Fate of big solar projects could ride on May poll, and carbon credits

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Analyst says federal election critical to fate of large scale solar industry in Australia, and raises prospects of carbon credits playing a role in funding.

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The fate of Australia’s large-scale renewable energy industry will depend heavily on the outcome of next month’s federal election, Green Energy Trading’t Ric Brazzale has forecast – and if the Coalition wins the day, the outlook could be grim.

Speaking at the Smart Energy Conference and Exhibition in Sydney on Tuesday, Brazzale detailed the record smashing year for large-scale solar PV in 2018, and what looked like more of the same this year, with a combined market of 5GW big solar “pretty much locked in” for development.

But with the federal Renewable Energy Target as good as met, and with wholesale electricity prices set to fall, there was “not much good news” ahead for renewable energy projects – and particularly not if the Morrison government was re-elected.

“We need new policies,” Brazzale told the conference.

“Under the Coalition, there is no incentive for new investment,” Brazzale told the conference. “For small-scale solar, it will be business as usual as the STC program progressively winds down over the next 12 years.

And in terms of large-scale solar, “nothing needs to be done to meet their targets.”

Under ALP policy, however, there was the promise of a resurrected National Energy Guarantee, or failing that reverse auctions, Bazzale said.

As well as its policies for large-scale solar, Brazzale notes Labor’s proposed $5 billion spend on energy security and modernisation; its “really interesting policy” for one million household batteries by 2025; and its behind the meter solar rebates and financing.

“If Labor wins” – and as Brazzale points out, they are currently the favourites with both news polls and sports betting agencies – “we’re likely to see policies implemented that will significantly support the solar industry.

“But we’re still a long way from the election. And anything can happen.”

Intriguingly, Brazzale also pointed to another aspect of the Labor policy, the safeguards mechanism which will have more bite under their 45 per cent emissions target, and will invite big business to trade carbon credits, known as ACCUs, which already exist under the Coalition government.

“With an expanded role for the Safeguard Mechanism to drive abatement in sectors other than electricity, there will be a need for an expansion of cost-effective supply of abatement,” Brazzale says.

“New renewable projects will be able to provide liquidity quite quickly in this market and will serve to reduce the volatility in the ACCU market.”

Brazzale is working on a paper analysing how this might work. It will require new methodologies to be developed for renewable energy generation to cover exports to the grid and on site generation (behind the metre).

Brazzale hastens to add that any such project that is accessing assistance from elsewhere – such as the existing RET, a future National Energy Guarantee or contracts through reverse auctions, should not be eligible to create ACCUs. This would be double counting and would not be additional to the 45 per cent target.

But renewable energy projects that have not registered for the RET and commence first operation after, say, January 1 in 2020, should be eligible to create ACCUs.

“It may take some time until a newly elected Labor Government is able to design and legislate an electricity sector emission reduction mechanism (such as the NEG) and such a scheme may possibly face Senate cross-bench resistance.

“This gap in legislative clarity creates a risk that investment and construction activity in renewable energy projects slows or stalls.

Providing a clear framework for post 2020 renewable energy projects to create ACCUs could be done quickly and without legislation and so could be very useful in maintaining renewable energy investment and construction momentum, as well as assisting non-electricity businesses to meet their safeguard obligations.”

He says ACCUs for renewable power generation also creates an effective mechanism for GreenPower and other voluntary abatement whereby the ACCUs can be voluntarily surrendered so that such action actually leads to a reduction in Australia’s greenhouse emissions beyond what would otherwise be the case.

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