The pandemic prompted a stream of investment in green technologies and infrastructure in 2020. US President Joe Biden campaigned on a $US2 trillion investment plan, including green energy and infrastructure, and 30 per cent of the EU’s pandemic-related stimulus is directed towards fighting climate change.
Trade policy is also shifting, with the EU progressing its plan for a carbon border-adjustment mechanism – a levy paid by exporters to the EU, based on the amount of carbon associated with the production and transport of the exported goods.
Australia is responding in kind, with proactive policies expected to underpin the local renewable major-projects pipeline.
As outlined in ANZ’s Australian Major Projects report, New South Wales saw a remarkable level of interest in its first proposed Renewable Energy Zone (REZ), Central-West Orana, and will fast-track approvals on transmission network upgrades. The state also has plans for four more REZs.
Victoria announced its second Victorian Renewable Energy Target (VRET) Auction, as well as plans to build a new Tesla battery, which would be the largest in the southern hemisphere. The Northern Territory has approved the procurement of a $A30 million battery energy storage system (BESS) for the Darwin-Katherine grid.
Queensland announced $A145 million towards creating three REZs and $A500 million for a Renewable Energy Fund. Western Australia announced a $A66 million renewable energy package including the installation of nine BESSs in regional communities. Tasmania reached its 100 per cent renewable electricity target in late 2020, two years early, and will double its target to 200 per cent by 2040.
Governments are also moving to address inadequate transmission infrastructure, which is a constraint on the renewable energy mix and a factor in the disappointing levels of activity in 2019-20 and the current financial year.
The New South Wales and South Australian governments will fund Project EnergyConnect, a $A2 billion electricity connector between the two states, which will enable more renewable projects to connect to the grid.
Some key trends in the take-up of renewable energy are emerging, including sourcing of renewables by both governments and private companies, investment in energy storage and exports of renewable energy.
Corporate and government sourcing of renewable energy is increasing, with Amazon signing power purchase agreements with the Suntop solar farm, which reached financial close in 2020, and the Gunnedah solar farm, under construction.
Accelerating investment in large-scale energy storage is also underway. A growing proportion of projects combine generation with storage, supported by the falling cost of batteries, with South Australia a standout state.
Renewable power for mining and mineral processing is also a growing trend. Fortescue is developing the Pilbara Generation Project, a solar/gas/battery plant, to power its Iron Bridge project and the Pilbara Transmission Project to connect its mine sites.
Green hydrogen production and export together with direct renewable energy export are becoming more realistic within the next decade. The $A22 billion Sun Cable Project in the Northern Territory expects financial close in 2023, with plans to export renewable energy to Singapore via submarine cable from 2027.
The Asian Renewable Energy Hub in Western Australia is planning to start construction in 2026, with plans for large-scale green hydrogen products, including for export. The Hub would also provide an opportunity for Australia to decarbonise mining and mineral processing.
Major renewables project investment in Australia has disappointed in the recent past but looking ahead the pipeline appears strong, underpinned by growing interest, both private and publicly - and corresponding investment.
Catherine Birch is a Senior Economist & Adelaide Timbrell an Economist at ANZ