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Trimmed CEFC budget signals end of renewables boom

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Australia is in the midst of an unprecedented, albeit heavily delayed, renewable investment boom – one that may not be repeated on this scale and in such a short period again.

The fact that this is coming to an abrupt end – given the lack of any coherent energy policy from the federal government – is no secret. But the budget entries for the Clean Energy Finance Corporation provide the first tangible evidence.

The $10 billion CEFC has told the government that it will need to draw down just $530 million from its special account in 2018/19.

That number itself is not unusual: It signalled a similar sum – $550 million – at the same time last year, but it ended up drawing down $2 billion because of the surprising level of investment in renewable energy projects.

The fact that it has not upped its request this year (as it had the previous year when it drew down three times its initial request) is being taken as a sign that the boom in renewable energy investment – at least at large scale – is well and truly over.

There are several tell-tale signals. According to the Clean Energy Regulator, and private analysts, the 33,000GWh renewable energy target for 2020 is basically already met, and most likely exceeded by the number of projects built and under construction.

The signals for future investment are not so great. Victoria is holding an auction for 650MW of wind and solar, which has attracted 3,500MW of bids, and will seek more as it build out its legislated state target of 40 per cent by 2025.

Elsewhere, Queensland has a 50 per cent renewables target, but not much has been heard of that in the last little while, and the Northern Territory is in no great hurry to acquit its 50 per cent renewables target anytime soon.

That leaves the only the corporate sector for large scale renewables. Sanjeev Gupta is promising to build 1GW of solar and storage to help power the Whyalla Steelworks, but many other corporates may simply contract with existing wind and solar farms.

A huge 9GW wind and solar project is proposed for the Pilbara – but this will depend on both corporate off-take agreements in the region, and contacting from customers in Asia. (You can hear out podcast interview with project partner CWP here).

The boom/bust scenario is highlighted by this graph above from Bloomberg New Energy Finance, which suggests that any remaining investment in the years out to 2020 will be dominated by solar.

Worryingly, it suggests that unless the federal government lifts its emissions reduction target for the electricity sector – currently at just 26 per cent below 2005 levels by 2030 – then the proposed National Energy Guarantee may actually strangle new investment.

This graph below shows that business as usual suggests only a modest increase in investment from 2020 to 2030, but with the NEG – under current government emissions targets – renewables would be less.

The only sectors that continues its boom, is the behind the meter or small scale solar sector, which will jump from around 7GW now to 19GW by 2030 – suggesting an annual run rate of 1GW for the next 12 years. Gas is also seen to benefit from the NEG.

Labor seized on the CEFC budget measures as a sure sign that there will be a dramatic fall in renewable investment as the country transition from the RET to the NEG. (Ed: Retnegs?)

“Few know the Australian renewables industry better than the CEFC, and this is an ominous sign of an industry getting ready for Malcolm Turnbull’s weak NEG,” Labor’s Mark Butler said in a statement.

“Under the current weak emissions reduction target of the NEG, analysis has shown there will be no new large-scale renewable energy projects built for the entirety of the 2020s.

“Malcolm Turnbull and the Liberals continue to wage their war against renewables to appease the hard right climate deniers of the Coalition party room.

Butler pointed out earlier this week the fact that Australia is already missing out on a  renewables job boom – despite the strong investment in the last year, suggesting that the country could have twice as many jobs in the sector, and more investment, with consistent policy.

The pace of the renewables investment boom caught most people by surprise.

After languishing in an investment drought for three years after the election of the Abbott government, as the Coalition sought to repeal and then cut the RET, the floodgates opened and enough capacity has been built and committed to meet the new target two years early.

In fact, some suggest there will be enough capacity built by 2020 to meet the old 41,000GWh target. Renewable energy critics insisted that even the 33,000GWh target would be impossible to meet.

So far the CEFC has made total commitments of $5.8 billion since its inception in the Gillard Labor government – along with ARENA, the now defenestrated Climate Authority, and the defunct carbon price.

The 2017 and 2018 financial years saw a total of more than $3 billion drawn down from the special account, much of it to large scale solar, and wind projects.

But much of its investment now is geared toward energy efficiency, and other clean energy economy investments such as electric vehicles.

