Australia’s energy transition picks up steam

Renewables‘ share of electricity generation in Australia reached 35.9% last year, more than double the level of 2017.

In particular, the country has embraced rooftop solar. Around one in three Australian households now have home solar systems, according to the Clean Energy Council. Rooftop solar contributed 25.8% of renewable energy generation last year, the first time it has accounted for more than a quarter of the country’s green power production.

However, to transform truly a power system still heavily dependent on fossil fuels, particularly coal, more utility-scale solar and wind are required. Deployment rates for utility-scale projects were down in 2022 year on year, but the recently published Clean Energy Australia Report charts clear evidence of growing momentum across the renewable energy sector:

• There were 72 large-scale renewable energy projects under construction or with firm financial commitments at end-2022, up from 66 at end-2021. These comprised 48 solar projects, 21 wind and three bioenergy.
• Utility-scale solar saw its largest ever monthly generation in December at 1,505 GWh.
• The deployment of batteries – a vital back-up for the efficient use of variable renewables – increased last year to 1,380 MW/2004 MWh, compared with 921 MW/1169 MWh in 2021.
• Over 5 GW of wind and solar projects started construction last year, the highest level on record.

More large-scale battery deployments look highly likely. RWE Renewables Australia in May won a competitive tender in New South Wales for a 50 MW/400 MWh battery energy storage system. The project will be located next to the company’s 249 MW Limondale solar farm, which started operation in 2021.

RWE Renewables Australia is currently developing a portfolio of on and offshore wind, solar and battery storage projects across Australia.

Political sentiment swings behind green growth

Increased activity in the renewable energy sector reflects a sea change in the national mood over the past year. The federal election of 2022 was dubbed the ‘greenslide’. The election brought Labor back into power with a majority for the first time since 2007.

Although Labor’s majority is slim, the Green Party won 4 seats, up from 1, and a group of cross bench MPs, known as the ‘teal independents’, who ran on strong climate agendas, have 11 seats.

Action has followed. In December, the government and the state of New South Wales announced a joint deal worth A$7.8 billion (US$5.2 billion) to support eight critical transmission grid and renewable energy zone projects. In total, the government plans grid modernisation investment of A$20 billion under its Rewiring the Nation policy.

This huge new investment in grid infrastructure is designed to facilitate the accelerated build out of renewable energy projects in order to reach the government’s target of 82% renewable energy on the grid by 2030. The new government also legally adopted in September a target of reducing the country’s greenhouse gas emissions by 43%, relative to 2005, by the end of the decade.

This ups the country’s climate ambitions substantially from the 26-28% target advocated by the previous administration.

Project pipeline builds

The renewable energy project pipeline has increased as a result. According to the Clean Energy Council, as of April, 16.4 GW of new renewable energy capacity had reached financial closure, representing A$23.5 billion in investment.

However, the pipeline of all projects under consideration is much bigger – more than enough to supply Australia’s electricity needs, according to some estimates.

These include a growing number of offshore wind projects and giant solar farms. Currently more than 50 GW of offshore wind projects have been announced around the country.

Australia has gradually been putting in place the legislative framework for offshore wind, which would provide a huge boost to its ongoing construction of battery capacity, solar, onshore wind and hydropower. The offshore Electricity Infrastructure Act was passed at the end of 2021. Then, in June last year, the licensing regime for the sector’s regulation came into being.

In December, the government declared the Bass Strait off Gippsland as the country’s first offshore wind zone, an area which could host more than 10 GW of offshore wind. A consultation on the Hunter Offshore Wind Zone, part of the Hunter-Central Coast Renewable Energy Zone, opened in February. The area could support 8 GW of offshore wind.

Wider economic transition

Australia remains a large fossil fuel user and exporter, notably of coal and liquified natural gas. It faces the twin challenge of domestic decarbonisation and transforming an export-orientated economy based on traditional fuels.

It is already having success. In 2022, production of lithium, vanadium and cobalt – all key battery minerals – rose by 9%, 10% and 6% respectively, according to the Australia Identified Mineral Resources report.

However, an even bigger opportunity may lie in clean electricity and green hydrogen exports to the energy-hungry economies of Asia, many of which also remain heavily dependent on coal. Some of the largest renewable energy projects worldwide have been floated in Australia with the aim of securing a share of future trade in clean energy commodities.