Renewable project bottlenecks hobble green energy pipeline

Australia must install about 40 wind turbines a month to meet a 2030 renewable energy target, but a winter wind drought shows the ambitious goal depends on a broader range of generation.

Australia’s bulging pipeline of renewable energy developments has been hit by construction and registration delays, with the market operator flagging a substantial increase in the time taken to deliver projects into the nation’s grid.

Data from the Australian Energy Market Operator showed that while it approved 12 gigawatts of connection applications in the last financial year, bottlenecks had seen a jump in the timeline for delivering new energy supplies.

The “time taken for developers, construction providers and original equipment manufacturers to physically deliver these projects has increased substantially with 75 per cent of projects taking up to 21 months to be constructed and ready for market registration”, AEMO says in its latest engineering roadmap report.

“Key challenges include project financing, the volume and complexity of contractual arrangements, workforce resourcing and supply chain constraints.”

Australia will need to install 16 times its current capacity in batteries and pumped hydro by 2050, while large-scale wind and solar generation will have to jump sixfold if the country is to achieve a transition to net-zero emissions by 2050.

Dawn aerial drone view of wind turbines at the Gullen Range wind farm, near Goulburn NSW. Picture by Max Mason-Hubers

In the near term Labor has set an ambitious target of having renewable energy generate 82 per cent of the country’s electricity by 2030.

To hit that target, some 6GW of capacity must be added every year. However, AEMO said delays meant only 2.4GW of projects achieved market registration last year while 2.2GW achieved full output in the 2024 financial year.

Over the past three years, the number of connection applications received by AEMO has nearly tripled from 6.5GW across 45 sites in 2022 to 19GW across 81 sites in 2024, according to AEMO.

The operator said the time taken to reach full output across 75 per cent of projects has been cut from 11.2 months in 2023 to 6.9 months or less in 2024.

However, problems in the physical deliver of projects remained a handbrake.

“These are challenges that fall outside of AEMO’s direct remit and instead require broad whole-of-sector efforts to address, without which there will be difficulties in realising the 2024 integrated system plan optimal development path,” AEMO noted.

AGL Energy chief operating officer Markus Brokhof. Picture: Britta Campion

The warnings come after industry players said a major wind drought that caused wholesale prices to spike provided a stark warning about what would happen if Australia did not develop a diverse mix of fuel sources, amid broad concern the role of gas was being downplayed.

AGL Energy chief operating officer Markus Brokhof said a wind drought in the June quarter illustrated the need for a broad range of generation types.

“The low wind levels across the National Electricity Market in recent months demonstrate the importance of a diverse and flexible portfolio of assets that can respond to variable conditions,” said Mr Brokhof.

“Through this period AGL was able to rely on the increased availability of our thermal fleet in combination with our hydro assets, gas peaker and battery portfolio to meet our customer load. As the penetration of renewables increases in the coming years, firming and short and long duration storage provided by grid-scale batteries, pumped hydro, and gas peaking plants will become increasingly important.”

The comments are a stark warning as the role of wind is expected to grow as Australia struggles to develop sufficient back-up options.

To meet the 2030 target, Australia must install about 40 wind turbines a month, an ambitious feat that could leave the grid more precariously placed.

“There is a lot of attention on developing renewable energy but what is going to support the grid when the conditions aren’t suitable? Batteries do the job for a few hours but the wind drought this year illustrates the need for gas,” said one senior industry executive who declined to be named.

Australia’s east coast faces tight supplies. The Australian Energy Market Operator in March said a gas shortfall could emerge as soon as next year and although mitigating steps could be taken, a deep structural deficit would emerge in 2028.

A bitterly cold winter saw AEMO issue an emergency warning earlier this year, and data released by the market operator showed wholesale electricity prices had spiked as a result.

The cost of producing electricity across the national market averaged $133/MWh in the three months to June 30, 23 per cent higher than the same period a year earlier, the operator said.

The increase followed a slump in renewable energy generation as wind output fell to a multi-year low, increasing Australia’s reliance on gas. AEMO said during the three months, gas-fired generation rose 16 per cent from the same period one year earlier.

The increase in wholesale prices will not be immediately felt by households and businesses, but the rise will be a major component in the next default market offer – the benchmark price for annual bills.

The increase in wholesale prices was particularly beneficial to Australia’s largest electricity and gas retailers, Origin Energy and AGL Energy. Both companies announced bumper full-year results this week after coal fleets at near capacity, while also using their gas peakers and batteries.