New investment in large scale wind and solar projects has come to a virtual halt in Australia, and investors are pointing to the twin hits of new market rules proposed by the Energy Security Board, and the the unhelpful intervention of Scott Morrison’s federal Coalition government.
Simon Corbell, the former ACT climate minister and now head of the Clean Energy Investor Group warned that investment is being held back by the new push for so-called capacity markets in Australia, concern about transmission, and the failure of the government to set a path towards zero emissions.
“We’re going to potentially miss out on those investment opportunities, the economic development opportunities, the jobs, the opportunities for cheap electricity for heavy industry,” Corbell told a Smart Energy Conference webinar this week.
“We’re going to miss all of those opportunities, and that would be an enormous penalty for the Australian community to wear because of the shortsightedness of some of that decision makers.”
Corbell’s concern is underlined by new data from the Clean Energy Council, which highlights the increased investment risk and a corresponding slow-down in investment that has delivered a loss of 2700 jobs in the sector and a 67.5 per cent decrease on new investment since 2018.
Just three large-scale renewable energy projects reached financial close in the second quarter of 2021: the Woolooga and Edenvale solar farms in Queensland and the West Wyalong Solar Farm in NSW.
For the wind energy sector the picture is even more grim, with just one wind farm reaching financial close in the past 18 months, compared to 17 in 2018.
All told, the quarterly average of newly added capacity is 432MW, which is 29% lower than the 2020 quarterly average, and 70% lower than the quarterly average in 2018.
The discouraging figures come in a week where the world – at least, most of it – has been left reeling at the latest climate report card from the IPCC, warning global leaders that every fraction of a degree of global warming will have dire consequences.
If that wasn’t bad enough, the federal government’s response to the IPCC’s “unequivocal” message has been mortifying, including – as Michael Mazengarb reported here – seeking to shift blame onto developing countries and refusing to increase the nation’s short term targets.
CEC chief Kane Thornton says the news of decreasing renewable energy investment, and the resulting hit to jobs, was another major blow to both the sector and to Australia’s broader climate effort, all at a time when most of the nation is in lockdown.
“This is a significant loss for the Australian economy at a time when it’s critical to get our nation moving again,” Thornton said.
“This represents a major loss of jobs in critical areas such as civil and electrical engineering, project management and logistics as well as the associated jobs in local communities supporting these large construction projects.”
Thornton sheeted much of the blame for the drop in investment levels “not seen for several years” to Morrison & Co, citing their apparent specialty in “ongoing unpredictable and unhelpful government policy interventions” as a key factor.
“Unfortunately, the continued resistance from the federal government to long-term and meaningful carbon targets in the energy sector as well as continued unpredictable energy policy interventions weigh heavily on investor confidence,” he said.
But some criticism was also reserved for the Energy Security Board, whose long-awaited package of energy market reforms, promoted as a landmark redesign of Australia’s electricity market, included a controversial a plan to benefit incumbent coal generators.
As RenewEconomy has reported, this has not gone down well with the renewable energy industry, and Thornton said the “reforms” were creating further anxiety and uncertainty for investors.
“The ESB appears to be proposing the establishment of a capacity mechanism that risks further extending the life of aging coal generation as well as dramatic and unnecessary changes to access arrangements,” he said.
“The so-called ‘congestion management mechanism’ could introduce significant price uncertainty for new renewable generators and storage and make it increasingly hard to invest in these new clean technologies.
“While the competitiveness of renewable energy and energy storage continues to improve, without the necessary policy and regulatory certainty, investors will continue to face materially higher risks in Australia than the many other countries who are unequivocally focused on accelerating clean energy investment,” said Thornton.
Corbell had the same message. “Investors globally will look to those jurisdictions around the world that are adopting an appropriate transition consistent with international agreements,” he said.
“Investor say it is critically important to have a clear timeframe, and a clear target about when we are trying to realize a decarbonized NEM (National Electricity Market).
“It has to be fundamentally shifting towards a scenario that is compliant with our international obligations.
“That means the Australian Energy Market Operator’s step change scenario, the step change scenario is the only scenario which is consistent with a less than two degree outcome in terms of Australia’s international climate obligations.