Figures published late last week by the Clean Energy Regulator (CER) in its Quarterly Carbon Market Report for Q2 2020 show an unexpected leap in Australia’s rooftop PV installations, and the delivery of an extra 2 GW of renewable energy from large-scale projects over the first six months of 2020.
Small-scale rooftop solar installations in Q2 reached 82,400, an increase of 1,400 on Q1 (81,000), bringing the six-month tally to 677 MW of capacity, which represents a 41% increase on the installations for the same period last year. The CER estimates that if this momentum were to continue, the amount of rooftop PV installed during 2020 will reach 2.9 GW, a substantial increase on the 2.7 GW forecast at the end of the March quarter.
Combining data from the Australian Bureau of Statistics on the reported levels of employment in the rooftop solar sector, with that on recent installation growth, CER Chair David Parker said, “The strong growth in rooftop solar PV over the first six months of the year is estimated to have added 2,800 jobs at a time when employment in other sectors has contracted.”
While the accelerated growth in rooftop solar may be interpreted as a likely ongoing trend driven by Australians hunkering down and improving their homes, taking advantage of low interest rates during the COVID-19 pandemic; the leap in large-scale renewables is widely seen as the bounty of projects begun before investor confidence was shaken by long delays in connection of projects to the grid and uncertainty seeded by the government’s constant spruiking and planned underwriting of fossil-fuel generation.
That is, an ongoing boom in large-scale renewable build is far from guaranteed.
However, opinions differ on the outlook for investment in large-scale renewables in Australia.
In August, analysis by industry body the Clean Energy Council (CEC) found that new investment in large-scale solar, wind and storage projects in Q2 of 2020 had slumped to $600 million, the lowest level of investment in financially committed projects in the past three years.
This represented a 46% drop compared to projects reaching financial close during the previous quarter, and a 52% reduction on the quarterly average for 2019. No new wind projects reached financial close in Q2; in fact, a total of only three projects hit that milestone, including Neoen’s 400 MW Western Downs Solar Farm and one utility-scale battery.
The CEC cited not only difficulties in finalising grid connection processes and obtaining Generator Performance Standards (GPS) as factors undermining the economic viability of large-scale renewable projects, but also the previously unexpected need to incorporate technical support such as synchronous condensers and harmonic filters in renewable generator specifications.
“Network congestion and system-wide challenges are contributing to unanticipated changes including to technical requirements, creating uncertainty about next steps and timing of resolution for project developers,” said Thornton.
On the other hand, the CER Q2 Quarterly Carbon Market Report sees cause for optimism in the fact that “probable” projects have reached “the highest level recorded by the Clean Energy Regulator, at 2.8 GW.”
It cites some 1.5 GW of recently announced power purchase agreements (PPAs) for the Western Downs solar farm and MacIntyre and Clarke Creek wind farms; in August. It also offers, “Murra Warra Wind Farm Stage 2 as having reached financial close for a total of 209 MW, which took “the total committed capacity to over 1 GW for the year”.
And while the total capacity of new renewable projects that reached financial close in the first half of 2020 was 837 MW, the CER expects 2-3 GW of large-scale renewables to reach financial close this year.
Meanwhile, the pipeline is bursting with green shoots
In terms of the pipeline of proposed projects, analyst David Dixon at Rystad Energy, reported in July this year that 28.4 GWac of utility PV, wind, storage and hydrogen electrolyzers had been added to its database in the first half of the year, an increase from the 27.2 GWac of capacity additions over the same period in 2019. Utility-scale PV accounted for 9.2 GWac of those proposed projects, with wind following closely at 8.9 GWac.
The CER posits that acceleration in New South Wales, Victoria and Queensland of renewable energy zones (REZs), as recommended in the Australian Energy Market Operator’s Integrated System Plan will continue to support investor confidence in coming years.
These planned zones, with guaranteed connection, built near strong transmission (or incorporating transmission upgrades); which will contract for supportive colocated energy storage and hope to attract energy-hungry industries that will make use of cheap renewable energy where it is generated, offer strong incentives to invest in new generation.
The CER report notes, “During Quarter 2 2020, registrations of interest for New South Wales’ first REZ in the state’s central west totalled 27 GW, well beyond the planned 3 GW zone.” This show of interest prompted the NSW Government to announce a second, far larger REZ of 8 GW in the New England region.
The Minister for Energy and Emissions Reduction, Angus Taylor said the CER Quarterly Carbon Market Report showed that, “Australia is a world leader in renewable energy,” and that, “This dispels the myths that some continue to spread around of a stall in investment.”
Ask the investors
Perhaps a truer bellwether of finance-sector sentiment comes from a group of investors themselves.
Late last week the Clean Energy Investor Group (CEIG), which includes Macquarie Capital, renewably challenged John Laing, BayWa, Lighthouse Infrastructure, RWE Renewables and a further 10 investors, established a dedicated and permanent policy secretariat to amp up its engagement with policy makers and regulators.
As part of establishing its permanent and powerful advocacy presence, CEIG also appointed former ACT Chief Minister and Energy Minister, Simon Corbell, now Chief Advisor to energy accelerator company Energy Estate, as its permanent chairperson; and Marilyne Crestias as Policy and Secretariat Manager.
Crestias is a former senior director in the Victorian Treasury and Energy departments where she contributed to the development of the highly successful Victorian Renewable Energy Auction Scheme.
“Now is the time for investors to have a unified and permanent voice which delivers the advocacy needed to shape the detail of future energy market reform and governance,” said Corbell on his appointment.
“This will be vital in ensuring Australia is able to continue to attract the significant amount of competitively priced capital needed to facilitate the clean energy transition,” he added.
Among its reasons for establishing permanent and coordinated representation, the CEIG stated that, “Shortcomings within the current regulatory framework have already had a material and ongoing impact on clean energy investment.”
There is no room for complacency as Australia struggles to develop renewables in time to replace retiring coal generation, especially as the government continues to shoehorn climate-change-stoking fossil fuels into the future mix, but perhaps there’s time for a moment of appreciation.
The CER’s Parker forecast that this year, new rooftop solar and large-scale renewables capacity would reach a total of 6.3 GW, which matches the record set in 2019. He pointed out that this figure is more than five times the total capacity of 1.2 GW delivered in 2016.
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