Australia: Gone with the wind: Planning Regulations Blow Away Investment

As the Federal Government rolls out funds to support the development of renewable energy, tough planning regulations are discouraging the development of wind farm projects in Victoria and New South Wales. The threat of similar rules in other states and territories has added to industry apprehension and is holding back investment in wind energy.

Last year, Victoria made a series of amendments to all Victorian Planning Schemes ( Victorian Amendments). The last set of amendments banned the development of wind farms in certain areas and gave residents the power to veto any turbine construction within two kilometres of their homes.

Wind farm projects which received approval before the Victorian Amendments are now required to meet certain milestones, such as commencing construction, to avoid having to reapply under the new rules. There are approximately 20 such projects, representing a total capacity of 2000MW and a capital cost of around $4.7 billion. To date, at least one wind farm (Wind Farm Development's 42MW Naroghid project) has missed its deadline to begin construction. If it chooses to go ahead with the project, Wind Farm Developments will now have to present a revised proposal, as its current plan does not conform to the new regulations.

New South Wales has followed Victoria's onerous approach and is currently considering the enactment of its Draft NSW Planning Guidelines: Wind Farms ( NSW Guidelines), which have been dubbed as some of the strictest in the world. The NSW Guidelines were introduced in December 2011 and were open for public consultation till 14 March 2012. The Minister for Planning and Infrastructure is aiming to promulgate the guidelines by as early as this month.

Like Victoria, the NSW Guidelines impose a setback distance of at least two kilometres (albeit, with a right to appeal to a Joint Regional Planning Panel through a "Gateway Process"). The NSW Guidelines go even further than the Victorian Amendments, by proposing strict requirements around community consultation, visual amenity, noise, health, decommissioning and auditing and compliance.

Approximately 17 wind farms applied for planning approval before the NSW Guidelines were introduced. The Minister for Planning and Infrastructure has estimated that 13 of these 17 projects would not conform to the guidelines. While these projects will not be formally assessed under the NSW Guidelines, the Department's Director General has written to the relevant proponents, encouraging them to have regard to the guidelines. If the NSW Guidelines are enacted into law, the Minister could impose a requirement to meet milestones or other construction deadlines, as was done in Victoria.

There have been no new wind farm applications in Victoria or NSW since the respective introductions of the Victorian Amendments and the NSW Guidelines. The issue for developers is that, at best, the nature of the regulations makes the planning and approvals process more expensive and time consuming, thereby adding additional cost and delays to the project. At worst, they make a project unfeasible. At least one large wind energy company (Pacific Hydro) has stated that it will no longer develop wind projects in Victoria after it completes projects with existing planning approval. Studies have estimated that these policies will eventually drive away $3.6 billion worth of investment in Victoria and $6 billion in NSW.

South Australia is the only other state which has sought to specifically address wind farms in its planning framework. In October 2011, the State Government made "interim" amendments to the Development Plans of 56 different councils ( SA Amendments). The SA Amendments have temporary operation until 12 October 2012, at which point the Minister for Planning Transport and Infrastructure will consider giving them permanent force, depending on the outcome of the public consultation process.

The Government's stated aim behind these amendments is to maintain South Australia's "international reputation for hosting wind investment". Accordingly, the SA Amendments are friendlier to wind farm development than those in Victoria or NSW. For example, the SA Amendments impose a mandatory setback distance of one kilometre, rather than two. More significantly, the SA Amendments have removed third party appeal rights to wind farm projects in "less populated zones". This is a significant change, as previously any person could appeal the approval of a wind farm development.

While encouraging, even investors in South Australia remain in doubt, with the State Opposition campaigning on a platform to repeal the SA Amendments and replace them with regulations similar, if not stricter, than those in Victoria and New South Wales.

Western Australia and Queensland have not yet specifically addressed wind farms in their planning frameworks. As Australia's richest resource states, with significant gas reserves, the uptake of wind energy has been slower here than other states or territories. This has made the imperative to establish guidelines lower. Last month, there were rumours that the Queensland Government was planning on implementing a two kilometre setback policy, as a result of health concerns relating to wind farms. While this has since been dismissed by the Queensland Government, it adds to industry jitters about investing in wind energy.

At the Federal level, a different story is playing out. The Federal Government has set up a number of initiatives to drive investment in renewable energy (at least $20 billion worth of investment expected to be driven by the Renewable Energy Target, $10 billion has been allocated to the Clean Energy Finance Corporation, $3.2 billion to the Australian Renewable Energy Agency, and, of course, the carbon price, which will help improve the competitiveness of renewable technology). Tough planning regulations at the State level will block the potential of these Federal initiatives to increase wind farm development.

Inevitably, those states which strike a genuine balance between community concern and supporting wind farm development will receive the lion's share of investment. So far, only one state seems serious about this opportunity.

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