Australia has caught the eye of many renewable energy companies over the past few years, as its weather conditions and expansive, non-urbanised areas have offered fertile ground for solar and wind development projects. 

Renewable sources contributed 21% of total electricity generation in 2019, an increase of 12% from the previous year and surpassing the government target of 20%, according to national investment promotion agency Austrade.  


Project pipeline

Spanish energy giant Iberdrola is now poised to take over Australian renewable energy company Infigen; construction has started on several large-scale energy projects, such as the Asian Renewable Energy Hub and Tennant Creek solar farm; and the New South Wales government has set out plans to establish the country’s first renewable energy zone. 

In May, EY’s Renewable Energy Country Attractiveness Index ranked Australia as the fourth most investment attractive destination in the world.

Yet beneath some of these broad strokes of optimism, project numbers are starting to slow down and since the country’s pro-coal government has not updated its renewable energy target, the renewable energy buzz may flatline. 

A tale of two Australias emerges. On the one hand, this is a country that has attracted billions of dollars worth of investment in solar, wind, lithium batteries and hydrogen; on the other, the disconnect between federal and state governments results in conflicting policies surrounding the transition to clean energy. Meanwhile, an overcrowded electricity grid has drawn investors’ attention to the possibility of exporting renewable energy capacity elsewhere in the region.

Different approaches


Peter Kiernan, lead energy analyst at the Economist Intelligence Unit (EIU), expects that beyond 2020 there will be “no further push” towards renewable energy at the federal level, despite considerable policy support for renewables in states with conservative governments, such as South Australia.

Mr Kiernan attributes the boost of renewable investment in 2017-18 to the government’s renewable energy target and, as this looked likely to be reached, investment fell to $5.6bn in 2019, from $9.3bn the previous year, according to Bloomberg New Energy Finance. 

Greenfield investment monitor fDi Markets recorded eight project announcements so far this year, compared to 21 in 2019, 25 in 2018 and 25 in 2017. One of these was Acciona’s $1.1bn MacIntyre Wind Farm in Queensland, which is due to commence operations in 2024. 

Renewable energy generation does not seem to have lost its appeal entirely, however. As of June 2020, there has been a total of 173 gigawatts (GW) proposed, in construction and in operation in the pipeline, according to Rystad Energy, compared to 144GW at the beginning of 2020 and 88.5GW at the beginning of 2019.

Within that, France’s Neoen and Germany’s WIRSOL are the largest solar developers, while Infigen and China’s Goldwind feature as the most prominent wind developers. 

Grid challenges

According to David Dixon, senior analyst at Rystad Energy, there is considerably more capacity being proposed than can fit on the country’s electricity grids. For instance, the Central West grid has capacity to connect an additional 100 megawatts, while new approved project total almost 3GW. “It’s just an order of magnitude difference,” he adds.

While projects may be announced in droves and receive approval, developers cannot always obtain a connection agreement due to low capacity, however, and only one project in 10 reaches a financial close.   

This is because the grid was designed to accommodate coal-fired power stations delivering energy to local heavy-demand urban centres and so built with low capacity transmission. Mr Dixon explains that one grid extends about 3000km, from Townsville in north Queensland to Hobart in Tasmania (a greater distance than Madrid to Oslo), to serve 10 to 15 million paying customers. 

By contrast, Australia’s potential for renewable energy generation stems from its non-populated areas, either outside of capital cities or in the outback, and so such projects require high capacity transmission. “The design of the grid is now completely flipped, in the sense that these regional areas are typically the ones with the best solar and wind resources, and now we want a grid system where we need to get high capacity lines from these centres to the capital cities,” Mr Dixon says.

An alternative solution to overhauling the power grid is to export this energy – the question is how and in what form it can be exported. The Asian Renewable Energy Hub in Western Australia aims to generate 15GW of renewable energy for both domestic and export markets, such as Japan and Korea, the bulk of which will take the form of green hydrogen. The Tennant Creek solar farm in Darwin will plant a subsea cable to transmit the majority most of its generated electricity to Singapore. These kinds of projects may well define the country’s renewable energy future, analysts say. 

Some optimism 

Elsewhere, the Clean Council Energy Outlook Confidence Index, which surveys senior leaders from across the clean energy industry, rose to a high of 7.3 out 10 in June 2020, having sunk to a low of 6.1 in December 2019.

Andrew Stock, energy expert and climate councillor at the Climate Council, notes that while the “race to the palace” that characterised the renewables rush in 2018 is over, there are still reasons for optimism. It only takes one large coal generator to fail in order to free up capacity, he says, as he expects international developers and politicians to be attuned to how renewables are set to “eat into the profitability of the large coal plants”.

Meanwhile, the concerns in the fossil fuel industry over maintenance costs and small margins due to low energy prices do not bode well for the survival of coal enterprises. 

“Certainly among OECD economies, Australia increasingly is being viewed as a fossil fuel hold-out,” says Mr Kiernan at the EIU. “In the Australian context, the resistance to the energy transition is perhaps predictable, given the fact that Australia is a significant coal and gas exporter, but a far-sighted energy strategy would involve future-proofing the Australian economy from dependence on fossil fuel exports.”

This article first appeared in the August - September edition of fDi Magazine. View a digital edition of the magazine here.