Western Australia has waited far too long for renewable energy

There is an often-repeated joke between West Australians that WA actually stands for “Wait Awhile”.

In terms of renewable energy generation this had proved to be accurate, as there’s been a significant delay in state investment in renewable energy meaning that now WA is lagging behind the rest of Australia.

WA’s electricity supply has one of the lowest percentages of renewable energy in Australia, and the state has the highest per capita emissions in the country – among the highest in the world. And WA’s greenhouse gas emissions are still rising.

Every other state has reduced its emissions on 2005, the Paris agreement benchmark year. This is important for Australia’s efforts to reduce emissions because, while WA is home to only 10% of the population, it is responsible for almost 17% of greenhouse gas emissions.

In 2019 WA’s state government finally set a target for limiting greenhouse gas emissions, or seemed to; zero carbon by 2050. According to the state government, it’s just an “aspirational target”, and merely meant to “provide guidance” to industry.

This rather loose target was enough to lift WA from last to second last in the Climate Council’s estimation of State by State renewable energy performance.

Figure: State Renewable Energy Rankings (Climate Council, 2019)

In 2018, 8.2% of electricity generation in WA was based on renewable energy and is expected to be around 10% in 2019. But that still leaves us way back with the stragglers.

This laggard status is not an inevitable outcome for WA. WA’s transition to renewables has been held back by large coal and gas reserves, the state’s incumbent thermal generators, an over-supplied main electricity grid, and ultimately by indifferent leadership.

Also, the Climate Council figure should be understood as covering the state’s total electricity supply – not just the main grid, the SWIS (South West Interconnected System).

WA is different to other states in having almost a third of electricity being produced for industrial uses directly, so not necessarily beholden to the same policy positions as the grid is.

But the declining cost of renewable energy – especially solar PV – and the fact that WA also has some of the best solar and wind resources in the world is creating a strong impetus for major new investment in renewable energy.

At the forefront of this new wave of investment are individual households who have invested in solar PV on their rooftops at a record rate.

By 2019, 27% of households had PV on their rooftops with over 950-megawatts of total capacity, and fast approaching 1GW – making this the single largest generator in the state.

There is enough solar PV on the SWIS to start requiring a new approach to network management. In WA there is only one network operator, the state-owned Western Power, in control of the SWIS.

As the incumbent in a natural monopoly, it is Western Power’s role to support an electricity system that will support the state’s economy and objectives. That now means decarbonising and supporting the clear and present community desire to meet its own needs from its own grid connected solar systems.

There is some early evidence that Western Power is now responding to these requirements with large, shared battery systems being installed in areas where the grid is beginning to stretch thin, and fringe of grid customers being moved to off-grid systems, which also reduce fire risk from power lines in rural areas.

Despite the incredibly low level of renewable energy in the state, shrill voices talk about the ‘danger’ that renewable energy poses to the WA network.

The Australian Energy Market Operator, AEMO, has faith that Western Power can manage this at least as well as other state’s utilities have, predicting rooftop PV could almost triple over the next 10 years, reaching at least 2,500MW by 2029. At this point PV rooftops will be providing around 20% of the total electricity on the SWIS.

Why does the Large-scale Renewable Energy Target (LRET) matter for WA?

To get to the kind of emissions reductions needed in our energy system to address dangerous climate change, large-scale renewable energy generators will be essential including solar farms, wind farms, and geothermal. But there’s another reason for WA to step up and support for large-scale renewable energy projects.

Renewable energy investments by individual households are making an impact but they will not help the state government meet its obligations under the national Large-scale Renewable Energy Target (LRET).

These LRET obligations are one important factor that we believe should motivate the McGowan State Government to further support the switch to renewable energy sources in WA.

The Renewable Energy Target scheme was introduced by the Howard government in 2001 and was strengthened in 2009 by the Rudd government. In 2011 it was divided into two parts: large-scale (the LRET) and the small-scale scheme that most rooftop solar PV systems have benefited from.

The scheme has largely had bipartisan support since it began with the exception of when the Abbott government tried to dismantle the LRET in 2014, at the time that the ‘carbon tax’ was repealed. In the end the RET survived, albeit with a target reduced by around 20% to 33,000 gigawatt-hours/year nationally by 2020.

This new target means that, in 2020, approximately 23.5% of electricity will need to be renewable energy.

The target then stays the same from 2020 to 2030, with the expectation that renewables will have taken off on their own by then.

During 2014 WA’s coalition government also supported an end to the LRET. When the scheme was continued, the then Chairman of WA’s state-run retailer, Synergy, which dominated the WA grid, responded by announcing that they would actively spend any LRET commitment funds in other states, rather than see more renewable energy generated in WA.

The WA government was explicit in not encouraging new large-scale renewable energy projects in WA and instead seeking to satisfy its RET requirement by purchasing certificates from projects in the Eastern States.

In other words, the position in WA was to not invest in local renewable energy projects that would generate investment and jobs – and instead subsidise wind farms and solar farms to be built in the eastern states – to protect the interests of fossil fuel plants that have been built but may never actually operate.

A conservative estimate based on published data on in-house renewable generation, is that around $240 million dollars has gone to projects in other states in the last five years. Costs going forward are potentially even higher without a different approach.

Some may ask; Why does it matter, in the big picture, if this investment happens in other states?

The answer is that it should matter to WA. As highlighted earlier, WA has an out of proportion share of national greenhouse gas emissions and will struggle to address these on other fronts such as fugitive emissions, transport, industrial processes and gas use. Electricity is WA’s big opportunity for greenhouse gas reductions.

