Is this the end of the renewables boom?
Angela Macdonald-Smithand
Mark Ludlow
Jul 30, 2019 — 12.00am
Soaring solar generation has meant that renewables provided 30 per cent of Australia's midday power supply most days last month,
depressing wholesale power prices and piling pressure on coal-fired generators unable to ramp down their operations,
But the price impact of the massive influx of renewables into the National Electricity Market has also triggered warnings that the end of the investment boom in wind and solar could be approaching as the economics of some plants exposed to wholesale prices are undermined.
The new figures to be released on Wednesday by respected analysis firm Green Energy Markets found that total solar power generation doubled in June compared with two years previously. Power production from solar was large enough to drive renewable energy's share of the market up above 30 per cent in the middle of the day for 20 of the 30 days in June, for the first time ever in winter.
The share of renewables reached a peak of 39.2 per cent on June 30, helping drive wholesale prices down to zero for a five-minute period right across the NEM, understood to be unprecedented for the market for winter.
Average wholesale prices in Victoria and South Australia were down more than 60 per cent on that day compared to the same day in 2017, and more than 40 per cent lower in NSW and Queensland, according to Australian Energy Market Operator data.
zero or negative prices on the NEM to become a lot more common in the next 12 months across other states as well as South Australia.
"It will be very interesting to see what happens in spring with a few more projects online and when solar irradiance picks up while demand for electricity will be low," said Mr Edis, adding that new state renewable energy auctions would be needed to prevent a steep fall-off in investment. He said that the risk may not have been fully appreciated in a recent upbeat assessment of future investment in renewables by the Clean Energy Regulator.
The warning comes as Clean Energy Finance Corporation chief executive Ian Learmonth declared the taxpayer-funded body will look at emerging technologies, such as battery storage, because there was already enough wind and solar investments already in the market.
Mr Learmonth said
the mandate of the CEFC, which is investing $10 billion into renewable projects, had changed because of the market dynamics.
"We are evolving with the market and it's happening rapidly," Mr Learmonth said in an interview with
The Australian Financial Review.
"There is a conscious move to focus more on storage, pumped hydro and firming technology because we do acknowledge wind and solar are mature technologies and a lot of people out there who are banking on them, so there's less need for the CEFC to be involved."
Reverse auctions
The CEFC will announce on Tuesday it had committed $1.5 billion to new clean energy investments in the 2019 financial year, across 30 transactions with a total value of $6.3 billion.
Federal Energy Minister Angus Taylor, who has vowed to bring down wholesale power prices to $70 per megawatt hour, has expressed concerns about the rate of renewables projects coming into the market, especially in Victoria and Queensland which have set ambitious targets, and about the need for firming capacity.
State Labor governments in Victoria and Queensland have held "reverse auctions" in which taxpayers underwrite large-scale solar projects by buying the output under long-term contracts.
Project proponents rely on the power purchase agreements to get financing.
Coal-rich Queensland and Victoria are aiming to reach 50 per cent renewable by 2030.
Grattan Institute energy program director Tony Wood said it was likely the influx of renewables would put pressure on existing coal-fired power plants, such as EnergyAustralia's Yallourn in Victoria.
He said there would also be a domino effect on the renewables roll-out in Victoria and Queensland, with cheaper renewable energy also putting pressure on older coal-fired power plants in NSW.
"Victoria and Queensland tend to go much more aggressive than NSW. One possibility is all the extra renewables in Victoria will make it harder for Yallourn, but it could export power into NSW.
"It's possible it could be black coal generators in NSW that get into trouble."
'All the risk is with the taxpayer'
Mr Wood said the renewables crunch would really hit home within the next five years, especially when Snowy 2.0 comes on-line.
He said government intervention at both a state level (through renewable energy targets) and at a federal level (Snowy 2.0, underwriting generation) would come home to roost.
"What's more concerning is the government is involving itself so much more frequently in the market and all the risk is with the taxpayer," he said.
And companies such as Alinta, Origin Energy and AGL are finding harder to compete because they are not competing by the same rules."
A recent Industry Super Association report on the electricity sector warned of the risk of "stranded assets" if the penetration of renewables topped 50 per cent.
"It is possible that beyond about 50 per cent of electricity, some solar and wind may become stranded assets. This would begin to raise serious questions about the trajectory of the energy system," the report said.
"If carbon capture and storage is not developed the eventual transition away from coal is almost certain."
The ISA report recommended keeping nuclear energy and carbon capture and storage projects on the table to help secure reliable energy supply over the next few decades.
Meanwhile Mr Taylor told Parliament on Monday that he intended to introduce the "big stick" energy legislation later this year, bringing forced asset divestments for integrated energy suppliers back onto the table.