Renewable energy investors are warning that “deep structural problems” are driving a slump in solar and wind investment in Australia, with commitments to large farms at their lowest levels in almost a decade.
Clean Energy Regulator data shows the government agency expects final investment decisions on 2.5 GW of industrial-scale renewable energy capacity to be made this year, up from 4 GW last year. The 12-month average of investment commitments for new developments is at its lowest level since early 2017.
Although the share of electricity from renewable sources has increased to more than 40% after years of growth, experts warn that the construction of solar and wind farms needs to be significantly accelerated if the Albana government is to reach the target of producing 82% of electricity from clean sources by 2030.
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The regulator said there was “real potential” that many more companies could receive financial support next year, thanks in part to its expanded capacity investment scheme and insurance program for solar, wind and battery storage needed to replace aging and dirty coal-fired power stations.
But the CEO of Clean Energy The group's investor Richie Merzian said the decline in financial investment decisions is “a symptom of deep structural problems, not just a signal.”
“Structural challenges include government planning delays, grid connectivity uncertainty, power transmission restrictions, rising project costs and lack of certainty of long-term revenues,” he said.
Merzyan said the underwriting program has helped develop a large pipeline of potential projects, but they won't provide the new energy capacity needed until the companies make final investments.
“The contrast between a large pipeline and a limited number reaching [financial investment decision] indicates that the system is not functioning properly,” he said.
Renewable energy sources, which previously received private financial approval, continue to be added to the grid. The Clean Energy Regulator said it expected around 7GW of large-scale generation and rooftop solar systems could be connected this year.
But the Climate Change Authority warned last week that more action would be needed for the government to achieve its targets. It says the growth rate of large-scale renewable energy production is set to more than double over the next five years.
Frankie Maskovich, executive director of policy at the Climate Change Investment Group, said the decline in investment decisions this year was a “worrying trend” and needed to be accelerated to meet renewable energy and climate targets. The latter includes emissions reductions of 43% by 2030 and at least 62% by 2035 compared to 2005 levels.
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She said some changes in government planning and the ongoing review of the national electricity market may cause uncertainty, but large-scale renewable energy developments are often marginal investments and the underwriting program should offer more support for each project awarded a contract.
Maskovich said the scheme should continue beyond its planned closure date of 2027. This will give investors more confidence to support renewable energy projects, she said.
“We may need more data to confirm whether this is a surge, but everything we hear suggests it is not. We need to be prepared and able to provide more support to support support [scheme]”,” she said. “We must stand shoulder to shoulder on this issue and state governments must be involved in this process.”
Delivering his annual climate statement to Parliament last week, Climate Change Minister Chris Bowen said the government currently has more than 16GW of renewable energy projects under contract or negotiations under the Capacity Investment Scheme, with up to 10 tender rounds remaining.
He said he expects about 11 GW of capacity to reach financial completion by the end of 2026.
A separate report from the Australian Energy Market Operator (Aemo) on Monday said urgent investment in new “system security” energy infrastructure was needed, especially synchronous capacitors – if the Eraring coal power station in New South Wales closes as planned in 2027.
