Clean energy sector urges reform priority as confidence hit by war in Ukraine

Clean energy investors are calling on the next federal government to prioritise energy reform, warning that confidence has been rocked by recent geopolitical shocks.

Australia’s move to renewable energy has been disrupted by recent global events. Picture: Bloomberg

Clean energy investors are calling on the next federal government to prioritise energy reform after the election, warning that confidence has been rocked by recent geopolitical shocks.

The Clean Energy Investor Group, with $24bn of power generation across 70 power stations, has raised the alarm that Australia is getting further out of step with international investor sentiment after its latest survey ­revealed uncertainty around reform of the National Electricity Market was undermining confidence.

“The incoming federal government will have to do a lot of work to focus and accelerate reform in the National Electricity Market,” CEIG chief executive Simon Corbell said.

“Investors report that the most negative development affecting clean energy in the quarter has been the Russian war against Ukraine with its associated impacts on the global economy.”

The direction of reform had failed to improve for the second quarter in a row, he added, warning that Australia was getting further off track against the “step change” scenario to transition to renewable energy.

“There were big international and national headlines over the quarter but investors reported that the most important development was the announcements from Origin Energy and AGL bringing forward the closure dates for coal power stations in NSW and Victoria,” Mr Corbell said. “This was the most positive headline for clean energy but does also carry some risk depending on how the NSW, Victorian and federal government respond.”

The Australian Energy Market Operator, which runs the national electricity network, in late 2021 released a draft “step-change” scenario, requiring a nine-fold increase in wind and solar capacity by 2050 to meet the nation’s net-zero emissions targets.

All up, 45 gigawatts of storage across batteries and hydro will be required while 9GW of gas-fired power will be needed to firm renewable capacity, according to the market operator.

Investors were positive about the NSW government’s response to the coal closure announcements in its decision to accelerate the Electricity Infrastructure Roadmap, Mr Corbell noted. “This shows that despite the regulatory risks faced by clean energy investment in the NEM, the underlying economics is strongly positive.”

While investors viewed the federal budget as having no impact on the investment environment, the Ukraine invasion was a negative development. “Most investors reported that the key risks faced by clean energy investment in the National Electricity Market have stayed the same over the quarter,” Mr Corbell said.

These include complex and lengthy transmission planning and connection processes, potential introduction of locational marginal pricing, emissions policy uncertainty and unrealistic scenario planning and a timetable for coal closure.

Originally published as Clean energy sector urges reform priority as confidence hit by war in Ukraine