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Net-zero vow fails to ‘shift the dial’ as renewables investment stalls

Investment in Australia’s renewable energy industry is drying up as developers warn a disproportionate level of risk is deterring the build-out of the next wave of wind and solar projects urgently needed to wean the nation off fossil fuels.

The federal Coalition’s promise to reach “net-zero” emissions by 2050, unveiled ahead of the COP26 climate summit in Glasgow, is partly based on a 97 per cent cut in the electricity sector’s greenhouse gas emissions.

However, after a period of significant growth, the roll-out of wind and solar farms has begun to slow. Year-to-date, 1.4 gigawatts of renewable capacity has been added, a 17 per cent drop from 2020 and 49 per cent below 2018 levels, according to JPMorgan. Just one new generator – a solar farm in NSW – was added to the grid last month.

Feedback compiled in the past week from 17 of Australia’s largest clean energy investors whose assets span roughly 50 per cent of renewable capacity countrywide suggests the Morrison government’s “net-zero” announcement has failed to lift souring investor confidence.

“The federal government’s 2050 net zero announcement has not shifted the dial when it comes to reducing risk in the electricity market and improving investor confidence in the renewable energy sector, Clean Energy Investor Group chief executive Simon Corbell said.

“Australia is not planning for a fast enough transition to clean energy and this makes Australia a risky destination for investors focused on net zero outcomes consistent with the Paris Agreement.”

Long-running problems of congestion, system-strength issues and transmission losses across the east coast’s outdated, coal-based power grid have become worsening causes of frustration for investors, creating uncertainty around project timelines and revenue expectations and pushing up the cost of capital far higher than other OECD markets.

Without a greater focus on driving the transmission upgrades to better-connect and modernise the grid, the risks threaten to stunt the roll-out of more clean power at a critical time – just as more coal-fired power stations are scheduled to close their doors.

In the survey of the Clean Energy Investor Group’s membership which includes Macquarie, Neoen, BlackRock and Andrew Forrest’s Squadron Energy, a majority of respondents expressed a “mixed or negative” view of National Cabinet’s post-2025 redesign of the National Electricity Market (NEM).

Only two wind projects totalling 553 megawatts had reached financial close in the three months to September 30, the survey said.

The net-zero pledge “failed to secure widespread investor support”, Mr Corbell said, because of a lack of detail and no short-term 2030 emissions-reduction targets.

“The NEM remains an incredibly risky market,” he said.

“The two reform priorities over the next 12 months need to be fixing grid access rules to remove arbitrary risks for generators wanting to connect and streamlining the build out of new transmission infrastructure so clean energy can replace ageing coal power stations.”

Kane Thornton, of the Clean Energy Council, has also called for greater leadership and coordination between the Commonwealth and state governments to open up the power market and help support the transition.

“The network we have today was built for the 20th not the 21st century,” Mr Thornton said. “We need significant public and private investment and regulatory reform.”

Source: Sydney Morning Herald