SEC rallies industry to prevent a sunset on opportunities in Australia’s renewable energy market

At a renewable-energy industry crisis meeting conducted by webinar on Friday and attended by solar developers and industry players whose workforces are at risk, the Smart Energy Council  (SEC) used its independent position to call out Government and market-regulator failings to enable the generation and trade in renewable energy required to power a healthy economy for Australia.

The meeting was called by SEC CEO John Grimes in response to the accelerated flight of investors and EPCs following the Australian Electricity Market Operator’s curtailment last year of renewable generator output to the grid, and its refusal this month to connect several new solar and wind farms due to system strength issues in southwest New South Wales and Victoria — despite the fact that developers had followed due process and been assured of grid connection.

Webinar speaker, Oliver Yates, former CEO of the Clean Energy Finance Corporation said the combination of curtailments and connection failures, of zero-risk COGATI rules governing access to Australia’s transmission network, of crippling and “arbitrary” determination of marginal loss factors … are creating “an environment that is starting to become uninvestable”. 

The market machinations that have emerged during 10 years of Federal policy vacuum on energy transition and climate-change mitigation, he said, have become “unable to be understood by participants”.

He said it has become too difficult to build a business case for new projects given increasingly random risk factors that cannot be outlined, managed and mitigated.

“There are reasonable risks in every business investment,” Yates said, but “when AEMO effectively has permitted connections along a [transmission] line … people have built manufacturing facilities and are effectively being prevented from delivering their product to market.”

Yates was referring to the fact that it’s against the Australian Constitution to block free trade between states and contends that the failure to plan and build adequate transmission to transport electrons from generators that have been accepted by the system is against that free-trade principle.

Multiples of renewable capacity required

“The industry has the ability to deliver what Australia needs which is rapid build out of renewables,” said Yates, who emphasised that Australia will require not only 50% renewable energy by 2030 as the Government has been conceding, but 100% and then 200%.

“We have to deliver multiples of what we have. The Government talks about having an investment pool, to enable us to make this transition clearer. Why it isn’t using that to clear bottlenecks to enable good-quality, low-cost renewable-energy projects to come to market is beyond me,” said Yates.

Government obfuscation and failure to act, he said will delay Australia’s energy transition, “making power more expensive for all consumers, including industrial consumers, which affects the nation’s overall competitive position.”

Call to political arms

The webinar demonstrated an arsenal of powerful arguments to fuel an SEC-proposed Campaign for Large-Scale Renewables (working title only!) to lobby state and federal energy ministers in advance of the Council of Australian Governments (COAG) Energy Council meeting in March.

The SEC promised to fight a “ruthless, pointed, political” campaign, advocating for a plan from all governments to finance a solution to the lack of policy framework and transmission.

“It’s about … taking AEMO, AEMC and Government processes out of the dark rooms that they’re in at the moment,” and shining a light on the cumbersome complexities that are stymying investment, development and delivery of energy Australia needs, said Wayne Smith, the SEC’s Government Relations Manager, and a practised political strategist.

The SEC has demonstrated its ability to successfully advocate for action, having succeeded in its fight for retention of a Renewable Energy Target during Tony Abbott’s stint as Prime Minister, and in recently resolving issues around Victoria’s Solar Homes rebate scheme.

Industry voices confirm unforeseen challenges

Responses from webinar attendees acknowledged the SEC’s formidable track record, and expanded on the problems faced by individual projects.

“Today we kicked off connection agreements with AEMO,” said one, “and basically they’re not worth the paper they’re printed on.”

Another remarked that “Projects ready to connect in Victoria shouldn’t be subject to AEMO delays. It’s a massive uncertainty among investors. The whole industry needs to push here.”

Yates mentioned having spoken to industry participants who believe their project is safe, and who comment that other developers should have been more careful, and not joined clusters of projects on particular transmission lines.

“That’s not the case,” he countered: “The regulator has full transparency and visibility when they allow people to spend all that time getting those development approvals and starting construction.

“Everything I see in the market is actually trying to ration the existing transmission, or delay construction of transmission,” he said.

He urged the industry to rally behind the SEC, and contribute the funds required to mount a successful campaign, saying that projects from 10 MW to 600 MW in size are facing extreme challenges in connecting and participating in the market, and that the environment has changed significantly from the time they launched or made the commitment to buy capital.

Budgeting for political action

Money spent on negotiating transmission and connection requirements could be wasted, without some funds being dedicated to a fight at the political level for the industry’s future, argued Grimes and Yates.

“If AEMO has been given a direction to take no risk — and that’s what’s coming from the COAG Energy Council — then they’ll take no risk,” Yates said, referring in part to AEMO’s recent decision to connect only one new renewable generator at a time in the West Murray region of Victoria and NSW. 

“They’ll do whatever their paymasters try to do,” said Yates. 

“At a political level, we may need to change the risk tolerance and get governments to direct AEMO to get ahead of this and to start getting connections in place.”