With a positive set of results for rooftop solar and record-breaking figures for investment in utility scale storage, 2023 was another strong year for renewable energy in Australia. However, a slowdown in new financial commitments to large-scale renewable energy generation is cause for concern, writes Kane Thornton, Chief Executive of the Clean Energy Council.
What a difference a year makes.
This time last year, I wrote about a mixed report card for Australian renewables; positive numbers in several areas backed up by a wave of increasingly positive political sentiment.
Reflecting on 2023, we saw very positive figures across rooftop solar and energy storage, but the slowdown in new financial commitments to utility scale generation projects is cause for concern.
I believe clean energy has the policy settings and positive momentum to boom over the next few years as we progress toward the Federal Government’s target of 82 per cent renewable energy by 2030.
The Clean Energy Council released the 2024 edition of the ‘Clean Energy Australia’ report in mid-March, revealing the state of the sector and providing vital statistics and trends.
Total generation capacity added in 2023 reached 5.9 gigawatts(GW), substantially up from 5GW in 2022, and not far off the record of 6.3GW in 2021. That was comprised of 3.1GW from rooftop solar and 2.8GW from utility scale projects – 1.9GW of large-scale solar (up from 841 megawatts [MW] in 2022) and 942MW of wind (down from 1.4GW in 2022).
While rooftop solar didn’t quite reach the record-setting heights of 2021, it was still a stellar year, with 337,498 solar systems installed across Australia (up from 315,499 in 2022).
These encouraging numbers demonstrate the value Australians see in rooftop solar and the benefits it brings, not just to the country’s decarbonisation effort, but to their energy bills and energy independence.
Dawn of the battery age
One area that saw an unexpected and welcome boom was utility scale storage.
Investment in big batteries broke the billion-dollar mark for the first time in Q2 2023, that record had already been broken and by Q4, making 2023 the strongest ever year for new financial commitments in the large-scale storage space at $4.9 billion, including hybrid projects with storage elements ($4.7 billion for storage-only projects).
That is a 157.9 per cent increase on 2022, which reached $1.9 billion in new financial commitments to large-scale storage. The combined capacity of large-scale storage projects reaching financial commitment in 2023 totalled 3949 MW/9905 MWh.
It is difficult to pinpoint a single reason for this upturn in battery fortunes. In truth there are many reasons, including the improving scale and cost of battery solutions, higher wholesale prices and ancillary services revenues.
This level of new commitments is a clear signal that investors and developers are comfortable with the risks and strong business case for these solutions and are increasingly optimistic about their role in Australia’s future energy mix.
Utility scale generation slows
While figures for capacity added from generation projects in 2023 were up on 2022, which is a huge positive, the status of the investment landscape for large-scale generation projects is concerning.
Large-scale projects have been facing a complex and challenging landscape for new investment decisions, including a constrained grid, slow planning and environmental assessment processes in some jurisdictions, higher costs, and tighter markets for equipment and labour.
There was only $1.5 billion of new financial commitments to large-scale generation projects in 2023, significantly down on $6.5 billion in 2022, and no new wind projects reached financial commitment (compared to six in 2022). This is a disheartening situation that needs to be addressed, and clearly the driving factor behind the Federal Government’s welcome decision to expand the Capacity Investment Scheme late last year.
In its ‘Renewables 2023’ report, the International Energy Agency reined in its growth forecast for renewables in Australia “due to continued policy uncertainty following early achievement of its Large-Scale Renewable Energy Target (RET)”. The expanded Capacity Investment Scheme is intended to be the big policy-driver that replaces the RET, and if implemented correctly will hopefully give the large-scale sector the acceleration it needs.
In its ‘Draft Integrated System Plan’ released in late 2023, the Australian Energy Market Operator forecast Australia would need to install at least 6GW of utility scale generation annually if it was to reach the Federal Government’s target of 82 per cent renewables by 2030. The 2.8GW of large-scale capacity added in 2023 is a good start but clearly well short of where we need to be, and the investment landscape must pick up if that number is to be dramatically increased.
Planning ahead
The fall in new investment commitments in utility scale generation is a leading indicator of the levels of new projects that will be competed and commissioned in the years ahead. So, despite the strong policy response from the federal and many state governments in 2023 (and early 2024), the levels of new large-scale generation coming online over the coming year is likely to be slower.
These are the topics and issues that will be the main focus of the clean energy industry throughout 2024.
The Clean Energy Council runs a series of essential industry events each year, and chief among those is the Australian Clean Energy Summit (ACES) in Sydney in July.
This is a jam-packed two days of discussion and debate that will be crucial to our industry going forward – a chance for industry leaders to connect with their peers, government, market bodies, community and regional leaders, and the finance sector.
Last year’s event was the biggest and most fully rounded we have hosted, and there is every reason to believe it will be even better this year, particularly given how pivotal the next decade will be for renewables in Australia. Join us in July to be part of the clean energy conversation and discuss the best ways forward for the industry.
For more renewable and solar news, subscribe to ecogeneration.
This article featured in the April edition of ecogeneration.
For more renewable and solar news, subscribe to ecogeneration.