Australia’s commercial and industrial (C&I) sector could become a major driver of the nation’s clean energy transition. However, a new report released today from the Institute for Energy Economics and Financial Analysis (IEEFA) warns that policy and regulatory barriers are holding back investment in solar and battery storage.
The IEEFA report, Unlocking the Clean Energy Potential of Australian Business Rooftops, finds that household uptake of rooftop solar and battery storage is strong, while uptake across businesses, schools, hospitals, farms and community facilities lags behind.
Australia currently has around 5.6 gigawatts (GW) of installed C&I solar capacity. However, IEEFA estimates this could grow to between 17 GW and 31 GW by 2050, and as high as 86 GW when rural and agricultural buildings are included.
The report argues that accelerating deployment across the C&I sector will be critical if Australia is to meet its renewable energy and emissions reduction targets.
Unlike utility-scale renewable energy projects, C&I solar can be deployed relatively quickly. It typically avoids lengthy planning approvals and does not require major transmission infrastructure upgrades. This allows projects to be delivered in months, rather than years.
IEEFA notes that business electricity demand profiles are also well suited to solar generation. Commercial loads generally peak during daylight hours, enabling businesses to directly consume a large proportion of the energy generated onsite while reducing reliance on grid electricity.
IEEFA report’s identifies four major barriers limiting investment.
The first is business-level investment challenges. Despite strong financial returns, solar and battery projects often struggle to compete for capital against core business investments. Split incentives between landlords and tenants further complicate decision-making, particularly where tenants pay electricity bills but landlords control building upgrades.
The second barrier is the complexity of network tariffs. Australia’s distribution network service providers operate hundreds of different tariff structures, creating significant complexity for installers, developers and energy service providers attempting to scale projects across multiple jurisdictions.
The third challenge is the grid connection process. IEEFA found connection requirements vary considerably between networks, with some projects facing approval timeframes of several months to more than a year. The report calls for a streamlined national framework; including, standardised technical requirements and fast-track pathways for compliant projects.
Finally, the report highlights an uneven playing field for distributed energy resources. While commercial solar and batteries can provide valuable network services, existing regulatory frameworks continue to favour traditional poles-and-wires investment.
To unlock gains in the C&I sector, IEEFA recommends targeted support for the ‘missing middle’ of C&I solar and storage projects, nationally consistent network tariffs, faster connection processes and a review of electricity network regulation According to the report, addressing these barriers could accelerate renewable energy deployment, lower electricity costs for businesses, and help Australia meet its decarbonisation objectives.
To read the full report, visit the IEEFA website.
