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Why Australia’s wind and solar market could grind to a halt

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The lack of any policy to meet the climate targets agreed to in Paris will mean that Australia’s large-scale wind and solar boom will quickly come to an end, even as wind and solar costs fall further below the benchmark price of the grid.

Kobad Bhavnagri, the chief analyst for Bloomberg New Energy Finance in Australia, says the current investment boom to meet the federal renewable energy target – $8 billion committed in 2017, and $5 billion in 2018 – will quickly slow as the target is met.

By 2020, investment will slow to around $2 billion, and for the next decade – without any changes to stated federal policy – the only drivers for the uptake of large-scale renewables will be state schemes, such as Victoria’s, and the emerging corporate market.

The proposed National Energy Guarantee, Bhavnagri says, will add little to demand because the 26-28 per cent emissions reduction will be met almost entirely by the LRET by 2020 (23 per cent), leaving little to be done over the next 10 years.

 

“That’s a very weak target,” Bhavnagri said, noting that according to his company’s analysis, it will mean less in the way of new wind and solar capacity by 2030 than business as usual. (See chart above)

Bhavnagri said this would be true whatever the policy – a carbon price, an emissions intensity scheme or a clean energy target; if the ambition is low, then little new renewables would be built because there would be no driver to displace existing coal and gas.

And it is clear that the current government has every intention of trying to keep existing power generators, including ageing coal plants, in the system as long as possible, dramatically reducing the need for new supply.

This bleak assessment is broadly consistent with other analyses, most notably by Reputex, which also said last month that the emissions reduction target is actually worse than business as usual.

However, Bhavnagri said there re a couple of factors that should be cause for optimism for the renewables industry, and this was based largely around economics.

It was clear now, he said, that the cost of new renewable – large-scale wind and solar – was already below wholesale electricity prices.

Wind and solar were being built at or around $60/MWh, and would continue to fall in cost in the coming five years.

After a brief fall in wholesale prices as the current surge in wind and solar investment had its impact on the market, the course of wholesale prices would then resume their upward curve.

This meant that wind and solar would be attractive, not just for big utilities looking to loosen their reliance on fossil fuels (Origin has pledged an exit from coal by 2032), but also for the growing corporate market.

On the subject of policy choices, amid all the criticism of the proposed NEG, Bhavnagri said that if it was accompanied by meaningful remissions reductions targets, then it would do the job.

“What really matters is ambition,”Bhavnagri said. “If the NEG were to be configured to 45 per cent, recommended for 2°C pathway, which has been adopted by Labor, the outlook for investment would be much stronger.”

As this graph above illustrates, that would result in 1GW less coal, but 4GW more large-scale wind, and 10GW of large-scale solar – according to BNEF’s estimates.

The only constant through the two scenarios (ambition or no ambition) is small-scale solar – which BNEF expects to add at least 1GW a year out to 2030 – taking the total installed capacity across the nation to 19GW by 2030, overtaking coal.

Tristan Edis, from Green Energy Markets, said for the NEG to work then the policy would have to be designed the right way, and it would have to be accompanied by more aggressive emission reduction targets.

“What about the NEG? The answer to that, quite simply, is that Malcolm Turnbull needs to grow a spine on this particular issue, if it’s going to be meaningful,” Edis said.

But, as John Grimes, the head of the Smart Energy Council said, there is just no chance of that anytime soon because of the secret deal that Turnbull signed with the far right when they agreed, reluctantly, to have him replace Tony Abbott.

  

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  • GlennM

    As Mark Twain said….

    “The rumours of my death have been greatly exaggerated”

    I do not see how the rooftop solar can only be 1GW/annum out to 2030….it will be twice that at least. As battery prices fall there will be even more incentive for more rooftop solar.

    Also as battery prices drop there will be financial incentive to install batteries to replace gas…see the Gina Reinhardt story today…that is only just starting.

    Then there is the fact that commercial is only just waking up and more corporate PPA’s. Then State goals of 50%.

    So yes it would be nice to have a 45% Nationwide target but not essential.

    Can you also see Turncoat still being in power in 2022 ?

    I hope not !

    • mick

      also factor in mass protests,civil disobedience and legal options in court.the less moronic neanderthals will back away from any real mission to kill off re and public funding of coal

      • john

        No pointless
        Use the price of both to point out the difference

        • mick

          cant reason with idiots,smart people already know the economics,the rwrnj(lovely acronym) aint smart

          • Steven Gannon

            Howard was interviewed on 7:30 last week. He said the economics say renewables and reminded the sitting members their supporters aren’t happy with the antics.

