Renewable energy investment heads to Abbott-era lows, as policy void takes hold

A new report has warned that renewable energy investment in Australia is headed to lows not seen since former Prime minister Tony Abbott brought the industry to an effective stand-still in 2015.

A major briefing paper published by the Clean Energy Council on Wednesday shows quarterly financial commitments in new renewable energy projects have collapsed to less than 800MW in each of the first two quarters of 2019, from a high of more than 4500MW in late 2018.

The investment outlook notes that while the plunging costs of large-scale solar and wind energy generation mean renewables no longer need subsidies to drive development, the need for long-term policy certainty and regulatory reform remain “crucial” to investor confidence.

In turn, investor confidence remains crucial to building enough large-scale renewable energy generation and energy storage systems fast enough to replace ageing and heavy-polluting coal power plants.

“With Australia’s coal-fired power stations ageing rapidly, it is essential new clean energy projects are built now to ensure lower power prices and improved reliability when these old clunkers retire from service,” said CEC chief Kane Thornton on Wednesday.

Unfortunately – and as Dylan McConnell explains here – with last week’s “good news” that the 2020 large-scale Renewable Energy Target (RET) would be met, has come the bad news that there is now no energy and climate policy to replace it.

There is, however, no shortage of potential projects. Neoen Australia on Wednesday flagged a massive wind, solar and battery project in Australia, taking the pipeline in that state to more than $16 billion. The Australian Energy Market Operator has said that nearly 100GW of enquiries have been received.

Victoria and Queensland have state-based targets, but the roll-out of these will be carefully controlled, while other investment is on hold as the market awaits for government intervention into the closure of coal-fired generators, and final decisions on projects such as Snowy 2.0 and the federal government’s delayed Underwriting New Generation Investment scheme.

The CEC warns that if the current pause is to become a sustained slow-down, it would have a dramatic impact on Australia’s energy prices and reliability, as well as the ability to achieve future emissions reductions targets.

“Investors have been forced to balance their record enthusiasm for Australian wind and solar projects with a lack of national policy, growing threats of government interference in the energy market and a range of out-of-date regulations,” Thornton said.

The report notes that the current public debate around Australia’s energy transition has not been helpful either, with politicians and media tending to “dramatically overstate” the risks associated with an increased uptake of renewable energy.

“Australia does not have an energy supply problem or a variable energy problem, but it does have a peak demand problem,” the report says.

“It is important that we continue to build more clean energy projects ahead of the retirement of large generators such as Liddell to ensure the continued security of the power system and that it can meet peak demand.”

This, of course, is what AEMO, the Australian Energy Market Commission, and the Energy Security Board have been saying and are trying to set in place with the Integrated System Plan.

It is also, Thornton notes, the motivation behind a meeting of clean energy industry senior executives and policymakers in Canberra on Wednesday evening, following a forum to consider the end of the RET and what comes next.

“The industry is working closely with the AEMO and the networks to address many of these issues in the short term, but a lot of the problems we are seeing now are symptoms of the underlying issues – the need for strategic investment in the electricity network to service the best zones for renewable energy across the country and unlock more cheap, clean power,” he said.

“There is no excuse for a slow-down in investment in renewable energy as the industry begins unlocking the enormous potential of energy storage across Australia, effectively complementing renewable energy projects.”

The CEC report notes that than 500MW of large-scale battery projects have already been financially committed across the national grid, and more than 9000MW of pumped hydro potential which has been identified.

“This demonstrates that there is no shortage of potential from energy storage to support the continued deployment of variable renewable energy projects and to meet peak power load as ageing coal-fired power stations exit the system.

“However investment in energy storage is challenging without market reform and clear policy that can reduce uncertainty and recognise the value that these projects provide to the energy system and market.”