Australia’s Large-scale Renewable Energy Target (LRET) requires that
41,000 gigawatt-hours (GWh) of electricity is generated from renewable
sources by 2020. Significant new generation infrastructure will be required
between now and the end of the decade in order to meet the target.
In considering the challenges of building that infrastructure, this paper demonstrates that the current target can be achieved, with clear and strong policy certainty.
Summary of findings
- Modelling undertaken by ACIL Allen for the RET Review panel showed that the 2020 target of 41,000 GWh can be achieved. This is supported by modelling by ROAM Consulting following detailed consultation with the renewable energy industry and its supply chain.
- The renewable energy industry has a long-established track record of delivering on targets, with higher levels of deployment, in shorter time frames and at lower cost than many analysts and decision makers have predicted.
- A strong and stable RET with bipartisan support will cement the obligations for new renewable energy investment necessary to deliver the legislated targets.
- There is currently a surplus of Large-scale Generation Certificates (LGCs) that allows some flexibility and time to ramp up investment necessary to deliver the currently legislated target.
- There is currently a surplus of electricity generation capacity that is resulting in lower wholesale electricity prices (and lower power bills for consumers). However, new renewable energy projects are commercially viable when this wholesale energy price is combined with LGC prices that are below the tax-effective penalty price of the LRET.
- The cost of renewable energy technology is expected to continue to fall, as forecast by the federal Bureau of Resource and Energy Economics.
- There is a significant pipeline of approved projects capable of delivering the 41,000GWh target in line with the legislated trajectory as soon as policy certainty is restored.
- While the major electricity retailers may be reluctant to enter into long-term contracts for new renewable energy projects, renewable energy developers and financiers are continuing to evolve deal structures and finance arrangements in order to meet the legislated RET obligations. There are a number of projects currently being completed that do not depend on the support of the three major electricity retailers.
- There is significant change and innovation occurring in the electricity retail sector that is providing new commercial channels to finance renewable energy projects that reduces dependence on the major energy companies. These changes are driving significant competition and establishing growing and diverse customer bases and foundation for project financing.