The future of energy in Australia is a hotly debated topic. Scott Morrison’s centre-right government is enacting a ‘gas-fired recovery‘ to the COVID-19 economic crisis. This involves exploring new natural gas production opportunities whilst investing in the existing natural gas infrastructure. 

However, critics point to the fact that natural gas is a key contributor to climate change. Investing in gas massively exacerbates the effects of global warming by increasing greenhouse gases in the atmosphere. Therefore, there is a strong argument that Australia should instead focus on renewables for its energy needs. They are cleaner and cheaper than fossil fuels and already provide a significant proportion of the energy in Australia.

Which types of renewable energy is Australia investing in the most?

Renewable energy in Australia accounts for about 24 per cent of the total electricity supply. In particular, solar power is receiving a large proportion of investment. There are now more than 2.8 million solar power systems in the country. This is an important resource, given that Australia has the highest solar radiation per square metre of any continent on Earth.

Solar power dominance in Australia

Thanks to sustained investment, Australia has had the highest installed solar photovoltaics (PV) capacity per capita in the world since 2019. According to the International Energy Agency (IEA), Australian PVs provide 644 watts per person. This is significantly higher than runner-up Germany, which has 589 watts installed PV capacity per capita.

Other investments in renewable energy in Australia

Investors are clearly aware of the benefits of funding PV solar. They are also providing funding for offshore wind. These are the top opportunity sectors that investors are seeking in 2021. 

Battery storage is also enjoying considerable investment. It witnessed a 300 per cent year-on-year increase during the first quarter of 2021. More funding for this technology is extremely important for renewable energy in Australia. Batteries are necessary to store energy at times of excess renewable generation. They can then provide the energy they store to the grid at times of low generation but high demand.

Is investment in Australia’s renewable energy sector increasing?

Almost two-thirds (65 per cent) of domestic and international investors have said that they will raise investment in renewables over the next one to two years. A further 20 per cent say that their current level of investment will continue unchanged, according to MinterEllison and Acuris’s 2021 Australian Renewables Report. Australia’s climate, topography, greenfield opportunities, and advanced technology and innovation are just some of the factors that make the country attractive for renewable investment.

A huge increase in foreign investment in the Australian renewable energy market is forecast over the next year or so. Just 45 per cent of Asia Pacific investors planned to increase their investment in the sector in 2019. However, in 2021, this increased to 77 per cent.

Solar panels energy in Australia

Why is investment in renewable energy in Australia on the rise?

One reason for the positive developments in renewable energy in Australia is the changing attitude towards fossil fuel projects. Major banks and financial institutions are increasingly basing their lending decisions on environmental, social and corporate governance factors. This means that they are more likely to back renewable energy projects. 

This is a welcome change given that between 2016 and 2019, Australia’s big four banks loaned AUD $7 billion to 33 new or expansionary fossil fuel projects. These projects would cancel out the country’s Paris Agreement national emissions reduction target 21 times over. 

Another reason is the falling cost of renewables. Utility-scale solar PV declined by 82 per cent from 2010 to 2019. The cost of concentrating solar power also fell 47 per cent. Likewise, both offshore and onshore wind costs dropped, decreasing by 29 per cent and 39 per cent, respectively. These cost reductions have meant that, for example, a dollar invested in solar PV today generates five times the electricity it did ten years ago. This is encouraging significantly more investment in the sector.

Obstacles to achieving more renewable energy in Australia

Nevertheless, investment in renewables declined in the first quarter of 2021. The fossil fuel-orientated government is to blame for this. Morrison has resisted raising long-term climate targets for Australia. He has also proposed offering support to extend the lifespan of ageing coal plants. This creates uncertainties around connecting new renewable energy plants to the electricity grid. It has led to a 29 per cent lower average quarterly investment in new renewable capacity.

What is the main source of electricity generation in Australia?

