Fresh doubts have been raised about the country’s ability to meet the 2020 renewable energy target after a new analysis found that $10 billion of extra investment is needed in a market where lenders are wary because of changing regulations.
In research to be released on Monday, BIS Shrapnel has determined it is “highly doubtful” the 2020 target of 33,000 gigawatt-hours of renewable energy output can be achieved given the stalling of investment over the past few years that means a huge catch-up effort is required. It expects the goal may only be reached one or two years late.
Some 4850 megawatts of wind farms and solar power plants need to be installed to meet the deadline, with most expected to be built in NSW, Queensland and Victoria, the research firm found. It calculates that though $340 million of investment has been committed to new projects, another $10 billion is needed.
The findings come as the Clean Energy Council is calling for an increase and extension to the 2020 target as part of a package of measures proposed to end greenhouse emissions from the electricity sector by 2050, as required if climate change is to be limited to less than 2 degrees C.
In a document called Power Shift, also released on Monday, the council proposes measures to ensure the “orderly” closure of heavy-emitting coal plants, which chief executive Kane Thornton said were “more at home in the Eastern Bloc” than in Australia.
“As these plants phase out, Australia can take advantage of our world-class sun, wind, waves and bio-energy that will deliver the lowest-cost form of new electricity generation,” Mr Thornton said. The document says regulated emissions limits or emissions trading could be used to drive plant closures.
On the renewable energy target, which peaks at 2020 and then continues flat until 2030, the council is pushing for an extension of the system to 2035 to provide the certainty required for investment.
The release of the documents follows the Labor Party’s low-emissions strategy plan, announced last week, which includes a proposed 50 per cent target for renewable energy by 2030.
The BIS Shrapnel analysis found that approvals for the projects required to meet the 2020 target are not a problem, with most already in place. But the biggest threat is financing as lenders are deterred by policy instability in recent years.
“Significant government policy changes in recent years have added to development risk, with most projects requiring a power purchase agreement to raise finance from banks for development,” the firm said.
The analysis is not the first to conclude that the target may not be achieved, triggering suggestions that the Turnbull government may have to renegotiate the scheme. But industry players such as Infigen Energy have insisted it can be met, pointing to renewed interest from equity investors and lenders as confidence built in the regulations, which were revised last year.
Adrian Hart, senior manager for BIS Shrapnel’s infrastructure and mining unit, said investment in large-scale renewable energy had lagged the rest of the world in recent years.
“An oversupply of renewable energy certificates caused by the boom in small-scale rooftop solar, coupled with heightened uncertainty caused by government policy changes, has stymied the development of new large-scale wind and solar generation projects in Australia,” Mr Hart said.
Missing the target would see electricity retailers liable tor a penalty equivalent to $93 per megawatt-hour. That means that if the spot price of large-scale renewable energy generating certificates (LGCs), each one representing 1 MWh, is higher than $93, retailers would find it cheaper to pay the charge. The LGC price has climbed in recent months and is currently about $78.