If renewables target is met this year, what’s next for wind and solar?

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Greens challenge Labor to get new modelling to justify its support for an emissions intensity scheme, as attention turns to what’s next for energy policy now that the renewable critics have egg on their face over predictions the RET could never be met.

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As recently as a few months ago, the biggest detractors of Australia’s renewable energy target were saying that there was not a chance that enough wind and solar could be built to meet the 33,000GWh threshold, and the RET should be cut again.

“There is no way we are going to make the 33,000 target. It’s impossible to get there,” Trevor St Baker, the founder of ERM Power, one of the country’s biggest retailers and a recent investor in coal fired generators, told the AFR, adding that 20,000GWh was all that we could “reasonably expect to be built.”

Really? The Clean Energy Regulator data released on Wednesday must have come as quite a shock. According to the CER, the number of solar and wind plants already committed, with signed contracts, takes the total to 28,000GWh. Enough wind and solar could be committed to meet the RET by the end of 2017.

CER pipeline

St Baker’s comments were typical of those arguing for the RET to be cut completely or slashed. Conservative commentator Judith Sloan, wrote in The Australian last November: “There is no way that the revised target of 33,000 gigawatt hours for large-scale renewables by 2020 will be met.”

Such self interested remarks look ridiculous in the light of the CER data. It turns out that even the old 41,000GWh could have been met quite easily, particularly if you consider the three-year investment drought caused by the Coalition’s efforts to firstly review, then try to kill, and finally cut the RET.

These are exciting times for the renewables industry. All told, nearly 6,000MW of large-scale renewables is or will be built in a relatively short time frame. This is a record amount of development.

Large-scale solar, a technology largely ignored in Australia despite the obvious progress overseas, where its unsubsidised costs have fallen to as low as $US2.6c/kWh (about one quarter of the wholesale price of electricity in Australia), has suddenly become the biggest source of new generation.

Solar is accounting for more than half the projects committed in the last six months, and the interest in new proposals is phenomenal. Transgrid reported 6,000MW of enquiries on its transmission network in NSW alone in the last 12 months. The CER describes the rise of solar as “extraordinary”.

The industry, and the commentariat, shouldn’t have been surprised. The smarter analysts have been predicting this for years. Now, the huge rush of solar projects, and the best of a huge pipeline of wind projects that may now go largely untapped, means that the RET could be fully committed by the end of 2017.

There are some in the renewable energy industry who think that the CER is painting a rosy picture, and fear it may take a little longer, particularly if the major retailers stop writing contracts for new plants.

But it does beg a question. If the RET is to be met by the commitments made before the end of this year, or even by the middle of next year, what happens next? Whatever does happen, it will most likely be in the absence of any national energy plan – presenting another cliff face where investment comes to an abrupt halt. So now is the time to be thinking about it.

“There is no federal policy to support large-scale renewable energy beyond this target,” says John Grimes, the head of the Australian Solar Council.

“It’s an utter lack of leadership and vision. This puts us back into position where international investors have a lack of confidence around investing in Australia. We have to rely on states (such as Victoria, Queensland, and the Northern Territory), going it alone (with their own targets).”

Former Liberal leader John Hewson agreed. “I’m dismayed that we sit today with no transition strategy from either side of politics to get to 2030 climate target, and what to do beyond that,” he told the ASC conference in Melbourne on Thursday.

Indeed, no mainstream political party has fully articulated a vision of what scientists, researchers, network owners and retailers know to be true – that we should be embracing a high renewable energy target as quickly as we can to smooth the way for the rapid transition we see around us.

The Greens want 90 per cent renewables by 2030, and Labor is aiming for 50 per cent.

The Coalition government says even this lower target is reckless and impossible, despite the fact that the rapidly decreasing costs, and the work down by AEMO, ARENA, the CSIRO and the networks, alongside numerous other research groups, show this claim to be nonsense, on both a technical and an economic level.

It wants the states to abandon their targets, but is offering no policy of its own.

The Greens on Wednesday put Labor on the spot by asking them to justify their attachment to an emissions intensity scheme (EIS), the main plank of the Labor Party’s platform of what comes next.

