Australia election: What can solar expect under Morrison’s coalition?

What was predicted to be a comfortable win for Labor turned into an outright parliamentary majority for the Coalition and a shock outcome for climate action proponents. With Scott Morrison at the federal government helm for another three years, solar could take a back seat.

First and foremost, the Coalition does not have a renewable energy policy beyond 2020 and will not be replacing the Renewable Energy Target (RET) “with anything“ when it expires in 2020. The race towards the RET’s 33,000 GWh ambition, which has effectively been met, has underpinned a renewable energy boom in Australia, and one that has been particularly pronounced in the large-scale solar sector. However, Morrison has repeatedly rejected to consider greater use of renewables to generate electricity.

Instead, he was arguing an ambitious renewable energy target, such as Labor’s 50% RET by 2030, would damage the economy. Such claims were in stark contrast to the findings of Australia’s chief energy institutions – the Australian Energy Market Operator (AEMO) and the national science agency CSIRO – which insist solar and wind are the lowest cost options for generating electricity in Australia, compared to any other new-build technology. Importantly, this also holds when the cost of fossil generation technology is adjusted for climate policy risk.

Analysts have voiced concern that investment in renewables will slump beyond 2020 as policy uncertainty surrounding the sector’s outlook undermines investment confidence. Such warnings fell on deaf ears as the Coalition continued to champion the interests of the fossil fuel industry. Having decided to play his trump card: King Coal, Morrison voiced support for Adani Power’s Carmichael coal mine in Queensland, suggesting such projects could guarantee blue-collar jobs. Unfortunately, that message resonated with voters and ensured the Coalition picked up the crucial seats in the state.

At a state level, ambitious renewable energy targets could help fill the policy void to a certain extent. For instance, Victoria and Queensland have both pledged to a 50% renewables target by 2030, a move which is expected to pave the way for more large-scale renewables. However, there are also setbacks that need to be taken into account, such as grid bottlenecks in Victoria and Queensland’s new solar installation rules which could push up the cost of commercial and industrial solar systems by some 20%.

Be as it may, it is important to remember the expected fall in wholesale electricity prices – which the Coalition will no doubt attempt to take credit for – should be attributed to the vast amount of renewable generation coming online.

I expect noticeable decline in wholesale electricity prices over next term of Fed Govt driven by surge of renewables supply. Going into next Fed election LNP will be able to claim they lowered power prices.

— Tristan Edis (@TristanEdis) May 18, 2019

Solar rebate

As for sub-100 kW solar system, things will remain unchanged until 2030 in terms of rebates available under the Small-scale Renewable Energy Scheme (SRES). As announced by Energy Minister Angus Taylor in October, there are no plans to change the SRES, despite the Australian Competition and Consumer Commission (ACCC) recommendations to wind it down nine years early.

While the ACCC recommendation sent a shockwave through Australia’s solar industry and community when suggested, big utilities such as Origin Energy and EnergyAustralia backed the initiative. Opposition to rebates can be explained by the fact soaring rooftop solar installation figures lead to a fall in residential demand and thus revenue loss for big electricity retailers.

Overall, axing the SRES was supposed to reduce annual electricity bills for non-solar households by $15 a year, but would have posed a major threat to diminish the uptake of rooftop solar picking up the pace nationwide. While incentives continue to reduce every year, the SRES program has helped Australia pass the two million PV rooftop milestone. 

Other policies and climate commitments

Importantly, the Coalition has no other programs to help the uptake of solar and battery technologies. The notable policy it took to this election was the rebadged Abbott-era Climate Solutions Fund, which included another $2 billion to be used for the Emissions Reduction Fund auctions, but would not bring much for the electricity sector.

The package retains the goal of reducing emissions by 26-28% on 2005 levels by 2030, which according to the administration can be met “in a canter”without intervention. Other studies, such as the annual UN Environment Emissions Gap Report, claim Australia is among a number of countries that are not on track to reach their 2030 target or which are uncertain to do so based on current projections.

The Coalition has often attacked Labor’s emissions reduction target of 45%  by 2030 as irresponsible, although a number of modelings have showed that impact of taking no action on climate change – for both Australia’s economy and jobs – outweighs the costs of reducing emissions. Unlike Labor, the Coalition plans to carry over Kyoto credits to reach its much weaker emissions reduction target.

Pumped hydro needs renewables

Pumped hydro is intended to play a prominent role in the years ahead. The Coalition has pledged $1.38 billion in funding for the Snowy 2.0 pumped hydro expansion, along with $56 million for the Marinus Link project, part of Tasmania’s Battery of the Nation program. The latter would provide a second interconnector across Bass Strait to increase the availability of the state’s hydro resources on the mainland.

While analysis shows that additional energy storage capacity makes financial sense in the light of coal retirements, experts have warned that the potential of these pumped hydro projects can be fully exploited only when they operate in concert with renewables. But, as previously noted, no policy to back renewables is on the cards.

On top of that, pumped hydro also emerged as a big winner in the Coalition government’s Underwriting New Generation Investment Program. The list of 12 projects which could be eligible for taxpayers money includes six renewable pumped hydro projects, five gas projects and one coal upgrade project in New South Wales.

Finally, in terms of electric vehicles, the Coalition did not present any policy, but it has pledged to release one around mid-2020.

While the pending cabinet reshuffle could bring policy tweaks, it is difficult to imagine things could change much for solar. All things considered, it appears the strong economics of PV will need to play the key role in driving investment in the years ahead.