electricity is tied to trends in household, industrial and

Commercial and services sectors

This market includes business operators in wholesaling, retailing, hospitality and

changed due to the growing household adoption of small-scale photovoltaic