   

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  • Paul Surguy

    Federal election next year see that happens

  • GlennM

    Hopefully not as bad as the projections suggest.
    Firstly Rooftop will grow to 2Gw not 1GW per annum. Then more corporate PPA’s will want/need firming which will encourage more wind. Then storage will require a lot of investment both private and commercial…..and of course you continue to get more bang for the buck as time goes along. Perhaps 530m was all the CEFC could get away with politically ?

    • Chris Schneider

      Such a good point and the fact they stand on their own now maybe that contributes to the drop too

    • CU

      2 GW rooftop PV per annum until 2030 (12 years) is 24GW, a number that probably scares many investors in large utility plants, especially coal plants.

      • Hettie

        What’s with the linear growth suggestions?
        Although FiTs may fall in some states, the cost of panels is falling too, so the ROI shouldn’t be that much lower. Rooftop solar is still the best investment going.
        The money it cost for a good 5 Kw system last year will now buy you a small battery as well.
        So perhaps uptake will not double every 2 years, but every 3 seems fair, and with a change of government, everything changes.

        • Andrew Roydhouse

          Only problem is that your roof space is not doubling every 3 yrs.

          Or at least mine isn’t!

          • Hettie

            FFS!
            Now, May 2018, a bit more than 17% of Australian households have rooftop solar. Double each 3 years,
            34%; 68%.
            Then there are many
            sytems of only 1 or 2 kilowatts. They provide a huge potential for growth, even worth pitching the old panels for new , much more efficient ones.
            It’s the total capacity that will double, not the individual householders’.
            And more and more businesses are going solar.
            Imagine if every Bunnings roof was covered in panels. (Imagine if they all installed RCAC, so staff and customers didn’t melt in the heat, or freeze their bums off )
            Don’t be such a jerk.

          • Andrew Roydhouse

            Dear, dear, touchy are we?

            If you look at all details then you will find your numbers do not stack up.

            You forget many key factors such as:

            # Blocks of units
            # rental properties
            # over-shadowed properties

            The roof of a multi-storey unit block (especially those built by that well known donor to both ALP & Lib/Nats) have very little space not in use for air con, lift over-runs etc etc. The shadows they cast are up to 3x their height (at worst in winter) so a 28 storey block casts the equivalent of an 84 storey long shadow.

            to name just a few.

            For commercial/industrial properties unfortunately a majority have been built to nearest lowest standards. That means they cannot add panels to their roof as it cannot take the minor additional weight. Sad but true.

            Some of those built in the last 15 years are so close to minimum standards that they have collapsed when a local downpour occured as they could not hold the additional rain water weight.

          • Dave

            Fair play, and a hell of a shame that’s the case. However, in the case of Bunnings at least – those stores in the burbs with massive carparks could perhaps more easily build solar panel carpark shading instead, which apart from also generating possibly more than even the roof space, and providing much needed summer shade, would also (if smart forethought and planning involved) be easily future proofed to easily add EV charging stations for the future EV customers that will eventually more and more become the norm = another future revenue source.

          • solarguy

            Ah huh, so you have a few rounds in your arsenal to fire off then.

          • Hettie

            Hehe.
            I don’t keep all my shot in one locker.

          • solarguy

            I didn’t think you would either. LOL.

          • Hettie

            Still can’t find the ac power draw? figure you asked for. There are some specs on the side of the outdoor unit, but very awkward for me to get to.
            My lovely panels gave 31.5 kWh yesterday. Filthy cold windy day, but bright sunshine. Hehe.

          • solarguy

            They can put those spec stickers in silly spots I know. Try asking whom you purchased it from or google it, remember your after input power, output power is good to know and many rate the things from that figure but that’s misleading, but you can confirm COP rating.

            Cold windy days with bright sun are great for PV output, the colder the better, just not for the bones. Today being Sunday and overcast, not so good, battery not charged yet, so I will unlikely sell anything to the grid today. Right now 12pm only producing 1.5kw, load is only 345watts. Wish it would rain and get coal mine dust off panels.

          • Hettie

            Friday 31.5
            Saturday 15.3
            Today 13.1 @ 13:20
            No coal dust. 10 mm rain a couple of days ago so panels should be pretty clean.
            The sticker is accessible, visible, but my knees won’t bend far enough to get my eyes within reading range of silly print size.
            I have a garden helper coming tomorrow. I’ll get him to read it for me.
            Had the ac running all day yesterday as the heater in the sky was not working well. Recon it might have cost 30c more than Wednesday, when solar output not great but house much warmer.
            Take home message, let it run from 07:00. The thermostat lets it work only when needed.