The attachment to the EIS as a policy mechanism has the whiff of Labor’s use of the CPRS as a tool to divide Turnbull and the right wing rump that was deployed in 2009.

Even Labor concedes that the two sets of modelling that justifies the EIS over an RET are rubbish – they assume low gas prices that do not, and will not exist, and costs for wind and solar that are so far out of date it is laughable.

The Greens distrust the EIS because it was originally dreamed up by the fossil fuel lobby, and is considered a Trojan horse for the gas industry.

“The EIS is becoming more and more popular among business and polluters precisely because they have looked at the details and realised that while it might push coal out, it won’t bring renewables in,” Greens climate spokesman Adam Bandt told the Australian Solar Council conference on Wednesday.

“Labor must come clean on the details as a matter of urgency if they want the renewable industry’s support.”

The Greens want Labor to crunch the numbers again, but this time with real costs.

Will it show that an EIS is the best mechanism? Or will it show, as they suspect, and as is in fact supported by the modelling, that an ambitious renewables target – either extending the current mechanism or perhaps delivered through a series of auctions – is the most cost effective means to reduce prices and meet emissions targets.

The call to account for Labor is fair, given that the EIS is the only form of carbon price in public debate right now, and is supported by a growing number of business groups.

But Labor is not in government right now. The real focus should be on the Coalition, the government that canned the carbon price, slashed the renewable energy target (after failing to cut it altogether), and has helped cause wholesale electricity prices to surge to twice the costs they would have been under a carbon price they once derided.

edis prices

Energy minister Josh Frydenberg this week suggested that renewables were unstoppable and irreversible, and praised the work of the two agencies that the Coalition also tried to kill, the Clean Energy Finance Corp and the Australian Renewable Energy Agency, in bringing prices down.

So what’s Frydenberg’s next move? It is now obvious that wind and solar are cheaper than new fossil fuels, and even existing gas plants. AGL has said we can forget about gas as a transition fuel, former coal plant executives agree that dispatchable power can be delivered more cheaply by renewables.

But how to dislodge the incumbents? And how to prove the right market signal for future wind and solar development?

The right wing of the party won’t allow him to embrace anything that looks like a carbon price. Putting faith in coal is insane, and embracing gas as a transition fuel would be an act of pure folly. If Barnaby Joyce really wants to see $100 lamb roasts, then he has only to follow his own prejudice on energy choices.

In the next few months, Frydenberg and his Coalition colleague are going to be faced with shocking energy price rises as wholesale costs are fed through to consumers. The scale of such rises were indicated by the recent doubling of solar export tariffs in NSW.

That is going to cause a stampede of more households and businesses to rooftop solar and battery storage. Rooftop solar costs less than 10c/kWh – less than the recommended tariff of exports back into the grid, and a fraction of the cost of energy imported from the grid.

The rooftop solar market is starting to rebound strongly, particularly among businesses. Morgan Stanley is also holding on to its forecasts of one million homes with battery storage by 2020.

The CSIRO and Energy Networks Australia are predicting phenomenal growth in solar and storage, rising to 80GW and 95GW respectively by 2050, when consumers will provide half of all the country’s electricity needs.

But because of the way the market rules are fixed, and the reluctance of most bankers to back “merchant plants”, the inaction of a federal government scared by its conservative base could still bring the large-scale wind and solar sector to a halt.

There is not a snowflake’s chance in hell that the gas price will fall – even the company once known as the Australia Gas Light Company (AGL) recongises this. Renewables and storage are beating it already. The idea of new coal is a joke perpetuated by right wing loonies who are kidding only themselves. Solar and wind costs have fallen so far.

It seems the only way that wholesale prices will reverse course is if more large-scale renewables are built. At a cost of between $60-$80/MWh, it is well below current wholesale prices and falling fast. Even the addition of battery storage will leave the total cost “well below” $100/MWh, according to Tony Concannon, the former head of Hazelwood who now runs Reach Solar, building a 220MW solar plant near Port Augusta.