    • Joe

      Two Tongues Turnbull will be gone before years end. New Leader required to give new hope for election next year.

      • Patrick Comerford

        I’m sure your right Joe. The Beetrooter has gilded the cat and set a date for Xmass. What a wonderful Xmas present to the nation. All the usual suspects are frantically back peddling on the Beetrooters remarks but they should know by now what a loose cannon he is. With two sore losers sniping from the backbench Turnbulls end is nigh.

        • Joe

          Wonderful little interview that he gave, yes. And yet there they were late last year basking in Bananabee’s re-election in New England…the arms held high together …’The Team is Back’ was the war cry….how has it turned to shite in so few months.

        • Cooma Doug

          Not so mate. Barnaby is that bloke after the footy on Sunday in the pub talking louder and more stupid than anyone else.
          Why he gets invited on to 7.30 report is a bit of a puzzle.

          • Joe

            …because he is such an entertaining goose that can’t help himself.

          • wideEyedPupil

            Family friend of the show/presenter? My mate was watching the federal election coverage on ABC and he reckons when Anthony Green said Windsor was done for in New England and Joyce home and hosed for sure, Sales under her breath, but picked up on mic said “Good” in a relieved tone. Haven’t confirmed it by checking the video footage myself but would sound about right.

      • Ren Stimpy

        No chance. That poll the other day had 62% wanting Turnbull to remain in the job. For a range of reasons no doubt – some thinking he’s better than any possible replacement, others thinking they want to put him out of office with their own pencil on election day, without having go through the drawn out drama of another PM getting turfed out by his or her own party. If there’s even the sniff of a spill their 2pp will slide from the lobby to the basement. I’m sure the opposition don’t rate the chance of the next election being against anyone other than Turnbull.

        It’s just sour grapes from Barnaby The Backbencher.

      • Nick Kemp

        It’s hard to see who that would be – as bad as he is the rest of them look worse.

        • Joe

          The only way can be Up…after Turnbull goes…. even it means deadbeats like ‘The Cockroach’ ( Bishop ), ‘The Lump of Coal’ ( Morrison ) or ‘You are dead to me’ ( Dud ton ) steering the sinking ship.

        • wideEyedPupil

          And they know it inside out.

    • Ken Dyer

      It seems almost certain that the next federal election will occur between August 2018 and May 2019 which coincides with the next half senate election. If not, it must be held on or before 2/11/2019.
      In view of the latest Newspoll loss, 60 in a row, I would not be surprised if Turnbull hangs on like grim death to the absolute last minute. However, Labor seems to be on a election footing given their recent policy announcements, so I suspect we may have an election sooner rather than later.
      Regardless, Australia will have a Labor government on or before 2/11/2019, the people have made up their minds.

      • Joe

        ..yes, 60 in a row BUT it was interrupted by the only poll that counts ie 2016 Federal Election. Surely the punters aren’t silly enough to again interrupt the Newspoll losing streak. How is it that 48% are still voting The COALition?

        • Ken Dyer

          Yes the LNP picked the date because the pools showed the 2 party preferred only a point apart. Won’t happen this time. The redistribution in Victoria has given Labor at least three more seats.

        • Ren Stimpy

          “How is it that 48% are still voting The COALition?”

          Income isn’t the determinant. 48% of people on $0K – $30K would vote for or preference the LNP. 50% of people on $100K+ would vote for or preference Labor.

          I could tell you the main determinant but then some folk would call me an ageist.

          • Rod

            Yes to a certain degree the baby boomers.
            But I always say there are two types of Conservative voter.
            The very rich and the very stupid.

          • Ren Stimpy

            The future is bright….

            https://www.businessinsider.com.au/world-economic-forum-world-biggest-problems-concerning-millennials-2016-8

            But it will be a bumpy road with a lot of (mainly political) potholes on the way there.

          • Nick Kemp

            You are ageist – I can read that between the lines 🙂

          • Ren Stimpy

            Perhaps, but in a respectful way. I would never disrespect the ignorant old bastards for voting LNP regardless of how vacuous their default party of choice has become.

          • Steven Gannon

            “A nations culture is a reflection of its popular media.” There’s the guts of the problem. Macquarie media have long tentacles that reach all the rural areas via 2GB and then we have Murdochs rags. The media is the main problem.

          • Ren Stimpy

            Bolt, Alan Jones and Credlin have been constantly laying into Turnbull, the latter two something fierce in the last couple of days. Even with their own party ‘stalwarts’ turning on them, this vacuous party still gets 48% support in the Newspoll. Sometimes I just throw my hands up and wonder.

