Surely it is apparent to anyone who realistically looks at our political master’s wish list, that an 82% renewable energy target by 2030 is not only unreasonable but more worryingly an unachievable folly. We as a nation are not yet ready, nor configured for such a fundamental pivot in direction. Notwithstanding the folly of this election promise, it is downright dangerous to the ongoing orderly supply and costs of electricity supply to all Australians.
It is therefore, putting our energy system is at an impossible impasse. Continuation of current trends will mean missing the Labor Government’s 2030 emissions reduction targets, risking electricity system reliability, and failing to deliver the federal government’s election promise of cheaper electricity. Change is urgently required on all fronts.
Renewable energy advisory Nexa has joined global analyst Rystad Energy in finding Australia’s green energy share is likely to be barely 60 per cent by the end of the decade under the current rate of progress.
Australia currently generates between 30 and 35 per cent of its power from renewable sources such as wind, solar and hydro power.
The forecasts that Australia will undershoot the goal come as resistance grows to a number of major high-voltage power lines that backers say are essential to connecting ever greater amounts of wind and solar generation to storage facilities.
A year ago, existing policies were projected to deliver a 32 per cent reduction in emissions by 2030. Two measures were projected to get near the 43 per cent target: reforms to the Safeguard Mechanism and increasing renewables’ share of generation to 82 per cent.
The government has made some progress in mechanism reforms, but we have yet to see if they will deliver the promised emissions reductions. The bigger problem is that renewables’ share in the National Electricity Market had grown to only 35 per cent as of the end of June 2023.
The growth in renewables has been steady and, most recently, at the expense of gas. Federal and state targets and policies for renewables had driven rooftop solar and grid-scale wind and solar farms, the latter where there was capacity in the transmission grid. But that capacity has been largely exhausted.
The federal government had proposed a fund to deliver more transmission through low-cost finance. This is not happening, primarily because finance was never the barrier – the barrier was and remains the planning and regulatory processes that surround transmission investment.
Curse of politics
A major hurdle is maintaining power system reliability as the share of intermittent renewables grows and the last of the coal-fired power stations close. Both big attempts to address this challenge over the past six years failed dismally.
First, the internal politics of the former Coalition government killed the National Energy Guarantee, an initiative championed by the Turnbull/Frydenberg duet. Second, the recalcitrance of state governments and some vested commercial interests led the Energy Ministerial Council to reject the Energy Security Board’s attempt to introduce a capacity market to deliver dispatchable capacity.
Bringing forward the closure of coal, delays to Snowy Hydro 2.0 and renewable energy zones, and big cost blow-outs for the Marinus Link create more challenges. It is unclear whether the yet-to-be-revealed Capacity Investment Scheme will be enough to address these challenges. The role of gas-fired generation in providing firming capacity to a renewables-dominated system has become unnecessarily contentious.
Third, Australia is not on track to deliver the power bill reductions that Labor somewhat bravely promised before last year’s election. From then to May this year, annualised average wholesale prices rose from $97 per megawatt hour to $146 per megawatt hour. The newly elected Labor government faced an almost immediate energy system crisis, due to factors beyond its control.
But despite caps on gas and coal prices and recent moderation in power prices, the government faces a big task to “cut power bills by $275 a year for homes by 2025, compared to today”, as it promised little more than a year ago.
At the same time, calls are growing louder for some ageing coal-fired power stations to be kept open for longer to ensure a shortfall in new green energy does not jeopardise the stability of the grid.
Tony Wood, the director of the Grattan Institute’s energy program, said it was looking increasingly unlikely Australia would be able to hit its 2030 target.
“On the current trajectory, we’re going to fall short,” Mr Wood said.
“We’re already almost at the end of 2023”.
“The fact is we haven’t been building the transmission”.
According to Mr Wood, delays holding up the construction of high-voltage power lines are at the heart of Australia’s slowing progress.
He noted that a key plank of the federal government’s renewable energy agenda was its so-called rewiring the nation scheme, which had set aside $20 billion in low-cost loans to help kickstart the development of transmission lines.
However, Mr Wood said the policy looked incapable of solving the underlying problem.
“Rewiring the Nation Corporation is an interesting idea because the idea there was to provide low-cost finance,” he said.
“But low-cost finance isn’t the problem.
“There’s plenty of money around.
“The problem is approvals.”
In a recent report, energy analysts Nexa Advisory found about 60 per cent of the electricity generated in Australia’s biggest grid was likely to be renewable by 2030, based on the current trajectory.
Rystad Energy, a global consultancy headquartered in Norway, forecasts “that just 64 per cent” of Australia’s electricity will be renewable by the end of the decade under a “business-as-usual approach”.
David Dixon, the firm’s vice-president of Australian renewable energy research, said congestion in the transmission network was throttling the country’s ability to achieve its goals.
Mr Dixon said Australia needed to add about four gigawatts of large-scale wind and solar power a year to meet its target – the equivalent of two large coal-fired generators.
But he said the country was falling short of the required pace, hindered by a lack of transmission and storage capacity to soak up and move around excess electricity.