  • Eric

    Mark Butler sounds like a real progressive on energy policy. I reckon if Labor wins the next election Australia will probably be 80% renewable by 2030 without any problems at all and we will be a global leader again in the energy transition.
    Best of all, the embarrassment of renewable riches we have down here will encourage a wave of new manufacturing lured by our cheap renewable energy. Good times ahead I beleive. We just have to consign the COALition to the dustbin of history where they belong.

    Most important federal election in decades coming up.

    • Rod

      There is a podcast on here somewhere with an interview with Mark Butler and as an energy minister he runs rings around Friednburnt,

      • rob

        LOVE Fried N Burnt!

  • DJR96

    I don’t think it’s as bad as made out. If last year the CEFC requested $550m and used $2b, much the same could happen this year too. They’re lucky that the pool of money was set aside for them and locked in.
    And I think the LGC market is more important for renewables projects anyway. Having some assured income makes for a safer balance sheet.

  • Tom

    Good to hear. neighbor of very noisy macarthur windfarm which operated at 21% efficency couple years ago but still got good share of 2 billion dollar a year subsidy racket

    • rob

      Waubra Foundation member are you?

      • Chris Ford

        Sounds likely. Doesn’t know the difference between efficiency and utilisation factor, for a start.

  • Ian Jones

    If green house gas emissions reduction is one of the primary goals of a transition to a renewable energy economy, a Carbon Tax would appear an essential component. I understand it was very unpopular in 2012 – 2014 however this was mainly due to the fossil fuel lobby. Now in 2018 when renewable energy has shown it is technically viable I would suggest “Australia should give it another go!”.
    And to reduce any political backlash from the “no more tax crowd”, just make the tax revenue neutral. Look at https://www.carbontax.org/

    • Hettie

      Rupert has a lot to answer for as well, and Rudd’s sniping and white-anting.
      If reminded , most people will recall that the end of the carbon price did not bring power prices down. The promised $550 never showed up.
      I’m pretty sure a second go would be accepted, and this time any attempt to call it a tax would be firmly refuted.
      Hopefully there won’t be long to wait.
      And abolition of all direct and indirect subsidies to coal, gas and CSG would put a big crimp in their tail.
      Then watch the renewables go!
      And the fossil fools – Kodak, anyone?

  • Rick

    Why are government targets (and other’s money) needed for something that is claimed to be the lowest cost electricity generation?

    Wind generators are beginning to understand the consequence of system constraints:
    https://itbrief.co.nz/story/mercury-acquires-stake-tilt-renewables-after-poor-wind-conditions-drive-fy-loss/
    With the gradual demise of rooftop subsidies, householders are realising there is no point in delaying the decision to get on board. The growing contribution to intermittence and unscheduled supply will see the wind generators more often constrained. Their only option will be to sack the guy who did the LCOE calculations as they try to explain the reasons for their losses.

    • Hettie

      Because investors need certainty. ATM, federal government intention is to put every possible obstruction in the way of renewables.
      They just haven’t been able to agree a policy that is able to do that and not be transparently criminal.
      They think that NEG will do it, but the States have refused to sign off on NEG, delaying it until at least August.
      In the meantime, nothing is far better than the toxic something the feds are pushing.

      • Rick

        What more certainty is needed than priority scheduling for all your output unless there is risk of oversupplying the grid causing instability and supply collapse. If wind and solar were truly the lowest cost form of generation they would not need any government input at all – think about.

        What the wind generators want is certainty that the uptake of rooftop solar will be limited and they can continue to pillage the poor. Power suppliers are already contemplating means of limiting grid defection because they realise that grid scale intermittents must be uneconomic compared with rooftop generation at the load.

        Maybe they want the same CERTAINTY as the Scottish wind farms that get paid NOT to produce:
        https://www.telegraph.co.uk/news/2018/01/08/wind-farms-paid-100m-switch-power/

        All this CERTAINTY comes at the expense of the poor who do not own a roof to produce their own intermittent power and further accelerate the demise of reliable generators.

        If you have a sun exposed roof with no solar panels on it you need to be aware that your opportunity to suck the life out of the poor is diminishing each year; planned to be zero by 2030. It is easy enough to justify your burden on the poor because it is less than half per unit of what the grid scale players get. If it is done on large enough scale it will hit the bottom line of the wind generators because they are no longer run-whenever-you-like generators.