The new energy era: Are we on the front foot or the back foot?

Topic
The Guardian18 July 2019

As renewables become increasingly more cost-effective their uptake in the wider economy is challenging that of fossil-fuels

Globally, the conversation about renewables is evolving: while they’re a sustainable and attractive energy source, the talk is no longer just about their environmental impact. Renewables’ cost-effectiveness is prompting their development in the wider economy to a greater extent than their fossil fuel counterparts.

When it comes to solar, Australia might seem like it’s not doing too badly. As a proportion of energy consumption, solar energy accounts for almost three times as much electricity consumed here as it does in the US – 4.6% to their 1.6% in 2018 – and more than Europe (3.9%). But while we are making use of our ample sunshine, we fall well behind those regions on a number of fronts, from our reliance on coal to government policy and our willingness to prepare for the change.

New Energy Solar CEO John Martin says overseas investors think of solar quite differently to those in Australia.

“I have spent a lot of time in the UK recently, and none of the debate we’re having in Australia is apparent in Europe,” Martin says. “Governments are working to manage the transition to renewables as quickly and as smoothly as possible. As a result, the investment community is seeing lots of innovative projects emerging and the collective expertise of industry is growing.”

Coal in Australia is something of a way of life. It’s our most valuable export product and its extraction sustains communities and our economy. While the US only generates 27.4% of its power from coal, Australia generates a whopping 74% of our energy from coal. Despite being among the top 10 solar countries in terms of photovoltaic output, having among the highest levels of solar irradiation in the world and generating a material portion of our energy from hydro and wind, our reliance on coal is very significant.

“For Australia, coal is easy and affordable,” Martin says. “Consequently, we are heavily invested in the industry. It is very difficult for us to look forward and imagine an energy era with declining use of coal, let alone prepare for that world.”

Australia’s reliance on coal is multidimensional, and in some ways, it could be suggested that we have a cultural impetus to maintain it. It creates jobs. Coal deposits occur in every state and territory except the ACT. Because we have it in abundance and it has been the cornerstone of electricity systems the world over, it has become a fundamental part of how we live and work. We need only look at the controversy of the Adani coalmine in Queensland to understand that the future of coal is a divisive topic.

This is clearly reflected in our political landscape. In 2018, the government abandoned the National Energy Guarantee, reaffirming its support of coal-powered energy. It also rejected an Intergovernmental Panel on Climate Change report calling for coal power to be phased out by 2050, claiming renewable energy cannot replace baseload coal power.

Over the past 10 years, solar energy costs have decreased enormously...

However, other countries are up for the challenge. The UK recently recorded a full fortnight without turning on its coal-fired power stations. In Canada, the government announced it intends to phase out traditional coal-fired generation by 2030. In Germany, a government-appointed commission has recommended the closure of the nation’s coal-fired power plants by 2038, together with measures to ensure coal-mining communities can transition to livelihoods in new sectors of the economy.

Over the past 10 years, solar energy costs have decreased enormously. In the US, the combination of wind or solar and gas is now cheaper than coal and nuclear. In 2018, asset-management company Lazard found that in some scenarios, alternative energy costs have decreased to the point that they are now at or below the marginal cost of conventional generation. Globally, non-subsidised wind and solar generation is now cheaper than fossil fuel in all developed countries except Japan. Despite the political rhetoric, this is also the case in Australia, where the price of electricity from newly built solar, including an acceptable return for that investment, is actually lower than the price of electricity generated by an existing coal-fired power station.

It appears that out of necessity, individual Australians are also on board. We’re investing in solar energy in our homes faster than ever before, and at the end of 2018, our 2 millionth household went solar. Six rooftop solar panels are installed on Australian homes every minute. Under the sunny skies of Queensland and South Australia, almost one-third of all homes have solar panels. Martin notes that 90% of his business’s Australian investors are individuals - the reverse of what he sees overseas.

“Only in Australia do I find myself debating with institutional investors about the future of coal,” he says. “They think of this transition as an absolute choice. They often assume that to invest in renewables they have to sell out of fossil fuel investments, the gas pipeline and the coal miner. They imagine that if one is right then the other must be wrong, and coal is not wrong. In Europe, investors recognise that a transition is underway, that getting a foothold in the future is essential, and that investing in renewables is an effective diversification strategy.”

Looking forward is also important for communities, for growth, and for the development of new fields of expertise. According to the Clean Energy Council, there are 92 renewable energy projects currently or imminently under construction in Australia, which will deliver more than $25.4 billion in investment and create 14,253 direct jobs. In the US, renewables account for 5.5 times as many jobs as coal mining.

There are other economic drivers of the transition. Many large consumers want lower-cost, long-term electricity supply. In the US, corporate power purchase agreements (PPAs) with companies including Facebook, Google and Amazon are driving investment in renewable projects, and we’re beginning to see these agreements in Australia.

Martin asks: "Do we want to participate so that we’re ahead of the curve and can profit from the change?"

“PPAs underpin the investment and the creation of future generation capacity,” Martin says.

“If there are no PPAs, solar energy is a riskier investment. Without these long-term offtake contracts, your return depends entirely on the market price of electricity, day in, day out. There is no certainty in that proposition and you just won’t find the capital. PPAs facilitate the management of this risk.

“One of the key components of our investment proposition is to say to investors, we’ve got a contract to sell electricity, so that revenue is locked in. We can’t just go to investors and say we’re spending hundreds of millions to buy a new plant, we don’t have any certainty about our revenues and we’re just going to see how we go.”

Many Australian corporations recognise the long-term economic value of renewable energy. Westpac recently announced it would use only renewable energy by the end of 2025. Australian-founded tech company Atlassian has also pledged to make the switch to 100% renewable. Macquarie Bank is part of a consortium developing a wind and solar farm in the Pilbara region of Western Australia that is said to be bigger than every existing renewable farm in the country combined.

In Australia, a more balanced approach to the power debate could promise the prospect of more sustainable energy, reduced environmental impacts and new areas of growth and development for the economy. Martin says it’s coming, ready or not.

“It’s a question of, do we want to participate so that we’re ahead of the curve and can profit from the change?” he asks. “Or do we want to be steamrolled by it?”

Written by The Guardian and paid for by New Energy Solar. View original article.

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