      • Barri Mundee

        I understand the next federal election has to be held no later than sometime in May 2019.

  • George Darroch

    Malcolm can’t grow a spine, as the spine of his government is composed of sniveling coal-lovers. They deserve to be thrown out.

  • RobertO

    Hi All, I hope your wrong Giles / Sophie. Labour have stated 50% as part of their election promises (change Fed Gov in 2018 or 2019) so I am hoping Australia get behind them and overshoots the target in 2022 by about 75% RE. Transport will put a stopper on further progress (RE will still be progressing but Transport will soak up additional RE). I never wrote to pollies until babbott and the shock jock sly news destroyed my trust in pollies and now I tell them what I think (9 e-mails on how bad the NEG is right from day 1). Both Snowy 2 and Battery of the Nation projects are controlled by “Boards” and I am not certain they will be stopped. AEMO ISP may also have a positive impact on how we as a “Nation” go. As for GlennM below small business and households (some will add Batteries) will I believe continue to accelerate (unless Fed Gov finds a way to stop it) and we may hit 2 GW pa installed in 2 – 3 years’ time.

    • Malcolm M

      The coal industry are well organised and fighting strongly for their survival. I believe there was a levy system self-imposed on the coal industry through legislation to fund clean coal, but can also be used for lobbying. The levy is also imposed on export coal. They are not working primarily on behalf of owners of existing coal-fired power stations, but rather the coal miners to keep their domestic and export markets open. Contrast this with the renewable industry is small-scale and relatively poorly organised with no levies for lobbying.

      • wideEyedPupil

        Almost nothing in RE industry for PR and activist approaches, trust me.

  • Peter F

    If we take BNEF’s prediction of $130/ MW for new black coal or even $90 for new brown coal plants, why would Energy Australia or any other retailer or large user not continue to buy more wind and solar PV when they have no fuel price risk, no future carbon tax risk etc. and they can buy it for less than $60/MWh.
    By the time Stockyard Hill is complete, and even before the state government scheme kicks in, new wind and solar will replace the entire output of Yallourn so somewhere on the NEM another coal plant will be mothballed causing prices to rise a bit and new wind and solar to win more work. Whether you call it a virtuous cycle, Darwinism r Schumpeter’s creative destruction, the snowball is rolling down the hill and the economics of renewables will just kill coal and to a lesser extent gas
    When most users whether it is Sun metals or a private house can save money by installing rooftop solar, why would they not continue to do so
    It just does not make any sense to suggest people will continue to buy expensive power because the mandate for renewables is no longer fixed

    • wideEyedPupil

      That’s the law of gravity this government is spending mine and your money defying though. It is not a high street market for smart phones, it’s not that much of a level playing field or as accessible to new investors/players/retailers.

  • Patrick Comerford

    With more large energy FF corporations starting to be bought before the courts overseas to answer for their deliberate obsfucation and delay in responding to what their own advice was telling them in respect to FF fuel emissions and climate change. It will be of immense interest to see how these LNP denialist politicians plead when it’s their turn to be called to account. Given the seriousness of their actions leniency should not be expected.

    • john

      They will simply say they were given advice by the Science Minister and his advisers.
      Or hang on we do not have a Science Minister so we are ok then.

      • Joe

        …plenty of advisers in that scientific body…. ‘The Moan Ash Forum’

      • Nick Kemp

        That is a sorry part of the problem. I read something not long ago about the background of our current pollies – all lawyers accountants union reps an od doctor or two and a famous fish and chip shop person but no IT or Science people, no one with a even a decent Math background

    • John Saint-Smith

      Clearly what is needed is a political trial in which we who dream of a pollution free and prosperous future for all creatures on our planet put our case before the people – the ones who have children and a conscience, not those who would sell them for 30 pieces of coal.

      If we defeat them we may at last turn our attention from this ridiculous debate about the arrangement of the deck chairs on the Titanic while it sinks.

      • RobertO

        Thank you John Saint-Smith We all need a laugh!

      • Paul Surguy

        Love it

  • john

    While yes solar and wind is cheaper than old coal and new coal has not a chance the fact is that Solar and Wind needs a whole heap of storage and this will happen.
    As everyone knows the old bell curve of energy demand has become a duck curve however what is needed is to flatten the daytime demand and put enough storage in place from excessive production to ensure the head of the duck is cut off and over night the wind restores the storage to cut off the tail then we have pure no emissions production system.
    There is a huge need to put in place 20,000 MW of production to try to get towards this goal a pretty large figure.

  • Ben Dixon

    Please please Giles & Sophie can you find a happy story I need some light relief. These mongrels are starting to get me very depressed.

