Australian investment in large-scale renewable energy projects fell sharply in the first quarter of 2016, more than six months after the Coalition government promised “certainty” after forcing Labor to agree to slash the renewable energy target to 33,000GWh.
New data from Bloomberg New Energy Finance showed that investment in large-scale renewables – wind and solar – slumped to just $US69 million, falling back to levels seen in the midst of the investment freeze, when the then Abbott government sought to abolish the RET altogether, or seek bigger cuts.
The impact in 2014 was so dramatic that large-scale investment actually dried up completely in the last quarter of that year, but the market is still struggling as utilities avoid contracts and financiers baulk at the lingering uncertainty of the market.
BNEF said unless investment in large-scale assets picked up by the end of the year, there was a real risk of falling short of the large-scale renewable energy target by 2018.
So far, nearly all the investment in large-scale renewable energy has come from projects contracted by the ACT government, and its reverse auction scheme, or through the Clean Energy Finance Corp.
Only one project, the White Rock wind farm in northern NSW, owned by China wind energy giant Goldwind, has committed to construction relying on the RET and market prices. Dozens of other projects are in the pipeline but are struggling to get finance.
This table above (please click to enlarge) shows the pattern of investment over the last few years. BNEF notes that the bulk of investment in renewable energy has come from homes and businesses investing in rooftop solar, and increasingly battery storage.
“The small-scale PV market continues to prop up Australia’s renewable energy sector, now estimated to represent 86 per cent of all new investments,” BNEF said of the latest quarter.
That is also despite a modest fall in the amount of rooftop solar installed across the country, which other groups have estimated to total just over 150MW for the first three months of the year. Battery storage is also starting to make inroads into the market.
Utilities are expected to exhaust their stock of LGCs – large-scale generation certificates – unless they sign new contracts within the next 12 months. Estimates of how much needs to be committed before the penalty price is incurred varies between 2,000MW and 4,000MW.
If the penalty price is incurred, the cost is borne by the consumer, with the money going to government revenue rather than renewable energy projects. There is no penalty on retailers, as RenewEconomy points out in this story.
BNEF also released a report overnight that said Australia will need to lift its ambition in coming years to keep up with its trading partners as they respond to climate science, and increased commitments to the Paris climate agreement.
“In our view, the carbon-clean energy virtuous circle suggests that Australia’s major trading partners could well pledge stronger 2030 emissions reduction commitments at the five-yearly review points in 2020 and 2025,” BNEF said in its analysis.
“Australia – which is essentially a follower on climate policy – will likely follow suit as it seeks to keep pace with peers and retain its place as a ‘diplomatic middle power’.
“Australia’s current emissions reduction target of 26-28 per cent below 2005 levels by 2030 should thus be regarded as a low-case scenario. Australia’s final 2030 target is likely to be higher and somewhere between this and a high-case scenario of 45-63 per cent, which is Australia’s fair-share of burden to limit warming to 2°C.
“Australia’s current climate policy framework is insufficient to meet the current targets, let alone deeper commitments. Market participants should thus expect further policy measures, including in the power sector (to modernise and decarbonise the generation fleet) and the broader economy (to achieve national targets).”
Giles Parkinson is founder and editor-in-chief of Renew Economy, and founder and editor of its EV-focused sister site The Driven. He is the co-host of the weekly Energy Insiders Podcast. Giles has been a journalist for more than 40 years and is a former deputy editor of the Australian Financial Review. You can find him on LinkedIn and on Twitter.