But how to get this new capacity built? Everyone agrees that some sort of price signal is necessary, but that doesn’t necessarily mean a subsidy, according to Tristan Edis, from Green Energy Markets.

He has proposed using emissions intensity targets for the national grid, but rather than swapping “carbon credits”, and holding a series of auctions for new capacity, where coal and gas plants could compete. He’s in no doubt that the winners will be wind and solar, as they have been in auctions in numerous other countries.

Edis says that government can put in place policies, like the auction schemes overseas, that would resemble the emissions reduction scheme under Direct Action, and would drive electricity emissions down to levels consistent with their 2030 emission reduction target. And power prices will actually go down, too.

This was the scheme adopted by the ACT, and which is now being duplicated by Victoria, and adopted by Queensland and possibly NSW and elsewhere. It now appears to be the obvious solution to a Coalition terrified by $100 lamb roasts.

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9 Comments
  1. John Saint-Smith 2 years ago

    Not even Trump’s fantasies of a coal fired revival of the US economy can match the ‘Alice-in-Wonderland’ factor in Australia’s bizarre electricity market.

    • Ian 2 years ago

      You’ve got to know something about Australians, they tend to be self deprecating , especially when the Government is involved, but they certainly get on with the job, evidenced by this rush to renewables. We’re doing OK not like those yanks.

  2. Chris Fraser 2 years ago

    The carbon price and EIS methods may have their own advantages, but if demand grows because of say EVs, we would still have some generators invested heavily in emissions intensive plant, while new investors are completely clean. One way of reducing emissions from the former might be to legislate a ten percent reduction of emissions, year on year, for each of them based on their share of the total wholesale market. That leaves them to decide how they’ll invest in clean energy.

  3. Just_Chris 2 years ago

    my opinion, and it is not based on very solid foundations, is that we’ll effectively do nothing. Policy will remain fairly neutral, the states will continue to battle with the Feds and we’ll see no innovative thinking of any sort. That will result in under investment in particular in large capital intensive plant like coal or solar thermal power stations. If we’re lucky we’ll get some pumped hydro. As the coal plants fall to bits and need replacing we’ll buy gas, pv, battery and wind because they are cheap per plant, can be installed in any state and, most importantly, they can be constructed in one election cycle. The resulting mess might even work. My hope is the finkel review and some serious changes from that point on.

    • Mike Shackleton 2 years ago

      Outside of AEMO needing to change their settlement rules, there isn’t really anything else that needs to be done. Renewables can out compete on price, competition is good, let them compete. The only other problem I see is a failure of the grid to update their equipment as we go to a distributed generation network.

      • Richard 2 years ago

        Market reality will decimate the incumbents. If the networks don’t upgrade the grid to the high renewable energy resources pronto. Then the market will go round via a whole host of new options.
        Meanwhile the government acts like a bunch of teenage morons.

  4. Gnällgubben 2 years ago

    What to do? Double it! Make it 66000 GWh! It would be fun to see what the detractors have to say then. There is an avalanche of cheap renewables coming, with some storage in the right places it could go anywhere!

  5. Jo 2 years ago

    I cannot forget Barnaby’s shiny eyes when he was staring at the block of coal in parliament.

  6. Alastair Leith 2 years ago

    We need zero emissions in Australia by 2035 if the world is to meet the Paris ambition of zero global emissions by 2050 — which still is only a low chance of a 2.0º C peak in warming (some even say there’s a zero chance now given climate lag due to feedbacks and loss of cooling aerosols when the coal plants close). That’s because if you take China and India to peak by 2025 and be at zero by 2050 it doesn’t leave much for the West.

    Stationary energy needs to get out ahead of other sectors so they can be electrified with 100% RE not coal and gas. So really we should be aiming for 90-100% RE on the grid ASAP. Displace coal and gas with as much EE, DSM, RE and storage as possible. Which would probably mean reverse auctions with govt providing the certainty for investment. Often these projects are considered blue chip investments by super funds and so on, so why are we waiting? Oh yeah, fossil fuels and their war chests of gold corrupting the body politic. Federal ICAC now!

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