Energy policy vacuum beyond 2020 is set to scare investors away, a new study confirms. According to BIS Oxford Economics, construction work done on renewable energy projects will plunge between 40% and 50% in Australia in the early 2020s as policy uncertainty surrounding the sector’s outlook undermines investment confidence.
This will be a major downturn from the expected $20 billion of investment in solar and wind energy generation in FY18 and FY19, which will occur despite policy uncertainty at the Federal and largely driven by falling costs of renewables and supported by state government renewables programs and the Australian Renewable Energy Agency loans, the consultants find.
“Investment levels at the moment are extremely high and a decline from this was inevitable, but the lack of a clear energy policy at the national level is creating some uncertainty and limiting some private sector activity,” says BIS Oxford Economics chief economist Sarah Hunter.
Australia has no renewable energy target beyond 2020 or national policy settings that can drive investment in new generation. Following the federal government’s most recent failed attempt at national energy policy – the National Energy Guarantee, Energy Minister Angus Taylor confirmed the Morrison government would not be replacing the Renewable Energy Target (RET) “with anything“ when it expires in 2020, noting that the 26% emissions reduction target will be reached even without additional intervention.
According to BIS Oxford Economics, the pipeline of confirmed projects going into the 2020s indicates that there will be a drop in activity in the near term, but a number scenarios are still in play.
“There is significant upside risk to this forecast given both the large number of proposed projects, and the potential for supportive policy following the upcoming Federal election,” the briefing states, noting Labor’s commitment to 50% renewable energy generation by 2030 would be more encouraging to renewables investment.
Analysts at Rystad Energy expect a smaller decline in 2020, which they describe as a significant year. Rystad predicts about 3 GW of potential PV, wind and storage coming online, with roughly 50/50, solar and wind, riding on slippage of some of the projects scheduled for the year before. This means a 30% slowdown compared to the outstanding year of 2019 with potentially 4.5 GW of new solar, wind and storage projects.
Presently, total renewable supply stands at 21.2% of generation from all sources across the NEM, including rooftop solar, eating into the share once firmly held by coal and gas, according to the latest report from The Australia Institute.