Financial investment commitments to utility-scale renewable energy projects in Australia reached their lowest level in several years in 2023. But they can get back on track with the expanded Capacity Investment Scheme (CIS) scheme, the Clean Energy Council (CEC) said today.
A total of A$1.5bn ($991mn) was committed to a combined 1.3GW of new large-scale renewable projects last year, down sharply from A$6.5bn for 3.8GW in 2022, the CEC said on 13 March in its annual report. This is the lowest level since it began tracking investment data in 2017.
The slowdown reflects issues such as a constrained electricity grid, slow planning and environmental assessment processes in some states, higher costs and tighter markets for equipment and labour, the CEC noted. But regulatory uncertainty also played a major role, as investments have been gradually falling since Australia met its Renewable Energy Target (RET) ahead of the 2020 schedule, with the scheme's end date of 2030 affecting investment decisions, it added.
Large renewable plants typically get accredited under the RET and can issue and sell Large-scale Generation Certificates, a key support mechanism that is scheduled to end at the end of 2030. The industry had been lobbying for the federal government to commit to a new long-term national policy mechanism, which led to the creation of the CIS in 2022 and its expansion last November.
The government plans to issue tenders every six months until 2026-27 to support 23GW of renewable generation capacity such as solar, wind and hydro and 9GW of dispatchable capacity such as pumped hydro and grid-scale batteries. Winners will need to start operating their assets by 2030, which could help the Labor party-led federal government meet its target of sourcing 82pc of electricity from renewable sources by 2030 across the National Electricity Market covering east Australia.
‘Urgent policy design' needed
While the expanded CIS could put Australia back on track, "urgent and careful policy design" needs to be carried out in this year's first half to ensure the programme realises its objective of driving up private-sector investment in the sector, the CEC said.
There were 56 renewable projects under construction as of December 2023 for a combined capacity of 7.5GW, down from 72 projects making up 9.5GW at the same point in 2022.
Australia installed 2.8GW of new utility-scale renewable capacity in 2023, up from 2.3GW in 2022 and a "solid number" according to the CEC, but well below the figure of at least 6 GW/yr estimated by the Australian Energy Market Operator for the country to reach the 82pc renewable target. Out of the total last year, 1.9GW came from solar and 942MW from wind compared with 841MW and 1.4GW respectively in 2022.
An overall 5.9GW of renewable additions were achieved in 2023, up from 5GW in 2022, driven by 3.1GW from rooftop solar compared with 2.7GW the previous year before, the CEC said.
New financial commitments to utility-scale batteries reached a record of A$4.9bn, including hybrid projects with a storage component. This was up from A$1.9bn the previous year, with capacity under construction rising to 5GW/11GWh at the end of 2023 from 1.4GW/2GWh in 2022.
Renewables accounted for 39.4pc of Australia's electricity generation last year, up from 35.9pc in 2022, the CEC said.
