2030 targets still too far away

Hey Reader, welcome to The Energy's weekly data newsletter. This week we explore some telling signs Australia's renewable energy target won't be met, at least not in the way many had forecast.

Mind the gap

The Albanese government’s Net Zero Plan sticks resolutely to the assumption that its target for grid generation to be composed of 82% renewable energy by 2030 will be met.

Progress on the ground continues to challenge that assumption, handing brickbats to the naysayers to hurl at the clean energy transition without ever having to offer a viable alternative.

If it weren’t for the continuing rooftop solar boom, and the boom in utility scale batteries — joined mid-year by a rude explosion in residential and small business batteries thanks to the home battery subsidy — things would be even grimmer.

Few folks in the energy industry expect the 82% target to be met. Rystad Energy’s Head of Renewables & Power for the Asia Pacific, David Dixon, who provided most of the charts used in this article, is particularly pessimistic. (Sunwiz and Green Energy Markets provided charts and data on rooftop solar and battery deployments.)

Dixon’s latest assessment of Australia’s progress towards the 2030 target — and the 2035 target of more than 90% renewables implied by the Net Zero Plan — makes sobering reading.

It projects that the renewables share will barely exceed 60% by 2030, and won’t top 80% until 2036.

Renewable energy won't top 80% of National Electricity Market capacity until 2036, says Rystad Energy

Abundance

It’s not for want of projects or capital.

The pipeline of utility-scale projects tops the scales at more than 70 gigawatts, with big batteries leading the charge, wind projects not far behind and solar farms — thanks to the growing phenomenon of negative daytime prices — a distant third.

“There’s no lack of projects — we just have to get them to financial close,” Dixon says.

The obstacles are well known. Environmental and planning approvals proceed at a leisurely pace, while the government’s marathon effort to streamline and speed things up by rewriting federal legislation crawls through yet another parliamentary term.

Take out a contract

Progress in building new transmission lines needed to connect far flung wind, solar and hydro projects to population and demand centres proceeds at an even more glacial pace.

The result is increasing curtailment of wind and solar farms in constrained corners of the grid, which reduces returns and makes them harder to finance.

Over the past decade, wind and solar projects not backed by a state or federal price support programs have typically been supported by power purchase agreements, or PPAs.

But these too have fallen to their lowest levels — ignoring the peak COVID year of 2021 — since 2019.

Expert view

"Australia will dramatically grow its production of renewables, but the question is how fast and how smooth the match with exiting coal generation will be.

We certainly still have the potential to deploy wind, solar, storage, transmission, distributed energy and gas peakers at the pace needed to hit the federal government’s goals.

But we have lost time while getting the policy suite, regulatory reforms and specific planning decisions in place - and actual delivery has been much harder than hoped on some projects.

Our best approach is not just to keep plugging away at lowering barriers, but to lean in to what’s proving fastest and most scalable - for example, batteries of all sizes.

The next draft of the Integrated System plan in December will likely show a shift in the mix of efficient resources. We’ll need to keep evolving in light of experience."

Tennant Reed
Director - Climate Change and Energy at the Australian Industry Group (Ai Group)

Power purchase agreements have fallen to their lowest levels — ignoring the peak COVID year of 2021 — since 2019. *Source: Rystad Energy*

Incapacity

The 40GW federal Capacity Investment Scheme (CIS), which sets minimum and maximum prices for projects via contracts for difference, was supposed to help solve this problem.

You’d think a CIS agreement would be enough. But only a handful of projects supported by the CIS have got boots on the ground and construction under way.

Rystad’s data counts nine under construction — the largest of which are the Liddell, Orana and Wooreen big batteries, along with the Goulburn River solar farm.

Another 39 — including seven between 400MW and 1000MW — are yet to see any boots on the ground.

The CIS was supposed to solve this, but intense competition to win the scheme’s blessing may lead to underbidding, Dixon suggests. This makes the winning projects less attractive to financiers and for many, CIS support isn’t enough to secure financing.

Only a handful of projects supported by the CIS have got boots on the ground and construction under way. *Source: Rystad Energy*

A difficult year

The upshot is that not nearly enough projects are commencing construction to keep pace with the 2030 target, let alone make up for the swelling backlog.

This year to date (end of September), barely 1GW of utility scale solar farms have commenced construction, along with a much smaller quantity of new wind generation.

In 2024 more than 1.5GW of utility solar and about 1.75GW of wind projects commenced.

Wind projects are a big challenge at the moment, Dixon says, because the rising costs of turbines and construction have made wind farm PPAs too costly.

Utility scale batteries are doing the heavy lifting, with just over 3GW commenced to date this year. But big batteries will struggle to match 2024’s more than 5GW of starts.

Big batteries have led the way this year, but barely 1 GW of utility solar capacity, and even less wind, have broken ground. *Source: Rystad Energy*

Shout it from the rooftops

The contrast with small-scale solar and battery deployment couldn’t be starker.

Data from Sunwiz show rooftop solar deployments have continued at a healthy pace, with about 2GW to the end of September, on track for roughly 2.7GW by year end.

That’s a little behind the pace of the past five years, in each of which — barring the Covid-affected election year of 2022 — more than 3GW of rooftop solar was deployed.

But it’s still outpacing all the wind and utility solar commenced this year.

And since 2025 is another election year, with the distraction of the government’s battery home battery subsidy thrown in for good measure, the rate may yet pick up. Sunwiz noted an atypical increase in deployment from August to September.

Rooftop solar is on track for about 2.7GW by year end. *Source: Sunwiz*

Telling

The home battery program, as previously noted, is proving a smash hit, and it's not a one-month wonder either.

According to data compiled by Green Energy Markets’ Tristan Edis, 1.6 gigawatt hours of small scale batteries were granted certificates in the 14 weeks to October 5.

If maintained — not an outrageous assumption given deployment accelerated through September — it implies an annual rate of nearly 6GWh.

That’s not an apples and apples comparison with the gigawatt capacity of big battery deployment.

But it does tell us that small batteries — properly managed — will before long be able to make a material contribution to grid and price stability by shifting solar surpluses to meet demand surpluses.

“Properly managed” is a bold assumption based on experience to date. But the steadily increasing average size of small batteries — to about 21-24 kilowatt hours — suggests an intent to engage with the market.

Of course, in a healthy projects market we wouldn’t expect rooftop solar and small batteries to outpace utility-scale deployment.

But while policymakers try to jump-start the big end, the transition needs the success of distributed energy resources.