The Clean Energy Regulator last month released their report into the current status of renewable energy in Australia. The report titled ‘Tracking towards 2020: Encouraging renewable energy in Australia’, reviews operations in 2016 and presents information regarding progress towards the Federal Government’s renewable energy target.
2016 was always going to be a key year in meeting the Government’s target of 33,000 GWh of new renewable generation by 2020. Although there was insufficient renewable generation built during 2014 and 2015, this report maintains an optimistic view that the target can be reached on the current trajectory.
Its fact sheet declares there were more than double the number of new renewable power stations accredited in 2016 than in 2015 and there was five times the amount of ‘committed and probable’ capacity.
These numbers, although correct, fail to deal with the actual needs of the scheme. Despite having twice as many power stations, capacity only increased by 65 per cent (from 300 to 494 MW). This represents an impressive increase but will still need to ramped up. With more than 20,000 MW of potential projects currently listed, there is plenty of potential new generation. It is converting these potential projects into actual projects that is going to be the challenge.
Financiers are generally risk adverse and use highly pessimistic curves to mark the revenue of projects. Until recently, it has been difficult to fund merchant projects. In these instances, it has meant a power purchase agreement for most of the project has been needed before the project could be developed. Retailers can pass on costs to customers so their motivation to take on risk to bring down prices is questionable. Large customers are still not used to signing long-term (10+ year) contracts which make them an unlikely source of funding. But, there is a growing acceptance of merchant risk among international financiers, however, it is still emerging in Australia.
The report considers that 3,000 MW of new renewable generation will have to be committed to during 2017. There are more than enough projects available to meet this target but the question is how many new projects can be supported by the grid?
There are several changes to legislation on the way to support fast response frequency services which will support the integration of renewable generation. There is also federally supported investigations underway to explore pump-storage hydro in South Australia and expansion of current pump-storage hydro schemes in New South Wales and Tasmania. These storage facilities are considered renewable enabling technologies. Both the proposed change in legislation and the pump-storage hydros will have a positive impact on the future of renewable technologies. Neither is likely to have a significant impact in 2017 (or even before 2020). It is also important to consider if the industry can add this amount of new renewable generation without upgrades to the notoriously slow transmission network.
In the short term, the optimism from the Clean Energy Regulator has helped bring down the price of LGCs and even caused a reduction in the energy prices. In the medium and long term, it will depend on the ‘poles and wires’ to see if the interest in new renewable generation can be converted to action in reducing carbon pollution in Australia.
The full report from the Clean Energy Regulator can be found here: https://goo.gl/1LpcWU
