Several Australian states have had to develop their own policies and roadmaps to progress the clean energy transition and enable private sector investment outside the national framework. This presents risks and challenges if not managed carefully.
With the new Labor government, there is opportunity to bring harmony with a national approach and position Australia as a “renewable superpower” on the global stage. Significant reform is needed to achieve this; reform that supports investment into the sector without putting the costs back on consumers.
In early September, just four months after the Federal election, Australia’s parliament passed the Federal Government's climate bill to cut the nation’s carbon emissions by 43 per cent by 2030 and to net zero by 2050. Whilst this target itself was met with a variety of opinions from industry commentators, businesses and scientists, there’s no denying that it sent a clear signal to the market that Labor intends to deliver on its election pledge – set out in its Powering Australia plan – and it will do this by boosting renewable energy and unlocking an estimated $76 billion in investment.
Following years of inaction on energy policy and drawing criticism at last years’ 2021 United Nations Climate Change Conference (COP26) for not putting forward a meaningful emissions reduction target in line with our allies and trading partners, our international reputation was under the spotlight. It’s clear the nation needs to step up and this target brings us closer to those set by other developed nations
To achieve this, the Federal Government is targeting an 82 per cent share of renewables across the energy grid by 2030. Even without an increase in demand, Australia will need to increase the pace of renewable energy infrastructure with approvals, financing and construction likely needing to be fast-tracked to meet these targets. According to the Clean Energy Council’s Clean Energy Australia Report 2022, over the last five years, Australia’s electricity generation from renewable sources has almost doubled to 32.5 per cent in 2021. The question is not only can it be done, but is it supported by realistic policy?
It’s going to take significant effort to restore investor and consumer confidence around policy uncertainty, regulatory compliance and market risk whilst tackling the challenges around grid access, congestion management, reliability standards and capacity constraints. There’s also uncertainty around the position of coal and thermal energy generation and when we may transition away from Australia’s economic backbone in the fossil fuel industry and decommission carbon-intensive power plants. In a recent report published by the Australian Energy Market Operator, considerable gaps are anticipated between supply and demand connected to this future phase out of coal and gas plants and the need for investment in generation, storage and transmission developments. Growing the renewable sector goes hand-in-hand with upgrading the nation’s electricity transmission system. Without this integration we cannot compete globally. Labor has committed to investing $20 billion to rebuild and modernise the grid, as outlined in its energy policy Rewiring the Nation. Investing in the electricity grid is a major step in ensuring the renewable energy mix is fully integrated, fixing energy transmission and keeping power prices down.
Labor’s $15 billion National Reconstruction Fund also seeks to rebuild Australia’s industrial base, and $3 billion of this will support the transitioning of existing industries to net zero emissions and unlock further private sector investment in manufacturing critical components of renewables and low emission technologies.
Backed by a focus on addressing skills shortages across multiple industries through education and migration, as highlighted in the recent Jobs and Skills Summit, we’re excited to see what the next steps will be for the renewables sector. Labor’s Rewiring the Nation plan is a positive move to support Australia’s growing renewable energy pipeline and our clients are excited for the planned government investment so they can fast track their projects to full operation. Improvement to grid stability is a confidence boost to investor risk appetite and hopefully encourages new investors to enter the sector.
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