    • Roger Franklin

      Ben – Agree! No need to enter into the same “Headline Grabbing” FUD messages that Canberra promote. Telling everyone about the amazing levels of innovation, investment and job/skill creation that is happening involving RE projects is the best message.

      Just my thoughts.

  • RobertO

    Hi All another good point about home solar (and maybe some small business solar) is batteries (storage + wind + solar) will cause coal to retire ( and a side effect may be that the home batteries cause the Transmisson Networks are written down in their prices). I agree that without a plan there is a good possibility that we will have disruptions to the network. Some coal may just walk without notice or with very short notice. Another thing that I believe will happen is that the wholesale market will continue to rise as a general overall picture despite some retailers buying at undisclosed rates well below wholesale market rates. We need more generator, more retailers in our market places.

  • Jon

    Federal policy is becoming less and less relevant on our energy generation mix.

    Private enterprise will follow the money.
    If you are a gentailer you’ll make more money from renewable generated power than fossil fuel generated power.

    No private enterprise is going to build a Coal fired generator when they can get a better ROI on a renewable powered generator.

    I know there are a lot of people on this forum that are anti Snowy 2.0 but I believe it will help underpin a lot of RE power generation in N.S.W. & Vic as well as get rid of “Sun don’t shine, wind don’t blow” BS.

    • wideEyedPupil

      At a unnecessary cost premium and a decade to late.

      • Jon

        ??

  • GregS

    Keep installing rooftop solar and storage and pretty soon those coal plants will not have consumers to sell electricity to anyway.

  • brucelee

    Labour public messaging around RE is so poor . They need some better energy advisers. Should be hammering price facts and the downward trends, and talking in the coalition language, calling THEM out for their subsidies, calling THEM out for their coal plants that trip all the time, calling THEM out for their nationalisation of Snowy. AND also presenting a comprehend retraining package for coal industry workers to transition, telling them WE’VE GOT YOU!

    • I agree strongly with your final point, brucelee. I hear no policies about retraining fossil fuel workers. This is absolutely essential if we are to have an holistic approach to the change.

      • Edgar

        Laughed like a drain when I heard the only jobs created in the Trumpet’s heartland were by a CHINESE company retraining COAL workers to produce SOLAR power!

        So much for bringing coal jobs back.

        Won’t be long before they’re doing it here too.

      • wideEyedPupil

        And to gain worker and union support for transition policies under labor states and federally. The unions are slow-tracking the entire ALP agenda. Fossil fuel jobs, have to say MUA is an exception and they see the potential of off-shore wind and things like that, and actually understand the future of humanity is riding on the decisions we make on energy today.

    • Marg1

      Totally agree with with you brucelee. They should be pointing out this stuff, goodness knows why they let the LNP get away with their lies.

    • Nick Kemp

      They want to stand out from the LNP making this a no brainer except the ALP also have massive donations from the minerals council and some cushy job hopping and swapping going on too!

    • wideEyedPupil

      Couldn’t agree more. and Shorten always looks like he has someone’s hand up his shirt moving his lips to me, so unconvincing and transparent in his yr 11 acting voice, lines and delivery. But he isn’t that mob of thieving crooks called the LNC so hopefully people choose the least dispicable of the two major parties.

    • wideEyedPupil

      That would require Shorten to be able to do more that deliver focus group tested sound bites, to actually prosecute an argument and not look like he’s stupid or ill-informed or hiding something. I dearly wish he would get his shit together or step aside for Mark Butler or someone competent.

  • itdoesntaddup

    But surely if wind and solar are the cheapest sources and reliable enough, they will win out under normal competitive markets? Or is something not quite true about that?

    • Ren Stimpy

      Our electricity market is not a normal competitive market. Competition is what is desperately needed …. by us consumers that is.

    • Joe

      Put a proper price on carbon pollution and FF is out the door straight away. The only reason ‘old coal’ can currently compete with RE is because it receives the public’s subsidy that it has enjoyed since the beginning of the FF era.

  • Clem Murray

    the answer is the same the only thing that will work is to get rid of the LNP govt it was the only thing that stopped the howard govt

  • ben

    Anthony Green suggests there will be an election this side of Christmas 2018, so with any luck the Coalition will be gone and the opposition to renewable energy with them.

    • Paul Surguy

      Cannot come soon enough

      • ben

        I know. I am so sick of these incompetent clowns.

    • wideEyedPupil

      Let’s hope federal labor grows some and vows to extends the national RET to 50% RE by 2030 to match their policy before the election then. And in a second term extends it to 100% by 2030.

      • ben

        That is easily achievable.