An energy policy vacuum is set to scare investors away beyond 2020, a new study claims. According to BIS Oxford Economics, construction work on renewable energy projects will plunge between 40% and 50% in Australia in the early 2020s, as uncertainty over the sector’s outlook undermines investment confidence.
This will be a major downturn from the expected AUD $20 billion of investment in solar and wind energy generation in fiscal 2018 and fiscal 2019. The investment will occur despite policy uncertainty in the federal government and will be largely driven by falling renewables costs, as well as state government support and loans from the Australian Renewable Energy Agency (ARENA), the consultants find.
“Investment levels at the moment are extremely high and a decline from this was inevitable, but the lack of a clear energy policy at the national level is creating some uncertainty and limiting some private sector activity,” says BIS Oxford Economics chief economist Sarah Hunter.
Australia has no renewable energy target beyond 2020 or national policy settings that can drive investment in new generation. Following the federal government’s most recent failed attempt at national energy policy — the National Energy Guarantee — Energy Minister Angus Taylor confirmed that the government of Australian Prime Minister Scott Morrison would not be replacing the Renewable Energy Target (RET) “with anything“ when it expires in 2020, noting that the 26% emissions reduction target will be reached even without additional intervention.
According to BIS Oxford Economics, the pipeline of confirmed projects going into the 2020s indicates that there will be a drop in activity in the near term, but a number of scenarios are still in play.
“There is significant upside risk to this forecast, given both the large number of proposed projects, and the potential for supportive policy following the upcoming Federal election,” the briefing states, noting the Australian Labor Party’s commitment to 50% renewable energy generation by 2030 would be more encouraging to renewables investment.
Analysts at Rystad Energy expect a smaller decline in 2020, which they describe as a significant year. Rystad predicts about 3 GW of potential PV, wind and storage coming online, with a roughly 50/50 mix of solar and wind, This means a 30% slowdown compared to 2019, with potentially 4.5 GW of new solar, wind and storage projects.
Presently, total renewable supply stands at 21.2% of generation from all sources across the National Electricity Market, including rooftop solar, which is chipping away at coal and gas, according to the latest report from The Australia Institute.