New data from Bloomberg New Energy Finance (BNEF) showed that investment in large-scale renewables wind and solar slumped to just US$69 million, falling back to levels seen in the midst of the investment freeze, when the then Abbott government sought to abolish the RET altogether or seek bigger cuts.
The impact in 2014 was so dramatic that large-scale investment dried up completely in the last quarter of that year, but the market is still struggling as utilities avoid contracts and financiers baulk at the lingering uncertainty of the market.
BNEF said unless investment in large-scale assets picked up by the end of the year, there was a real risk of falling short of the large-scale renewable energy target by 2018.
So far, nearly all the investment in large-scale renewable energy has come from projects contracted by the Australian Capital Territory government, and its reverse auction scheme, or through the Clean Energy Finance Corp.
Only one project, the White Rock wind farm in northern NSW, owned by China wind energy giant Goldwind, has committed to construction relying on the RET and market prices. Dozens of other projects are in the pipeline but are struggling to get finance.
DG bearing the load
BNEF notes that the bulk of investment in renewable energy has come from homes and businesses investing in rooftop solar, and increasingly battery storage.
The small-scale PV market continues to prop up Australias renewable energy sector, now estimated to represent 86% of all new investments, BNEF said of the latest quarter. That is also despite a modest fall of rooftop solar installed across the country, which other groups have estimated to total just over 150 MW for the first three months of the year. Battery storage is also starting to make inroads into the market.
Utilities are expected to exhaust their stock of LGCs large-scale generation certificates unless they sign new contracts within the next 12 months. Under Australia’s RET, utilities are required to purchase or generate, through developing large scale wind or solar, LGCs. Estimates of how much needs to be committed before the penalty price is incurred vary between 2,000MW and 4,000MW.
If the penalty price is incurred, the cost is borne by the consumer, with the money going to government revenue rather than renewable energy projects.
BNEF also released a report overnight that said Australia will need to lift its ambition in coming years to keep up with its trading partners as they respond to climate science, and increased commitments to the Paris climate agreement.
In our view, the carbon-clean energy virtuous circle suggests that Australias major trading partners could well pledge stronger 2030 emissions reduction commitments at the five-yearly review points in 2020 and 2025, BNEF said in its analysis.
Australia which is essentially a follower on climate policy will likely follow suit as it seeks to keep pace with peers and retain its place as a diplomatic middle power.
Australias current emissions reduction target of 26-28% below 2005 levels by 2030 should thus be regarded as a low-case scenario. Australias final 2030 target is likely to be higher and somewhere between this and a high-case scenario of 45-63%, which is Australias fair-share of burden to limit warming to 2C.
Australias current climate policy framework is insufficient to meet the current targets, let alone deeper commitments. Market participants should thus expect further policy measures, including in the power sector (to modernise and decarbonize the generation fleet) and the broader economy (to achieve national targets).
Labor’s 50% renewable target
The opposition Labor party today sought to outflank the Coalition government. It committed to a zero net carbon pollution target by 2050, proposing two separate low-cost emission trading schemes, and reinforcing its interim commitments to cut carbon emissions by 45% by 2030, and reaching 50% renewable energy by the same date.
Labor has not yet said how it will achieve its 50% renewable target. It will not be through an extension of the current RET, but with other mechanisms, quite possibly a series of reverse auction successfully adopted by the ACT government, and widely used overseas.
This is an edited version of two articles, published on the RenewEconomy website. It is republished with permission.