Foreign Investment Raising Concerns

There’s global interest in Tasmania’s wind farms — but can foreign ownership laws cope?

By Alison Branley, ABC News

https://www.abc.net.au/news/2021-01-06/foreign-investment-in-tasmanian-wind-farms-raising-concerns/13036164

A cow chews on some grass underneath a tree, with two wind turbines in the background.
The Chinese-owned Cattle Hill Wind Farm came online with 48 turbines last year.(ABC News: Alison Branley)

On the south-east corner of Australia, the winds known as the Roaring Forties whip across from the Indian Ocean.

Key points:

  • Most of Tasmania’s wind turbines have some form of Chinese ownership
  • An analyst believes investors are banking on a proposed cable to export energy to the mainland that may not stack up
  • Some are warning the regulator to learn the lessons of past foreign investments

As they cross Tasmania they lick its mountainous ranges, making the island one of the best spots in the world for wind farms.

And overseas investors have caught on. The majority of turbines on the island have some form of Chinese ownership.

But the foreign interest is starting to raise eyebrows, because Tasmania doesn’t necessarily need the extra energy.

The majority of its power famously comes from hydro-electricity.

The remaining 10 per cent has been supplied from either a small amount of gas or a power cable from the mainland known as Basslink.

“A lot of the big plans for wind farms in Tasmania are far in excess of Tasmania’s need for energy,” energy analyst Marc White told 7.30.

The turbines are springing up because of a proposal called Marinus Link.

It’s a $3.5 billion project to build a second power cable across the Bass Strait to Victoria, to allow energy to be exported to the mainland.

It would mean hydro-electricity and wind farms join forces to become a so-called “Battery of the Nation” and solve some of the country’s energy woes.

Water spill over a dam wall.
Tasmania has an extensive system of hydro-electricity dams.(Supplied: Hydro Tasmania)

The Federal Government has promised millions to help fast-track this power cable but energy analysts have growing concerns about the proposal.

Since the wind farms started feeding into the grid, Hydro Tasmania has been pumping the brakes on its hydro-electric dams to keep the grid under control.

Wind farms made up 37 per cent of the state’s power at one point in March last year, and hydro had to be scaled back.

Now, with the rise of battery technology, experts are also not convinced a second expensive cable is necessary.

Mr White believes if the business case for Marinus Link was there, the private sector would already be involved.

“Market players could have come forward and funded this project for the last 10 years. And nobody’s come forward,” he said.

Consumers could bear the cost

Marc White, wearing a suit and looking at the camera, sits in front of a laptop in an office.
Energy analyst Marc White is not convinced of the benefits of the proposed Marinus Link.(ABC News: Mitch Woolnough)

Mr White’s other major concern is that the structure of the current system means it would be up to Tasmania’s energy consumers to pay for Marinus Link.

“The problem is, they’re not the beneficiaries of the link,” Mr White said.

“Consumers could be asked to pay for a product that really benefits other parties such as wind farms and generators.”

Then there’s the possibility that too many wind farms could paradoxically lead to higher power bills.

“When the wind blows, the price goes very low,” Mr White said.

“But when the wind doesn’t blow, the price goes very high. Consumers have to pay for that market volatility.

“We’re not convinced that the numbers stack up.”

Premier Peter Gutwein told 7.30 the mainland wanted renewable energy and the Marinus case was sound.

“The initial business case indicates that it will be able to stand on its own two feet,” he said.

“We’ll get to a point where Marinus is a project that can get up.”

China-backed wind farm confident on Marinus Link

Wind turbines under a cloudy sky, with dead trees and an animal skull in the foreground.
Power generated at Cattle Hill Wind Farm is fed into the state’s energy grid.(ABC News: Alison Branley)

Others, like John Titchen from Cattle Hill Wind Farm, are equally optimistic.

The Chinese-owned farm in central Tasmania came online with 48 turbines earlier last year.

Mr Titchen, who is Goldwind Australia’s general manager, is reluctant to entertain any suggestion that Marinus Link might not go ahead.