Coal provides about 54 per cent of Australia’s total electricity generation, according to 2020 government figures. Meanwhile, renewable sources, such as wind, solar and hydropower, account for 24 per cent. This represents a three per cent increase since 2019. 

Solar installation has led to this boom. It is now the greatest source of renewable energy, accounting for nine per cent of all energy generation. One in four Australian households now have solar panels. This is the highest level of solar uptake on the planet.

Indeed, renewables are taking over an increasing proportion of the country’s electricity generation. Gas consumption has declined by 21 per cent since 2014. This is largely due to the reduced costs of renewables. A record 7.0 gigawatts (GW) of new renewable capacity energy in Australia was added last year. This beat the previous record set in 2019, in which 6.3 GW was installed. It reveals the direction that energy in Australia is moving; towards a greater proportion of renewable electricity.

How much of Australia’s electricity comes from natural gas?

Natural gas provided 20 per cent of Australia’s electricity generation in 2018-19. Its contribution fell in all National Electricity Market states during this period. The reason for the decline was the expanding use of renewables. However, in the Northern Territory and Western Australia, the use of natural gas grew. 

Gas-fired generation across Australia then grew by six per cent from 2018 to 2019. In 2019, it accounted for 21 per cent of all electricity generation. Changes in gas prices, electricity market conditions and expansions of LNG production capacity were behind this shift.

Installing wind turbines energy in Australia

What is the National Electricity Market?

The National Electricity Market (NEM) is the biggest interconnected electricity system providing energy in Australia. It is one of the largest globally, interconnecting the five eastern and southern states and the Australian Capital Territory. The system delivers about 80 per cent of the country’s total electricity. Only Western Australia and the Northern Territory are not part of the NEM. Their electricity is distributed separately under different regulations.

The NEM is also a wholesale market. It enables generators to sell electricity to retailers. These retailers can then sell the electricity to businesses and households. Since multiple different generators and retailers participate in the NEM, it is highly competitive.

How does the National Electricity Market affect Australia’s renewable energy supply?

The National Electricity Market affects Australia’s renewable energy supply in various ways. The NEM is transitioning from predominantly large-scale coal and gas generation to a mixture of both large and small-scale renewable energy. As coal-fired plants close down, the NEM must adapt to balance resources and connect the new renewable sources.

For example, the Australian government estimates that more than 26 GW of large-scale renewable energy needs to join the grid to replace the retiring coal-fired generation. An additional 19 GW of dispatchable electricity sources is also necessary. Dispatchable electricity is energy that can be turned on or off according to demand. It includes both gas power plants and battery energy storage systems. 

To facilitate Australia’s changing energy supply and demand needs, the NEM will need to provide larger volumes of energy to its consumers. It will need to increase its ability to deliver energy across and within regions. A larger capacity for storing energy is also necessary to balance out the intermittent nature of renewable sources.

Forecast for energy in Australia

Looking at the generation of energy in Australia over the past decade or so, it is clear that renewables are growing continually. Each year, the country adds more solar, wind and other green sources to the grid. For example, over three gigawatts of small-scale solar capacity was added in 2020. This was the fourth-straight record-breaking year in a row. As more renewables contribute to the grid, the share of fossil fuel electricity generation decreases.

However, this is not a smooth trajectory. The current government is focusing investment on hydrogen, carbon capture and storage, microgrids and energy efficiency instead of wind and solar power. Once Australia had reached its national renewable energy target of 23 per cent electricity from green sources in 2020, investment in large-scale renewable energy declined.

Nevertheless, investment in battery storage has continued to rise uninhibited. Private investors appear to be optimistic regarding renewable energy in Australia. Renewables are already a cheaper energy source than any fossil fuel. Consequently, it would be cheaper for Australia to transition straight to renewables instead of relying on gas as an intermediary solution. The movement towards a greater proportion of renewable energy in Australia is both economically and environmentally logical. Any pushback from Morrison’s government merely delays the inevitable.