Thirty of the biggest debt and equity investors in Australia’s wind and solar industry have cited growing risks around grid connections and uncertainty over changes to market rules as the biggest threat to new investment in the country.
At an investor roundtable hosted last week by the Clean Energy Council, the investors cited the three biggest hurdles to new investment in wind and solar farms in Australia, which has fallen to its lowest level for years.
– Unpredictable grid connection and associated delays in commissioning
– Increased congestion risk and constraints placed on operational projects
– Change and uncertainty about long term energy market design.
The investors included most of Australia’s biggest banks (ANZ, CBA, NAB and Macquarie), some of the largest energy companies in the world (Iberdrola, Enel, RWE, Total Eren), and some of Australia’s biggest utilities (AGL, EnergyAustralia and Meridian).
It also included some of the leading renewable energy investors and developers in Australia (Neoen, Acciona, John Laing, Elliott Green Power, Palisade, Impact Investment, Pacific Hydro, Octopus, FRV, RES, PARF and Infigen), and some of the biggest equipment suppliers (Canadian Solar, Hanwha, Siemens Gamesa).
“It was a formidable of collection of companies,” Kane Thornton, the CEO of the Clean Energy Council, told RenewEconomy.
“We ran a poll, and these were the top three issues around the grid and market. That grid connection issue is consistent with what the broader industry is worried about, and in some cases it has had material impacts on current investment and uncertainty.”
The uncertainty around grid connection, construction delays, commissioning delays, and growing grid congestion and network constraints have contributed to some of the huge losses recorded in the last two years by contractors, developers and investors. Some have gone out of business, others have withdrawn from the market, and some have decided to quit the country.
Meanwhile, the main rule makers and regulators have embarked on a complete re-write of the market rules – under the tutelage of the Energy Security Board – which are expected to come into force in 2025. Still more rule changes are being proposed and imposed on an ad hoc basis to address deficiencies in the market.
The investor roundtable was held behind closed doors and its deliberations are not being released – apart from the findings of the poll. But they will be sharing their views with regulators and policy makers, Thornton said.
“The discussions were about recognising the risks … and making sure regulators and policy makers knew that investors are very concerned about this issues,” Thornton said.
“We are working with the Australian Energy Market Operator on grid connection issues, in both the immediate sense, and for further reforms, particularly for a review of the system strength issues and the “do no harm” policies.
The “do no harm” policy – designed to ensure that any new wind and projects invest in equipment that ensures that the grid is not weakened by their inclusion, have been widely criticised, including by networks themselves who say the “ad-hoc” nature of the additions may be reducing grid security rather than maintaining it.
Many of the problems lie in the lack of infrastructure planning and investment, and while AEMO has unveiled its 20-year blueprint to accommodate up to 94 per cent renewables by 2040, in what it describes as the “world’s faster energy transition”, there is concern on the impact of the investment now and in the next few years.
“Hopefully (we can find a way) to reduce risks and make them more manageable,” Thornton said..