Australian government de-prioritises wind and solar investment

The Australian government will no longer provide funding to wind and solar projects unless in cases of ‘clear market failure’, energy minister Angus Taylor has said.

The minister outlined the change in priority as part of the government’s First Low Emissions Technology Statement – 2020, published this week.

The statement builds on a Technology Investment Roadmap that was released earlier this year and highlights five priority areas that the government will support:

• getting the cost of hydrogen production to below A$2 ($1.4; €1.2) per kilogram;
• enabling long duration energy storage (six to eight hours or more) to be dispatched at less than $100 per MWh;
• the development of low-emissions materials production, such as steel and aluminium;
• support for carbon capture and storage to lower the cost to below A$20 per tonne of carbon dioxide;
• and lowering the cost of soil carbon measurement to below A$3 per hectare per year.

The statement describes wind and solar, alongside coal, gas and hydroelectric generation, as “mature technologies … that are already enjoying widespread commercialisation”. These will not be a focus of the Technology Investment Roadmap, Taylor said.

“For the most part, the government will look to the private sector to lead investment in existing technologies, although there will be instances where it will make strategic investments, particularly where there is a clear market failure, like a shortage of dispatchable generation, or where these investments secure jobs in key industries,” the government said in its Low Emissions Statement.

The shift in emphasis will require the boards of the Clean Energy Finance Corporation, the Australian Renewable Energy Agency and the Clean Energy Regulator to focus on accelerating the development of the five priority technologies, with the government intending to introduce legislation that will expand the remits of ARENA and the CEFC to give them more flexibility of where to deploy funds.

Clean Energy Council chief executive Kane Thornton said it was “surprising and disappointing” that the roadmap failed to address the barriers to accelerating further deployment of wind and solar, and that the statement was “no substitute for a comprehensive energy transition strategy”.

Mark Fulton, founder of consultancy Energy Transition Advisers, told Infrastructure Investor he welcomed the statement but also said it fell short of a comprehensive plan.

“Our study Pathways to Net Zero sets out the importance of not just having a net zero target but, as the government says, a plan to get there,” he said.

“This First Low Emissions Technology Statement is welcome for looking to tackle some of the hard-to-abate sectors with government seed capital. [But] as many commentators are saying the Australian government still has a long way to go to develop a comprehensive plan to reach net zero.”

A Technology Investment Framework, published as part of the statement, aims to leverage a 3.5x level of co-investment from the private sector and other levels of government in supporting the strategy.

As part of this, the CEFC’s A$1 billion Grid Reliability Fund, announced in October 2019, will invest in low-emissions energy generation, storage and transmission, supporting private-sector projects, the government said.

The Investor Group on Climate Change cautioned that the roadmap was “not a substitute for a coherent national climate policy framework for the entire economy and a clear target for net zero emissions by 2050”, and this could hamper efforts to engage private capital.

“The government’s technology regime remains predominantly focused on policy to guide taxpayer investment. Even more important is developing a climate and energy policy framework that ensures private capital is deployed into the commercialisation and deployment of these technologies,” IGCC policy director Irwin Jackson said in a statement.

“The scale of investment needed to reach net zero emissions and the natural fiscal constraints of federal budgets means engaging private capital is critical to any successful climate policy. Government investment alone cannot address the systemic risks that climate change poses to our economy.

A ministerial reference panel of industry figures that advised Taylor in advance of the Low Emissions Technology Statement will also be made permanent, chaired by Australia’s chief scientist Dr Alan Finkel. Macquarie Group managing director and chief executive Shemara Wikramanyake will be one of the seven members of that panel.