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Breaking Australia's vicious energy cycle

A lack of long-term planning to create a 21st century grid and decades of political infighting are beginning to catch up with us.

In the past 15 years Australian politics has too often been typified by short-termism and reactiveness, with policymakers distracted by political point scoring over considered long-term planning. While this haphazard approach has occasionally delivered positive outcomes, such as the Finkel Review following the 2016 blackout in South Australia, it more often than not leads to half-baked policies and solutions.

The consequences of the failure to plan an orderly energy transition or an emissions reduction pathway were apparent in the electricity price spike seen after the closure of the Hazelwood coal-fired power station in 2017 and, more recently, in the public backlash against climate inaction in the wake of this summer’s catastrophic bushfires. This vicious cycle of distraction has resulted in a grid that is no longer fit-for-purpose for the clean energy transition, with a lack of reform in the market and regulatory settings and under-investment in infrastructure.

The failure to provide a long-term plan for the transition of Australia’s energy system to renewable energy and energy storage has affected every level of the energy market, from the construction of new projects to the build out of transmission infrastructure. This has been most keenly felt in the West Murray region of Victoria and NSW, where grid constraints are preventing the development of some of Australia’s best wind and solar resources.

Since September 2019, several operational solar farms have had their output severely curtailed to ensure grid stability in the region, while a number of other projects that are under construction or completed have been told they may face long delays before they are able to connect to the grid. This has resulted in considerable losses for existing project proponents and is threatening over $6 billion in new investment and more than 5,000 jobs in the region.

The issues being experienced in the West Murray are beginning to reverberate throughout the entire renewable energy industry. The risk of connection delays and curtailment have been a major contributing factor in the dramatic drop off in investment in large-scale renewable energy in 2019, when the number of new investment commitments in large-scale projects halved. When combined with ongoing policy uncertainty and other challenges such as volatile marginal loss factors, this fall in confidence threatens to slow the renewable energy industry’s momentum at a time when it’s beginning to have a tangible impact reducing electricity prices and doing the heavy lifting on Australia’s emissions reduction ambitions.

Challenges for rooftop solar

The rooftop solar sector has also begun to experience a related but different set of network problems. While these challenges are different to those being encountered by the large-scale sector, the causes are largely the same – a lack of planning combined with rapid uptake of new technology.

The issues confronting rooftop solar relate to the distribution networks’ ability to integrate high levels of sophisticated rooftop solar and battery technology. These networks now confront challenges managing voltage control in areas with a high penetration of rooftop solar, establishing new requirements for smart inverters to be installed to help support the grid and the fundamental problem of managing a grid that was not designed to handle the dynamic two-way flow of power between rooftop solar systems and the grid.

These problems are reducing the benefits of rooftop solar for existing solar and battery system owners and slowing the market for new installations. With rooftop solar expected to serve more than 10% of Australia’s total electricity needs by 2030, it’s extremely important that we don’t put any limits on the industry’s growth. The Clean Energy Council has produced a roadmap, The Distributed Energy Resources Revolution: A Roadmap for Australia’s Enormous Rooftop Solar and Battery Potential, to address the challenges that distribution network service providers, regulators, governments and policymakers will face as we make the transition to more rooftop solar and household batteries. There is a lot to change.

Change coming, but at what cost?

Many of these challenges stem from the two decades of irrational debate about the legitimacy of climate change. Meanwhile, the pace of change has accelerated due to the enormous success of our industry, resulting in huge cost reductions, technology innovation and development and improved capability in the Australian clean energy industry. Australia’s clean energy rollout has put us at the forefront of the global energy transition, meaning that we are regularly encountering new situations and unique challenges. This has often caught governments and regulators off guard, leaving them in situations where they must find innovative solutions to unfamiliar problems.

While there is no end in sight to the energy policy impasse at the federal level, regulatory and market reform is underway. Reforms such as the Australian Energy Market Operator’s Integrated System Plan, the establishment and piloting of renewable energy zones and the Energy Security Board’s post-2025 market design project all provide potential solutions to the problems facing the renewable energy industry. These will all take time, while the challenges for new renewable energy projects will remain.

But one can’t help but wonder where we’d be today if we’d introduced a long-term, sensible energy and emissions reduction policy all those years ago rather than wasting our time debating the climate wars.