Renewable energy investors have warned that solar and wind investment is declining in Australia due to “deep structural issues”, with commitments on large-scale farms at the lowest level in almost a decade.
Clean energy regulatory data shows that the government agency expects industry-level renewable energy capacity to reach a final investment decision of 2.5GW this year, down from 4GW last year. The 12-month average of investment commitments on new developments is the lowest since the beginning of 2017.
While the share of electricity from renewables has surpassed 40% after years of growth, experts warn the Albany government needs to significantly speed up construction of solar and wind farms if it is to meet its goal of 82% of electricity coming from clean sources by 2030.
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The regulator said there was a “real possibility” it could get more financial support next year, partly because of its expanded capacity investment plan, an underwriting program for solar, wind and batteries needed to replace old and dirty coal-fired power stations.
But Richie Merzian, chief executive of the Clean Energy Investors Group, said the low financial investment decisions were “not just a blip, but a symptom of deeper structural issues”.
“Structural issues include delays in state planning, grid connection uncertainty, transmission constraints, rising project costs and lack of long-term revenue certainty,” he said.
Merzian said the underwriting program has helped develop a large pipeline of potential projects, but unless companies make final investments, they will not provide the needed new energy capacity.
“The gap between the large pipeline and the limited number reaching (financial investment decisions) points to a system that is not working as expected,” he said.
Renewable energy, which previously had private financial signoff, continues to be added to the grid. The clean energy regulator said it estimates about 7GW of large-scale generation and rooftop solar systems could be added this year.
But the Climate Change Authority warned last week that more would be needed if the government is to meet its targets. It said the pace of growth in large-scale renewable energy generation would need to more than double over the next five years.
Frankie Muskovik, executive director of the Investment Group’s policy on climate change, said lower investment decisions this year were “a worrying trend” and needed to be accelerated to meet renewable energy and climate targets. The latter includes cutting emissions by 43% by 2030 and by at least 62% by 2035 compared to 2005 levels.
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He said some state planning changes and the ongoing review of the national electricity market could cause uncertainty, but large-scale renewable energy developments were often marginal investments and the underwriting program needed to provide more support for each project that received a contract.
Moskovic said the plan should extend beyond its scheduled completion date of 2027. He said this would give investors more confidence to support renewable projects.
He said, “Maybe we need more data to confirm whether this is an omission, but everything we are hearing suggests it is not. We need to be willing and able to provide more support to promote (the scheme).” “We need to stand shoulder to shoulder on this, and state governments need to be on board with this.”
Delivering the annual climate statement in Parliament last week, Climate Change Minister Chris Bowen said the government so far has more than 16GW of renewable energy projects under contract or in negotiation through the Capacity Investment Scheme, with 10 tender rounds remaining.
He said he expects about 11GW of capacity to reach financial milestone by the end of 2026.
A separate report from the Australian Energy Market Operator (EMO) warned on Monday that if New South Wales’ Araring coal-fired power plant closes as planned in 2027, urgent investment in new “system safety” energy infrastructure – particularly synchronous condensers – will be needed.
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