The future of energy in Australia is a hotly debated topic. Despite signing up to the Paris Agreement, 93 per cent of Australia’s primary energy consumption still comes from fossil fuels. Furthermore, there are many more new fossil fuel projects or expansions in the pipeline, with the emissions equivalent of over 200 coal power stations.
Burning fossil fuels is the most significant driver of dangerous climate change by increasing greenhouse gases in the atmosphere. Therefore, there is a strong argument that Australia should instead focus on renewables for its energy needs. They are cleaner and cheaper than fossil fuels and already provide a significant portion of the electricity generation in Australia.
Which types of renewable energy is Australia investing in the most?
While total energy consumption remains dominated by fossil fuels, renewables are gaining traction in powering Australia’s electricity generation. According to the Clean Energy Council’s 2022 report, renewables accounted for 32.5 per cent of the total electricity supply in 2021. In particular, solar power is receiving a large proportion of investment. There are now more than three million solar power systems in the country. This is an important resource, given that Australia has the highest solar radiation per square metre of any continent on Earth.
Solar power dominance in Australia
Thanks to sustained investment, Australia has had the highest installed solar photovoltaics (PV) capacity per capita in the world since 2019. According to the Australian PV Institute’s 2022 report, in 2021, Australia had 26 GW of solar installed for a population of 26 million, averaging 1 kW of solar per person. Following behind are Germany and the Netherlands, with less than 800W installed solar per capita.
Other investments in renewable energy in Australia
Investors are clearly aware of the benefits of funding PV solar. They are also providing funding for offshore wind, bioenergy projects and hydropower projects. As of the end of 2021, 68 renewable projects were under construction or had finances committed to them. These represented more than 9 GW of new capacity, over 35,000 jobs and over AUD $18 billion of investment. 42 of these projects are for solar and 19 for wind.
Battery storage is also enjoying considerable investment. It witnessed a 300 per cent year-on-year increase during the first quarter of 2021. According to a 2022 report from SunWiz, growth in battery installations continued throughout 2021, meaning that in 2021 more than one gigawatt-hour of battery capacity was installed in Australia. At least the same amount is expected for 2022 as well. More investment in this technology is extremely important for renewable energy in Australia. Batteries are necessary to store energy at times of excess renewable generation. They can then provide the energy they store to the grid at times of low generation but high demand.
Is investment in Australia’s renewable energy sector increasing?
In 2021, almost two-thirds (65 per cent) of domestic and international investors said that they would raise investment in renewables over the next one to two years. A further 20 per cent said that their current level of investment would continue unchanged, according to MinterEllison and Acuris’s 2021 Australian Renewables Report. Australia’s climate, topography, greenfield opportunities, and advanced technology and innovation are just some of the factors that make the country attractive for renewable investment.
A huge increase in foreign investment in the Australian renewable energy market is forecast until 2023. Just 45 per cent of Asia Pacific investors planned to increase their investment in the sector in 2019. However, this had increased to 77 per cent just two years later.
Why is investment in renewable energy in Australia on the rise?
One reason for the positive developments in renewable energy in Australia is the changing attitude towards fossil fuel projects. Major banks and financial institutions are increasingly basing their lending decisions on environmental, social and corporate governance factors. This means that they are more likely to back renewable energy projects.
This is a welcome change given that between 2016 and 2019, Australia’s big four banks loaned AUD $7 billion to 33 new or expansionary fossil fuel projects. These projects would cancel out the country’s Paris Agreement national emissions reduction target 21 times over.
Another reason is the falling cost of renewables. Utility-scale solar PV declined by 82 per cent from 2010 to 2019. The cost of concentrating solar power also fell 47 per cent. Likewise, both offshore and onshore wind costs dropped, decreasing by 29 per cent and 39 per cent, respectively. These cost reductions have meant that, for example, a dollar invested in solar PV today generates five times the electricity it did ten years ago. In 2021, two-thirds of the 163 GW clean power generation capacity added globally was installed at a lower cost than the cheapest fossil fuel-based alternative. This is encouraging significantly more investment in the sector.
What is the main source of electricity generation in Australia?
Coal provided 59.1 per cent of Australia’s electricity generation in 2021, according to the Clean Energy Council’s 2022 report. Meanwhile, renewable sources, such as wind, solar and hydropower, account for 32.5 per cent. This represents an all-time high for clean energy and a five percentage point increase from 2020. Small-scale solar led the boom. Almost one in three Australian households now have solar panels. This is the highest level of solar uptake on the planet.
Indeed, renewables are taking over an increasing proportion of the country’s electricity generation. Gas consumption declined by 21 per cent from 2014 to 2021. This is largely due to the reduced costs of renewables. It reveals the direction that energy in Australia is moving; towards a greater proportion of renewable electricity.
How much of Australia’s electricity comes from natural gas?
Natural gas provided just 7.7 per cent of total generation in 2021 — a decrease from 9.9 per cent the year before. This was driven by renewables taking over their share of the energy market. For example, in South Australia (SA), the Australian Energy Market Operator (AEMO) reduced the gas generation required for grid stability from 240 MW to 80 MW in SA. This allowed wind and solar to meet more of the state’s energy needs. Furthermore, technological advances and economies of scale in battery storage have taken over the reliance on gas to meet energy peaks in Australia.
What is the National Electricity Market?
The National Electricity Market (NEM) is the biggest interconnected electricity system providing energy in Australia. It is one of the largest globally, interconnecting the five eastern and southern states and the Australian Capital Territory. The system delivers about 80 per cent of the country’s total electricity. Only Western Australia and the Northern Territory are not part of the NEM. Their electricity is distributed separately under different regulations.
The NEM is also a wholesale market. It enables generators to sell electricity to retailers. These retailers can then sell the electricity to businesses and households. Since multiple different generators and retailers participate in the NEM, it is highly competitive.
How does the National Electricity Market affect Australia’s renewable energy supply?
The National Electricity Market affects Australia’s renewable energy supply in various ways. The NEM is transitioning from predominantly large-scale coal and gas generation to a mixture of large and small-scale renewable energy. As coal-fired plants close down, the NEM must adapt to balance resources and connect the new renewable sources.
For example, the Australian government estimates that more than 26 GW of large-scale renewable energy needs to join the grid to replace the retiring coal-fired generation. An additional 19 GW of dispatchable electricity sources is also necessary. Dispatchable electricity is energy that can be turned on or off according to demand. It includes both gas power plants and battery energy storage systems.
To facilitate Australia’s changing energy supply and demand needs, the NEM will need to provide larger volumes of energy to its consumers. It will need to increase its ability to deliver energy across and within regions. A larger capacity for storing energy is also necessary to balance the variable nature of renewable sources.
Forecast for energy in Australia
Looking at the generation of energy in Australia over the past decade or so, it is clear that renewables are growing continually. Each year, the country adds more solar, wind and other green sources to the grid. For example, 3.3 GW of small-scale solar capacity was added in 2021. This was the fifth-straight record-breaking year in a row. As more renewables contribute to the grid, the share of fossil fuel electricity generation decreases. Furthermore, investment in battery storage has continued to rise uninhibited. Private investors appear to be optimistic regarding renewable energy in Australia.
The new Labor government has set the target for 82 per cent of the NEM to be powered by renewable energy by 2030. To achieve this, the current rate of renewable deployment must double. Furthermore, other sectors such as industry, transport and buildings must also be decarbonised as rapidly as possible to bring down the emissions that are causing climate change and breakdown. Renewables are already a cheaper energy source than any fossil fuel. This means a rapid phase out of fossil fuels for a clean and efficient renewable-powered economy is both financially and environmentally logical.