Pipeline of renewable energy projects falls 80pc, hurting the nation’s transition goals

Renewable energy generation hit a record in 2023 but the number of new large-scale generation projects fell 80 per cent, a Clean Energy Council report reveals.

Spending on large scale renewable energy developments during 2023 fell nearly 80 per cent from the previous year, a hammer blow to federal Labor’s plan to rapidly accelerate the rollout of new zero emission energy sources.

Investment in big solar and wind projects plummeted to just $1.5bn in 2023 from $6.5bn in 2022, a 77 per cent fall, according to a new study by the Clean Energy Council. The sharp slowdown in financial commitments was blamed on a logjam in planning and environmental approvals, higher costs and tighter markets for equipment and labour.

An uncertain policy environment also contributed to the decline, with a long-term Renewable Energy Target set to wind up at the end of 2030.

Wind farms were the biggest drag on momentum, with no new financial commitments to big wind projects in 2023, compared with six in the previous year. The “alarming statistic is the significant slowdown in new financial commitments to large-scale generation projects, which is usually a good signifier of how the sector will perform in the years to come,” Clean Energy Council chief executive Kane Thornton said.

Federal Energy Minister Chris Bowen has set an ambitious target of having renewable energy generate 82 per cent of the country’s electricity by 2030.

While the CEC said renewable sources in 2023 provided about 40 per cent of the power consumed, it questioned whether current targets would be enough to deliver on the supply pledge.

“While there were supportive renewable energy targets announced in 2022, clearly targets alone, in the absence of policy mechanisms, are not always enough to drive investment. Hopefully the federal government’s expansion of the Capacity Investment Scheme announced in late 2023 will help bring on the kind of investment Australia needs in order to meet its targets,” Mr Thornton said.

Squadron Energy, Australia’s largest renewable energy developer, said the figures overlooked its Uungula Wind Farm, which reached financial close in December 2023 and will cost more than $1bn. Uungula Wind Farm, located east of Wellington in NSW, is the largest committed wind farm in NSW with a capacity of 414MW.

Mr Bowen last year announced a massive underwriting scheme to get renewable energy developers to commit to new projects.

The Capacity Investment Scheme guarantees developers a minimum return on new solar and wind projects.

The Clean Energy Council said 315,499 new solar installations were added in 2023, and there were now 3.7 million households with rooftop solar. The surge in solar comes as energy users seek shelter from high electricity bills, which have increased of more than 20 per cent for two successive years.

An aerial view of the Stubbo solar farm project under construction just north of Gulgong in NSW. Picture: Max Mason-Hubers

While the increase in the contribution of renewable energy will be celebrated as evidence of momentum to Australia’s energy transition, the trajectory into 2024 and beyond looks gloomier.

The Australian Energy Market Operator said the nation must urgently add large-scale renewable energy generation capacity to offset the retirement of coal power stations, or risk unreliable electricity supplies for the next decade.

But the downturn in financial commitments illustrates that fewer projects are poised to begin construction.

Financial investment decisions – when organisations make financial commitments to major outlays – can occur many months before construction begins, and a slowdown to just $1.5bn threatens to delay a transition that can ill-afford any missteps.

The slowdown in commitments to generation is in stark contrast to investor appetite for storage projects – most notably batteries.

The Clean Energy Council said $4.9bn has been committed for so-called storage projects.

AGL Energy, Origin and EnergyAustralia all committed to developing large-scale batteries last year, pledges that were, however, incentivised by market conditions.

The influx of solar has seen wholesale electricity prices tumble during the day. Batteries could be used to consume excess generation before earning revenue again when they dispatch electricity at night.

The indicative slowdown on new utility-scale generation will now heighten the need for Mr Bowen’s centrepiece policy, the Capacity Investment Scheme, to deliver.

Under the scheme, should the wholesale electricity price fall below an agreed threshold, taxpayers will compensate the renewable energy project.

Labor hopes the scheme will remove revenue risk, allowing would-be developers to commit to renewable energy developments. The scheme has been cautiously welcomed by developers, but they said Australia continued to face profound challenges in planning and transmission.

States and territories have promised action to streamline planning laws, and have offered a spate of financial sweeteners to secure landowner permission for the 100,000km of new high-voltage transmission lines that need to be built by 2050.

Without changes, particularly in NSW, developers have said projects remain unviable. Existing planning laws in NSW allow property owners well outside the jurisdiction to oppose large-scale developments, making them un­viable.

Even if a project can secure development application (DA) approval, developers will be unwilling to commit millions of dollars without certainty that they will be able to connect into the grid via the transmission lines.

New modelling released in January by AEMO Services suggests the country could at most install 4GW of new clean energy capacity, compared with a 6GW target.

Originally published as Pipeline of renewable energy projects falls 80pc, hurting the nation’s transition goals