Policy changes needed: Rystad
What’s more, he said Australia’s renewable energy output would continue to be stifled so long as the grid ran largely on coal-fired power.
While coal plants could be turned down to accommodate surges in wind and solar power at windy and sunny times, he said they typically had to run at between 30 and 50 per cent of their maximum output for technical reasons.
“This results in the curtailment of renewables, which could otherwise generate more power,” Mr Dixon said.
For Mr Dixon, governments could pursue relatively straightforward policy changes that could help to ease some of the pressure on Australia’s transition.
Among these were moving the subsidies flowing to households to install rooftop solar panels to instead encourage them to fit batteries.
He said this would “stimulate demand for battery storage to soak up excess rooftop solar generation and reduce peak demand in the evening”.
“The current economics favour installing rooftop solar only,” he said.
On top of this, Mr Dixon said there needed to be more certainty for investors looking to build large-scale batteries, suggesting this could be done via “auctions to de-congest the existing transmission network”.
In the absence of such measures, he said governments may be left with few other options than to delay the closure of coal-fired power plants such as Origin’s giant 2880MW Eraring, which is the country’s single biggest generator.
Eraring is scheduled for closure in August 2025, but NSW Energy Minister Penny Sharpe is coming under increasing pressure to keep at least some of the plant online in a move that would reportedly cost taxpayers hundreds of millions of dollars a year.
“In short, if we are unable to construct adequate transmission, firming, and renewable capacity before the scheduled coal plant closures, it would be reasonable to delay the retirements of coal generators,” Mr Dixon said.
Developer interest ‘massive’
Marija Petkovic, the boss of consultancy Energy Synapse, said the sputtering nature of Australia’s transition had nothing to do with investor enthusiasm.
Ms Petkovic noted there was “massive” interest from developers keen to build generation, storage, and transmission projects.
She pointed to a pipeline of proposed wind and solar projects amounting to 150GW of capacity as evidence of the money “lining up” to be invested in Australia’s move to renewable energy.
It was a similar story with batteries, with projects totalling about 50GW on the drawing boards.
“Obviously, not all these projects will be built,” Ms Petkovic said.
“Throughout their development process, companies might decide that they might not be feasible or they might not be in the best spot”.
“But given that these numbers are huge what it does show is there is massive interest in building these projects from the renewable energy sector”.
“The renewable energy sector is very much willing, able and capable of stepping up to meet that target.
“The challenge is it’s simply taking too long from conception to construction and having these projects be operational.”
Rystad believes policy changes are needed to spur the development of large-scale batteries.(Telsa Motors: Timothy Artman)
Ms Petkovic said the time it was taking for projects to be approved and connected to the grid was the most significant “bottleneck” jamming up Australia’s transition.
Governments facing ‘choices’
She said it was here – rather than the provision of money – where governments could make the biggest difference.
“If they could accelerate that process, we would be seeing these projects come online much faster,” she said.
“It’s a huge task that’s ahead of us, especially when you think of how much transmission has to go into the grid to hit that target.”
Federal Climate Change and Energy Minister Chris Bowen has maintained the government can meet the 2030 target, saying it was “ambitious … but achievable”.
During a recent visit to Japan, Mr Bowen acknowledged the difficulties facing the government, but insisted it was not about to abandon its goals.
“This is a hard task,” Mr Bowen said.
“It’s a little fashionable in Australia to say it’s too hard, that we won’t lift from 35 per cent renewable energy today to 82 per cent by 2030.
“I completely acknowledge it’s a big job with many road bumps on the way. Of course, it is”.
“If it was easy, someone else would have done it.”
Mr Wood queried whether governments may eventually have to make difficult decisions about whether to step in and force through controversial projects such as transmission lines.
“They’ve got a choice,” Mr Wood said.
“If they don’t, you say goodbye to the targets we have and you probably say goodbye to how we get our emissions down.”
The NEM commenced operation as wholesale spot market in December 1998. It interconnects five regional market jurisdictions – Queensland, New South Wales (including the Australian Capital Territory), Victoria, South Australia, and Tasmania. Western Australia and the Northern Territory are not connected to the NEM.
The NEM involves wholesale generation that is transported via high voltage transmission lines from generators to large industrial energy users and to local electricity distributors in each region, which deliver it to homes and businesses.
The transport of electricity from generators to consumers is facilitated through a ‘pool’, or spot market, where the output from all generators is aggregated and scheduled at five-minute intervals to meet demand.
The pool is not a physical thing, but a set of procedures that AEMO manages in line with the National Electricity Law and National Electricity Rules.
The market uses sophisticated systems to send signals to generators instructing them how much energy to produce each five minutes, so production is matched to consumer requirements (spare capacity is kept ready for emergencies), and the current energy price can be calculated.
NEM infrastructure comprises both state and private assets managed by industry participants.
The federal minister, Chris Bowen, seems to have demonstrated a complete a lack of understanding and reason as to the issues that such a promise will require, and the problems it will face. Delivery will also demand the co-ordination and co-operation with the states that we have not seen to date.
