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Australian states stress urgent investment needed to meet renewable energy targets

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2023-07-20

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New South Wales and Victoria have emphasised the need for immediate investment in developing new zero-emission generation to achieve ambitious renewable energy targets. State energy ministers warn of potential challenges in transitioning without sufficient infrastructure, leading to higher electricity prices if the retirement of coal, the country's dominant power source, outpaces renewable energy development.

Speaking at the Australian Clean Energy Summit in Sydney, NSW Energy Minister Penny Sharpe highlighted the joint efforts of states and the federal Labor government to expedite the energy transition. Sharpe expressed hope that their endeavours would be recognised by the end of the decade, stating, "I hope in the end that those who are part of it... will say in 2030 that it was bumpy but NSW tried to smooth that out as best as possible."

Australia is facing mounting pressure to accelerate the development of renewable energy generation as coal-fired power stations are phased out due to societal and economic pressures. The continuous operation of coal plants, coupled with the influx of renewable energy, has led to low wholesale prices, resulting in fossil fuel operators reducing output until evening peak hours.

If more coal-fired power stations are retired without adequate replacement, electricity prices may spike during periods of low renewable energy generation, such as evenings or when the sun is not shining or the wind is not blowing. Concerns are mounting among influential figures, including former Reserve Bank of Australia Deputy Governor Guy Debelle, who warned that neglecting renewable energy priorities could result in surging electricity prices for years to come.

Australia has experienced consecutive years of electricity bill increases exceeding 20% amid a global energy crunch that has driven coal and gas prices to record levels. However, the progress of new renewable energy developments has been hindered, with transmission infrastructure posing a significant challenge.

To address this, Australia requires over 10,000 kilometres of new high-voltage power lines across the east coast, yet community opposition has slowed down infrastructure development. Although states have increased financial compensation offers, pockets of resistance persist, fuelling expectations that compulsory acquisitions may be necessary.

While the federal government and state counterparts remain reluctant to implement such measures, renewable energy developers are hesitant to invest until they have certainty regarding electricity supply to the grid. Federal Energy Minister Chris Bowen has called on developers to improve local consultation but acknowledges that waiting for universal support is not feasible for Australia.

A hiatus in renewable energy development could lead potential investors to seek opportunities elsewhere. Australia is already losing ground to the United States, where President Joe Biden's administration offers enticing incentives to attract a plethora of investors.

In Victoria, to supplement renewable energy development, the State Energy Commission (SEC) has been re-established with a $1 billion budget. The SEC's primary task is to develop 4.5 gigawatts (GW) of generation and storage capacity, enough to replace AGL Energy's Loy Yang A coal power station, scheduled to close in 2035. However, concerns have been raised among potential investors regarding SEC-backed developments having preferential treatment, particularly in terms of transmission access.

Victoria, which has implemented Australia's most aggressive carbon reduction plan, aims for zero-emission sources to account for 95% of its energy needs by 2035 and to achieve net-zero emissions by 2045. Victorian Energy Minister Lily D'Ambrosio reassured the private sector that ample opportunities exist for all, stating, "I want to make it really clear to the private sector that there is a lot to be done and there are plenty of opportunities for everyone," during the Australian Clean Energy Summit.

The SEC has recently closed submissions of interest and is currently reviewing them to create a shortlist. While the agency has received significant interest for seed capital, it is still in its early stages, and the extent of its remit remains uncertain.

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