Thanks baron.I won't post the opinion piece, just suck the...

Thanks baron.

I won't post the opinion piece, just suck the juice:

Five forces are simultaneously decelerating renewables investment: the end of the renewable energy target (RET), growing network constraints, a weaker Australian dollar, renewables cannibalising their value in the market and, most recently, a large and exogenous shock to electricity prices.

Like a domino chain, falling gas prices have halved domestic wholesale electricity prices.While coal-fired power stations still produce about 73 per cent of our electricity, gas generators are needed to top up supply and so are the main marginal price setters. When gas goes up or down, electricity follows.

This green rush was primed by a combination of factors, led by high wholesale electricity prices and a push to capture the fading financial benefits of the RET subsidies.It has resulted in grid congestion to some high renewables regions, triggering a heated debate about what should be built to fix this and who should pay.With the RET now delivered, the value of the subsidy scheme is evaporating – as it was designed to. Certificates for producing large-scale wind or solar worth $80 two years ago now fetch $27 and are heading towards zero.Wholesale electricity prices have halved to about $40 per megawatt hour, which is at or below break-even for most large-scale projects.

Renewables are high capital, low operational expenditure. As most of the key components of renewables projects are imported, a softer Australian dollar will push up the strike price needed to get new projects across the financial line.

Meanwhile, the value of renewable electricity keeps falling as more projects come on line, as evidenced by canyoning electricity prices in the middle of the day in high solar states such as Queensland and South Australia.The eroding value of renewables generation will not self-correct. It will require active measures taken to rebalance the intermittent oversupply – such as investment in large-scale storage, load shifting capacity, or new processes that can soak up the surplus electricity.

(Renewable) technologies are highly automated, low maintenance and fuel free.

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Ash here.

For Wind, revenues from at-market electricity sales and LRECs will be down. Contracted sales will lag then follow.

Solar, pumping mutely into midday, will struggle to cover its cost of capital. Holders of utility scale solar will wonder why they bothered.

Coal's high fixed costs means the least efficient will suspend production. Some of these will never reopen.

Gas has got a lot cheaper, which has driven down the marginal cost of electricity and made gas producers more competitive.

For IFN, Smithfield and SA OCGT (under construction) just became more useful and valuable, despatchable at lower price points. The value add Bonney Bess provides arbitraging low/nil value intermittent wind production into despatchable peak production likely doesn't change. Production from IFN's "highly automated, low maintenance and fuel free" windfarms doesn't change.

Lower electricity prices mean second hand windfarms for sale are cheaper. RR & team must be looking at WFs whose owners despair over grid congestion and are ready to capitulate. Add a battery as an alternative destination and the problem is largely remedied. The right addition to IFN's WF kit would enhance geographic diversity and make the entire enterprise more reliable.

IFN has ~$100m in cash. Even if lower prices mean it can merely cover financing costs and the small dividend, it can consider buying in this slump. There are also gains to be had in re-financing its debt - plenty of money out there for sound names.

So, maybe lower profits and cashflow but better opportunities.

Ash