Despite this, the state-owned energy retailer, Synergy, is suffering.

As a state corporation it received a subsidy – known as the tariff adjustment payment – as part of ensuring electricity supply across a State where some locations are significantly more expensive to service.

The current government moved quickly to remove this subsidy and make electricity tariffs more cost-reflective overall. Despite the resulting rise in electricity tariffs in WA, this has damaged Synergy’s revenues significantly at a time when residential PV was already causing demand to fall each year.

It would have been smart to invest more heavily in renewables in the boom years, rather than deliberately shunning locally sourced green energy – now there would be a fleet of generators with low operating costs and high value electricity.

The boom is over but there is never a good reason to make the same mistake twice. The cost of renewables keeps dropping, the cost of capital is at an all-time low, and the community demand for action on emissions can no longer be ignored.

What is required to meet WA’s large-scale renewable energy target from within the state?

The LRET target, 23.5% of wholesale electricity purchases in 2020, will not be met by WA generators.The renewable energy component of the SWIS in 2019 is estimated at 10%, increasing to 12% by early 2020 as projects added this year come on line.

This will leave us well short of the 23.5% LRET target for 2020 and needing to buy LGCs from other states. Approximately 673MW of renewable energy generation will need to be added to the SWIS to satisfy the requirement locally.

While the new ALP state government had been slow to address the state’s under-investment in renewables, there are indications this is beginning to change.

In 2018 the state government announced that Synergy would lead a development fund called Bright Energy Investments with CBUS and the Dutch infrastructure developer DIF.

Alinta is another major retailer in WA, also moving on renewable energy. This is having a dramatic effect, expected to almost double the amount of renewable energy consumed in the SWIS.

The Clean Energy Regulator forecast for renewable energy systems committed to completion in 2020 in WA is shown in the table below.

These projects will add an estimated 1,700-gigawatt-hours of renewable energy to the SWIS, bring us to just under 22% at the end of 2022 if all proceed as planned. But the uncertainty in energy policy at the Federal level has had a widely reported on impact on investment, particularly in wind power.

The Clean Energy Regulator forecast for ‘probable’ new power stations, announced publicly and expected to proceed in the next few years, features a handful of solar PV projects, the largest of which, the 60-megawatt Chichester mine solar farm, is not connected to the SWIS.

With these we add another 52-gigawatt-hours per year, lifting the percentage renewables in the SWIS to just over 22%. This would still leave us 62MW short of having enough renewable energy systems connected to the SWIS to meet the LRET, with most of the scheme having already elapsed.

Apart from a disappointing result for WA, for the emerging renewables industry (a potent employer in other countries), and for action on climate change, this is also going to mean more money going to other states that have been more proactive and find themselves in the stronger position now.

Based on some conservative assumptions, including the reduction of the price of renewable energy certificates to $0 by the end of the scheme, WA will be giving $275 million to renewables projects in other states over the next decade of the LRET.

Adding the money already spent, this means that over half a billion dollars of renewable energy investment could unnecessarily have flowed out of WA during the term of the LRET by the time it finishes in 2030.

It’s not just about the LRET target either. Other states are moving past the LRET, whether because of policy settings or targets, or based on the ever-improving economics of renewable energy.

What is also noticeable, is that despite this more recent growth in renewable energy investment, WA is still under performing in comparison to others states.

The graph below shows that other states that got started earlier than WA, are already seeing the benefit of the transition to renewable energy and expanding their programs:

While the challenge before WA is substantial, change is entirely possibly – aided by the fact that control of the energy system in WA is strongly concentrated in state government entities. This is a problem when the government is recalcitrant but also a strength if it chooses to act to support investment in renewable energy.

The newly announced Energy Transformation Taskforce might be a sign that the shutters are coming off and the drawbridge is coming down.

The Taskforce was established by WA Energy Minister Bill Johnston to implement the McGowan Government’s Energy Transformation Strategy. This strategy talks a lot about clean energy and there are reasons to be optimistic.

WA is realising that we’ve been steadily paying for other states to transition to better ways of doing energy and watching them reap the benefits of this investment.

WA is one of only of two states without a renewable energy target and investment is lagging as a result. It is time WA set itself some targets to both provide greater certainty to investors in renewable energy and to see an end to hundreds of millions of dollars flowing east as a result of this under-investment to date.

A reasonable short-to-medium term target for WA would be to set a timeline for WA’s entire annual LRET quota to be sourced from WA projects. This will require an extra 62MW of installed renewable energy generation on the grid – easily achievable by 2022 and achievable with money that would otherwise be spent in other states.

A longer-term target, based on climate science could be one that aligns with the 21 councils from across Western Australia that have jointly called on the State Government to commit to a renewable energy target of 50 per cent by 2030 and a 100 per cent emissions reduction target by 2050.

Hundreds of millions of dollars of renewable energy investment has been unnecessarily heading east. It is time WA stopped sending money to other states and invested in renewable energy and jobs locally.

For this to happen most effectively, a clear target for renewable energy beyond 2020 and a clear plan and commitment to meet the 2020 LRET target locally are needed as soon as possible.

WA has fallen behind in the renewable energy transition but there are encouraging signs that it may be ready to make up for lost time and the “Wait Awhile” may finally be coming to an end.

Dr Brad Pettitt is the Mayor of Fremantle, Western Australia. Mark Taylor is principal of built environment sustainability at Josh Byrne & Associates.