Labor’s claim that Australia’s national electricity grid would be running on 82% renewable energy by 2030 started as a projection, but at some point it effectively became a target. The Albanese government is as responsible for this as anyone, having implied it’s where the country is inevitably headed.
Depending on what happens at the next couple of elections, the government will be seen to have failed if the country doesn’t get there. Among other things, it is a necessary step for Australia to reach its minimum 2030 emissions reduction goal and make deeper cuts in line with scientific advice.
But things have changed since the pseudo-target was announced in late 2021. Unless there is a significant change in direction, the view from regulators and the energy industry is that the grid won’t get to 82% green power by the end of the decade.
Renewable energy has surged in recent years to now provide about 36% of generation, but estimates suggest the pace of construction still needs to at least double. There is no shortage of development proposals, but the head of the Australian energy market operator (Aemo), Daniel Westerman, used a major speech last week to warn investment was “just not happening fast enough”.
What’s changed?
For one, the lost decade on the climate crisis under the federal Coalition had a greater toll than some realised. It took steps to slow the rise of renewable energy and pressured companies to keep ageing coal plants running. Its attitude was encapsulated in the moment the then-treasurer, Scott Morrison, brandished a lump of coal in parliament and taunted “it won’t hurt you”. The country was left way behind.
The current federal and state governments have discovered that constructing the huge amounts of transmission infrastructure needed to connect what is basically a new, clean electricity grid is a laborious and complex task. It’s not helped by an investment test before major new connection lines can be built that many consider not fit-for-purpose. Labor has promised $20bn to “rewire the nation”, but each transmission connection is a multi-billion dollar project, and it takes seven years on average to get one approved and built.
In part, this is because proponents need a social licence for connections that are proposed across farms and public land – a challenging issue in some places.
Most of these issues were foreseeable. Others were a bit less easy to predict.
Cost is a major one. For some projects, the price for getting a development in the ground has blown out by 30-40% due to inflation and supply chain constraints.
Global competition for equipment and parts is escalating. The change agent was the $A557bn support for clean energy projects in last year’s US Inflation Reduction Act. Some other countries are responding with their own climate-focused packages. Many energy companies are global players. If it is more attractive to build solar and windfarms elsewhere, that’s what some will do.
The challenge this poses for Australia is greater than just whether the government can reach 82% renewable energy by 2030. The real target is much greater. In its blueprint for a future grid, Aemo suggested Australia would need nine times today’s level of large-scale renewable energy capacity to meet future demand.
So how do we get there?
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The short answer is the country needs a national policy that drives investment in renewable energy. The current approach – relying on solar and wind being so cheap that it will be financially attractive enough for companies to spend up big as coal plants die – won’t be enough. Neither will the underwriting schemes introduced in some of the large states.
Two steps could help address the problem. The first is to expand and extend the national renewable energy target. The target was filled in 2019 and will stop offering support for existing solar and windfarms by 2030. Solar and wind can compete and will continue to be built without it, just not fast enough. It would be relatively uncomplicated to reset it to give the system the big push that it needs.
The second is to announce closure dates for coal plants to give investors a clear picture of what the future looks like. The Queensland government, for example, has implied closure dates for its coal plants by announcing ramped up renewable energy targets, but hasn’t taken the next step of telling Aemo when all its fossil fuel generators will stop running.
The second half of this year is an opportunity for major change. The climate change minister, Chris Bowen, has promised a federal underwriting program to ensure there is enough “firm” renewable energy and storage capacity that can be called on at any time to fill gaps around variable generation. On Thursday, he announcement the commonwealth would underwrite 550MW of new firmed generation in NSW – the first commitment from a new capacity investment scheme.
Perhaps just as importantly, the government has allocated $5.6m to develop a plan to “catalyse clean energy industries, ensure Australian manufacturing competitiveness and attract capital investment”. In other words, to respond to the massive influx of clean investment elsewhere, building on $2bn for green hydrogen in last month’s budget.
Whatever form that response takes, it will need to be substantial. If there’s a message from recent renewable energy investment trends, it’s that Australia’s natural advantage in sun and wind energy won’t be enough on its own.