“I expect that Marinus Link will proceed, there’s pretty significant federal and state support for the project,” Mr Titchen said.

He said the farm’s turbines weren’t at risk of becoming a stranded asset because they were already helping to make up the 10 per cent gap in the state’s power supply.

“The wind and the hydro really fit well together. Hydro is quite controllable,” he said.

At the Cattle Hill Wind Farm headquarters in Waddamana, there’s an office for their major investor and 80 per cent shareholder PowerChina.

Who owns what?

  • Woolnorth Wind Farm [Musselroe, Studland Bay, Bluff Point] (118 turbines) : Hydro Tasmania, with a 75 per cent share by Chinese state-owned enterprise Shenhua’s Clean Energy Group
  • Cattle Hill Windfarm (48): 20 per cent Chinese private wind farm Goldwind, 80 per cent state-owned enterprise PowerChina
  • Granville Harbour (31): Started by Tasmanian farmer Royce Smith and backed by Australian infrastructure investment group Palisade Partners
  • Jim’s Plain and Robbins Island (31 + 163): UPC Renewables which is based in Hong Kong but is part owned by UPC Asia Pacific which is 64 per cent by US shareholders, 21 per cent by a Dutch shareholder, 13.5 per cent by British shareholders and 1.33 per cent by a Canadian shareholder. The rest owned by Philippines company AC Renewables
  • Huxley Hill, Flinders Island and Sassafras (7): Single or small numbers of turbines, mainly owned by Hydro Tasmania
  • There are other proposals for Low Head by Australian company Epuron

However, the reason for Chinese investment in this remote piece of infrastructure could be more to do with the turbines themselves than Tasmania’s energy needs.

Jeffery Wilson, research director at the University of Western Australia’s PerthUSAsia Centre, said China had a well-documented “over-capacity” problem.

“Now that China has largely industrialised, most of its country has an industrial capacity overhang problem,” Dr Wilson said.

“Too much steel, too many automobiles, too much construction equipment.

“What we’ve seen with China’s Belt and Road initiative launched in recent years is an attempt to export that capacity.”

Mr Titchen said the Cattle Hill project included turbines manufactured in China, with “locally manufactured sections”.

He said Goldwind had a variety of investors across Australia, including some from the Middle East.

“Whoever’s got the most competitive source of capital will be attracted to projects,” he said.

While cheap money is great for developers, Dr Wilson said Chinese companies don’t necessarily invest in feasible projects.

“Chinese state-owned enterprises are a mixed beast,” he said.

“They combine both normal commercial incentives but they also often bring policy or strategic goals on behalf of the Chinese government.”

A man and a woman in orange high-vis stand next to a car in front of some large wind turbines.
John Titchen says government support for Marinus Link means it is likely to proceed.(ABC News: Alison Branley)

Wind farm not popular with some green groups

The renewable energy from wind farms in Tasmania has raised the ire of Tasmania’s green groups.

Veteran campaigner and former Greens leader Bob Brown has been a vocal opponent for many reasons, including their impact on the state’s threatened eagle populations.

One particular farm that’s causing outrage is the proposed Robbins Island Wind Farm in the north-west of the state.

It includes 270-metre tall turbines that are roughly double the size of the famed Stanley Nut headland nearby.

Pat and Len Doherty have run six tourist cabins in the Loongana Valley for 40 years.

A high-voltage power line that will connect the Robbins Island proposal to Marinus Link will run alongside their property in central Tasmania.

Pat and Len Doherty stand in a lush Tasmanian property, with mountains and escarpment behind them.
Pat and Len Doherty say the plan to run power lines near their property will ruin their business.(ABC News: Mitch Woolnough)

Their private nature reserve has been a drawcard for walking groups and international tourists who want to view Tasmanian Devils and platypuses in their natural surrounds.

“It’ll ruin our business,” Mr Doherty said.

While there, tourists also visit the world renowned Leven Canyon nearby.

The proposed power lines will pass to the south of the Canyon and take out a 60-metre-wide clearing as they pass through.

“You’ll go to the Leven Canyon, look out, you’ll be looking at towers coming across from one side to the other,” Mr Doherty said.

