The Federal Government’s latest statements that it is considering underwriting new coal generation as well as extending the life of existing coal generators has sent further shockwaves through the clean energy sector.
While the Federal Government has proven incapable of delivering a robust climate and energy policy, the Underwriting New Generation Investment program is appearing to favour high cost and high emissions winners and now risks undermining the current wave of new clean energy generation. Recent statements by the government have highlighted coal, gas and hydro submissions to the Underwriting New Generation Investments program and made no mention of the renewable energy submissions that the clean energy industry has submitted.
This is at distinct odds with the market’s view that wind and solar supported by batteries and pumped hydro are the lowest cost new generation and that new coal is entirely uneconomic.
In 2018 alone there were over $20 billion worth of large-scale wind and solar projects committed by private investors. An increasing amount of this 14 GW worth of generation capacity was hybrid – wind and solar – with battery storage. In addition, there are now over a dozen proposals for pumped hydro projects being progressed by investors.
The Australian Competition and Consumer Commission's (ACCC) original recommendation was for a technology neutral approach to address current challenges with project financing for new generators. The proposed program strays substantially from the ACCC’s intent in a way that is rushed, lacks transparency and appears to be picking winners.
If the Federal Government cannot establish a robust and sensible enduring climate and energy policy, then it should at a minimum ensure that the way this program is managed does not further undermine investor confidence in the energy sector.