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  • Writer's pictureCrest Economics

Australia’s renewable energy targets are going off the grid- Aug 2023

In 2022, the Federal Government unveiled their ambitious plans to ensure more than 4/5 of Australia’s power is generated from renewable sources by 2030. However, lack of community support and efficient government policies are jeopardising the management of this energy transition.

Currently, resistance towards a number of high voltage power lines, which are essential to connecting greater amounts of wind and solar energy, are emerging. Communities claim that these visually intrusive power lines would cause needless social and environmental damage while saddling consumers with billions in extra costs. Calls for some ageing coal fired power stations to remain open also persist as households are uncertain about the stability of new green energy. However, it is crucial to build these transmission lines as congestion in the transmission network is throttling the country’s ability to achieve its goals. Hence, more time and resources must be dedicated to convince local communities of the positive externalities of this energy transition and mitigate this inertia.

Additionally, with developers and investors keen to build generation, storage and transmission projects, the sputtering nature of Australia’s transition is not a result of poor investor enthusiasm, but rather poor allocation of resources by the government. Instead, governments may look to pursue relatively straightforward policy changes that could help ease some of the pressure on Australia’s transition. This includes altering the terms of certain market based policies such as the subsidies currently flowing to households for rooftop solar panel installations. Instead, households should be incentivised to install and fit batteries. This would in turn bolster demand for battery storage to soak up excess rooftop solar generation and reduce peak demand in the evening. However, this is a political constraint given the government’s favour towards installing rooftop solar panels only.

Delays in Australia’s energy transition also have direct and often contradictory commercial implications. Rio Tinto, for instance, warned this week that a clean energy solution is urgently needed to power the firm’s aluminium smelters and refineries in NSW and QLD. Therefore, this lack of renewable energy infrastructure is hindering the effectiveness of the industry’s increasing investment and efforts in renewables generation. Instead, energy companies continue to benefit from the continued demand for their coal and gas assets.

Although Australia’s energy transition is necessary and inevitable, the path to 2030 is proving much more complicated and expensive than most governments, regulators, companies and consumers anticipated. With Australia only at the 30-35% portion of the target, it has been forecasted that the nation will barely scrape past the 60% point by the end of the decade.

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