Understanding renewable energy policy

Michael_van_der_Vlies_New_Energy_SolarMichael van der Vlies8 March 2019
  • Renewable energy policy in Australia is often "complex" and "fragmented"
  • The government seems to have moved away from the National Energy Guarantee
  • States and territories continue to push their own renewable energy initiatives

While renewable energy continues to be a hot-button topic in Australia, it can be difficult to distinguish between rhetoric and reality regarding energy policy in Australia. Although states have improved their accountability over recent years, the federal government seems to have lagged further behind – a conflict that can understandably cause confusion. Below, we offer some insight.

The International Energy Agency’s Energy Policies of IEA Countries report on Australia – which aims to present the Australian Government with a comprehensive all-energy assessment of and recommendation for the country’s renewable energy policy – has affirmed that energy policy governance in Australia is complex and fragmented, suffering from “frequent changes of policy direction and institutions at Commonwealth level”.1 While Australia is well-endowed with natural resources, energy security risks across several sectors are reported to have increased – perhaps exacerbated by unclear policy direction “from changing administrations with fundamentally different views”.2

"Australia is well-endowed with natural resources, but energy security risks across several sectors are reported to have increased..."

According to the Australian Government, it is committed to the provision of adequate, reliable and affordable energy that can help meet future energy consumption and underpin strong economic growth.3 It has also pledged its commitment to achieve an emissions target under the Paris Agreement, but steered further away from its emissions goal last year by abandoning the reduction obligations of the National Energy Guarantee (NEG)4 – designed by top energy regulators to encourage the market to provide a healthy mix of reliable power sources that could not only reduce the country’s carbon emissions, but also reduce household power bills in the process.5 The government also reaffirmed its support of coal, which is believed to have generated some 62% of Australia’s electricity over 2016–17.6 Even in the face of looming coal-plant closures and despite critical findings in last year’s landmark report on climate change, it appears the government has all but rejected the possibility of phasing out coal in the near future.7

Since then, Australia has been left without a firm energy policy to reduce greenhouse gas emissions beyond 2020 when the renewable energy target is set to expire.8 So, what is the government working towards?

In preparation for its Portfolio Budget Statement 2018–19, the government outlined funding of $41.5 million for various energy initiatives – including $3.1 million to support the development of the now-scrapped NEG.9 The government also proposed measures to provide consumers with energy affordability and reliability. For example, the Department of the Environment and Energy outlined an initiative which seeks to help consumers with their power bills through a price safety net – one that aims to keep electricity retailers honest, setting a price cap on some standing offer prices and improving, among other things, competition and transparency in the retail sector.10 In addition, the Australian and Tasmanian governments have jointly funded a multimillion-dollar feasibility study to investigate potential pumped hydropower sites in Tasmania as part of their Battery of the Nation project11 – sites that could store as much energy as 40 gigawatt hours, more than 300 times the storage capacity of the South Australian Tesla battery.12 In the same vein, the Australian Government also committed funding of up to $1.38 billion for the Snowy 2.0 project13 – another measure that could soon see hydropower play a significant role in Australia’s energy mix.

While discussions around the current government’s proposals progress, opposition leader Bill Shorten has promised that his government, if elected, will drive new investment in renewable energy generation and storage – in turn transforming Australia’s energy supply systems by delivering more renewables and cheaper power for all.14 With two different stances on energy policy between Australia’s two major political parties, Australia’s energy future still remains unclear.

In the meantime, states and territories continue to push their own energy initiatives15 – many of which New Energy Solar has reported on over the last year. Australia also continues to push ahead with renewables, installing more solar panels than ever before16 – with new solar installations tripling in capacity and solar power plants adding roughly 2,000 MW of capacity in 2018.17 Conversely, New South Wales’ ageing coal and gas plants broke down 27 times in the last year alone, leading to a number of groups calling for more installation of renewable energy.18 With a larger range of debt funding sources expected to enter the market this year,19 we could indeed see more renewable energy development in 2019 – even without a firm course for energy in Australia.

Michael serves as Chief Financial Officer for New Energy Solar, responsible for all the team's financial activities. He has more than 16 years' experience working at the forefront of the finance, infrastructure and investment management sectors.

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