As the couple questioned:What good is renewable energy that destroys natural habitat?

An aerial view of Leven Canyon, lined by green and gold trees under a blue sky dappled with clouds.
TasNetworks wants to run high-voltage powerlines near Leven Canyon to connect to the proposed Robbins Island Wind Farm to the proposed Marinus Link.(ABC News: Mitch Woolnough)

“Renewable energy is great, but this is not the best way to go about it,” Mr Doherty said.

“It could be all one huge white elephant.”

TasNetworks, which is planning the powerline route, said in a statement it was “listening to local communities and working with landowners and local residents to minimise potential impacts and explore the benefits”.

British Virgin Islands is base for Tasmanian wind farm

The Robbins Island Wind Farm is being proposed by UPC Renewables, which is headquartered in Hong Kong.

It’s got a complex company structure which the ABC traced to the British Virgin Islands but not beyond.

Aerial shot of Robbins Island in Bass Strait.
Robbins Island sits in the Bass Strait, off Tasmania’s north-west tip.(ABC News: Henry Zwartz)

A spokesman said in a statement: “UPC Renewables Australia is majority owned by US, UK, Netherlands and Philippines interests (AC Energy) and the management team is 100 per cent Australian-based.”

Upon further inquiry the company said UPC Asia Pacific Holdings Limited was approximately owned 64 per cent by US shareholders, 21 per cent by a Dutch shareholder, 13.5 per cent by British shareholders and 1.33 per cent by a Canadian shareholder.

That’s news to Len and Pat, who said they’d been repeatedly told UPC was an Australian company.

“We wonder where the profits from the wind farm are going to end up,” Len Doherty said.

Chinese dairy purchase gone wrong sounds warning

Evan Rolley is among those who are urging caution with foreign ownership, particularly given the role of the Foreign Investment Review Board.

Mr Rolley, himself an advocate of foreign investment, said the board was not well structured to govern conditions attached to sales.

He ran Van Diemen’s Land Dairy for two years after it was bought by a private Chinese investor.

Evan Rolley, a man with a grey-and-black beard and a hat, looks at the camera in front of a vineyard.
Evan Rolley says the Foreign Investment Review Board did not properly enforce the conditions of purchase when a Chinese investor bought the dairy.(ABC News: Mitch Woolnough)

The dairy is made up of 25 farms on Tasmania’s north-west coast and is the largest grass-fed dairy in the country.

“The regional community of the north-west coast were given this very glowing investment proposal,” Mr Rolley said.

“It included investing $100 million into the farm, 95 new jobs, an air bridge between Tasmania and China along with a commitment to invest in the Aboriginal and environmental heritage of the farms.

“These were very important in community support.”

The review board approved the sale on the basis the promised conditions were met, but Mr Rolley said none of them were delivered.

Mr Rolley said local businesses felt that they had been misled.

Five non-executive board directors quit in 2018, and he left soon after.

“That’s where people, I think, lose faith that foreign investment is delivering,” he said.

Van Diemen’s Land representatives did not respond to the ABC’s inquiries.

Mr Rolley said the Foreign Investment Review Board didn’t adequately enforce the conditions it attached to sales.

“Simply relying on a report from the investor about whether or not they’re complying is completely inadequate,” he said.

The Federal Government says it has a suite of reforms to enhance its compliance regime.

It says it is spending $54 million on reforms that include stronger and more flexible enforcement options such as increased penalties.

But analysts like the Perth USAsia Centre’s Jeffrey Wilson aren’t convinced.

“China dominates the Foreign Investment Review Board’s work at the moment,” Dr Wilson said.

“In this new context, with new powers and new obligations to do so. It’s going to need a big investment in its enforcement capabilities.”

The Productivity Commission agreed, saying in a report earlier in the year that the board, based in Treasury, wasn’t “well-suited to being a regulator”.

The board’s annual report said it has just 55 staff. Dr Wilson estimates they would need at least 200.

The Federal Government says it has increased staffing, including contractors.

Watch this story on 7.30.

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