Renewable generation installation has accelerated to such an extent it is on track to provide almost 80 per cent of the electricity market by 2030, according to research from consultancy Green Energy Markets.
- Rooftop solar installations are up 76pc on this time last year
- By end of the year rooftop solar capacity will exceed that of the closed Hazelwood power station
- Renewable financing faces big challenges from the likely collapse of power prices
GEM director Tristan Edis said the renewable energy industry has built itself up to such a significant scale that even 50 per cent by 2030, the renewables target being pursued by the Federal Labor Party, would involve a significant contraction in activity and employment in the industry.
“I think most of us had thought a while back that 50 per cent by 2030 would be a pretty massive task for the industry to scale-up to meet,” Mr Edis said.
“But given the spectacular level of construction and rooftop solar installation activity since 2017, the industry is now facing a rather massive contraction in activity and employment even if Labor is elected nationally.
“The current scale of construction and installation activity in the renewables sector is actually consistent with achieving something like 78 per cent renewable energy market share.”
In October, renewables were responsible for 22.5 per cent of electricity generation.
Sticking to the Coalition government’s current policy of reducing carbon dioxide emissions to 26 per cent below 2005 levels would slam the brakes on the sector.
On GEM’s figures, the amount of new renewable energy capacity required each year to achieve a 50 per cent target is around 1,850 megawatts.
Between January 2017 and October 2018 the rate of large-scale construction commitments and small-scale rooftop solar installations was 5,150 megawatts per year.
“The Coalition’s 2030 emissions target, as embodied within the proposed National Energy Guarantee, would involve a collapse to 839 megawatts per year,” Mr Edis said.
Renewables already covering coal closures
GEM’s quarterly Renewable Energy Index found October had been a record month for rooftop solar with Australian homes and businesses installing more than 150 megawatts of capacity for the first time.
That pace of installation is 76 per cent greater than the monthly average of last year — which had been a record year.
The report noted the amount of rooftop solar installed so far this year has already passed last year’s total and now stands at 1,243 megawatts.
“This exceeds the Liddell coal power station’s average capacity over last summer’s peak period,” GEM said.
“By the end of the year it’s quite likely the total capacity installed in 2018 will exceed the peak capacity of the recently closed Hazelwood coal power station.”
The report also found the total capacity installed by the end of 2018 was expected to save solar system owners close to $3 billion in energy costs over the next ten years.
Price collapse pressures funding
Mr Edis said even if Labor does not manage to pass the NEG legislation then it is not necessarily plain sailing for the renewables sector.
As renewables — with their low cost base — make gas and black coal less competitive, pushing them out of National Electricity Market’s generation auction, prices received by generators will tumble and margins will be crushed.
“The amount of solar capacity we’re on track to have operational by 2021 will mean competitive conditions in the wholesale market between around 10am to 3pm will be akin to what we tend to experience late at night between 2am and 5am even if you take Liddell out,” Mr Edis said.
Big generator AGL has maintained it will close its aging, black-coal-fired Liddell generator in New South Wales in 2022, despite strong protests from the Federal Government.
“That suggests very low power prices set by the marginal cost of black coal generators — roughly $35-to-$40 per megawatt hour —which are likely to be below the levels required to make a solar farm financially viable,” Mr Edis predicted.
Those low prices, when it is windy or sunny, will put pressure on Clean Energy Finance Corporation’s ability to lend, which is required by law to exercise financial diligence with its investments.
“Without a revenue top-up via the NEG, the CEFC may judge that further finance to renewables projects is inconsistent with its objectives to obtain a financial return at or above the government bond rate,” Mr Edis said.