While covid-19 will cause a lot of short-term pain, it presents us with a unique opportunity to accelerate the clean energy transition.
Back in the February edition of EcoGeneration I wrote, “trying to predict what the [energy] industry will look like in 10 years’ time is a fool’s game, but it is possible to look ahead to the coming year”. It is fair to say no-one saw a once-in-100-year global emergency that would threaten millions of lives and decimate the world economy.
The events of the past few months have not only drastically changed the outlook for the renewable energy industry for the coming year but possibly forever. Despite covid-19’s unprecedented disruption to society and the economy, many of the pressing issues that the Australian energy industry needed to address at the start of the year haven’t changed.
While some of these issues may now be a lower priority for governments and regulators, many others will become even more urgent as we look to jumpstart the economy and replace the jobs lost as a result of covid-19.
As with every facet of Australian life, the covid-19 pandemic has deeply affected the renewable energy industry. Incredibly difficult decisions have had to be made, whether it’s standing down staff, reassessing the viability of projects or adapting work practices to ensure social distancing compliance. No business in the renewable energy industry has been unaffected by the crisis.
The economic aftershocks of the past few months are likely to be even more challenging for the industry for many months and years to come as the industry navigates its way through the worst economic upheaval in living memory.
There are a range of factors that will impact the renewable energy and energy storage industry. A lower Australian dollar will make imported components more expensive while supply chains are being disrupted as businesses struggle to recover from the shutdown. Lower energy demand and domestic gas prices have resulted in lower wholesale energy prices, impacting the business case for large projects that are exposed to the wholesale energy market. Consumer confidence and spending have also plummeted, in turn lowering demand for rooftop solar. However, for other households, increased electricity demand in the home combined with a growing interest in self-sufficiency is likely to drive them toward solar and household batteries.
What hasn’t changed is the need to reduce emissions in line with our Paris Agreement commitments or the ageing and increasing unreliability of our fleet of coal-fired power stations. As a result, the slowdown should only be temporary as investment in new clean energy generation picks up again in anticipation of the first of many coal-fired power station closures in April 2023.
As federal and state governments look to restart the economy in the aftermath of the covid-19 health emergency, there is a significant opportunity for renewable energy and energy storage to be at the forefront of Australia’s economic recovery. Renewable energy is in the unique position of being the only industry that can drive economic growth while reducing Australia’s emissions profile. By adopting a renewables-led recovery, we can create thousands of new jobs, empower consumers, bring economic activity to regional communities, lower power prices and create the smart infrastructure of the future that can cement Australia’s place as a global clean energy superpower.
As part of its economic recovery measures, governments should accelerate reform and provide policy support to the industry so that it can deliver the enormous pipeline of potential large-scale wind and solar projects currently under development. This could involve transitioning the Renewable Energy Target to a “New Energy Target” or using reverse auctions to accelerate the next wave of renewable energy investment.
With the Australian Energy Market Operator finding that 30-45GW of new generation will be required by 2040 to replace retiring coal-fired power stations, an energy policy that encourages greater renewable energy investment will support the industry through this challenging period and give Australia a clear pathway for the clean energy transition.
This transition will require governments to take a more active role in improving the transmission system by directly funding key projects, bringing forward future anticipated projects and expanding the capacity of existing developments. By investing in the transmission system, governments can improve the reliability, security and resilience of Australia’s energy system, while creating thousands of jobs in regional Australia and unlocking new investment in large-scale renewable energy.
Governments can also take advantage of the cost and emissions reduction benefits of rooftop solar and batteries by expanding state-based home battery installation programs to the entire country and installing solar on government buildings. In addition, governments can send a strong message about the benefits of rooftop solar by changing their electricity procurement policies to ensure that all future supply comes from 100% renewable energy. Not only will this create additional renewable energy jobs, it will provide badly needed economic support for small solar businesses while reducing the energy cost burden for some of our most important institutions.
As we’ve seen during previous downturns, any number of industries will be arguing their case for government assistance to lead the economic rebuild. This includes the coal industry, which will see the current crisis as a lifeline to extend the life of existing assets.
As a result, this could be a watershed moment for the Australian energy industry. Get it right, and we can accelerate the transition to a renewables-led electricity system and open significant new export opportunities in the form of hydrogen and inter-regional interconnection. However, get it wrong, and we could face another decade of energy policy inaction, political distraction and painfully slow progress.
Predicting the future is difficult at the best of times, but it is even more fraught in periods of extreme uncertainty. However, I will make one more prediction: while the clean energy industry will face some challenging times over the next few years, it will emerge from the covid-19 crisis stronger than ever and will be at the forefront as we transition to a low-carbon, clean energy future.