Picking up the pace towards 2035

Hey Reader, welcome to The Energy's weekly data newsletter. This week we explore how the electricity sector is performing in the transition as the market awaits guidance for 2035.

Heavy lifting required

The electricity sector is doing the heavy lifting in Australia’s emissions reduction task to 2030 while others — light transport and heavy industry — belatedly work up a head of steam or get off with a light load or none at all (aviation, shipping, agriculture).

Although the load should be spread a bit wider when 2035 national emissions targets and “sector plans” are released later this week, the sector needs to shift substantial approvals backlogs holding up wind farms and some solar farm projects.

Still, there are opportunities in adversity for the sector to pick up the pace of transition towards 2030 — and 2035 — climate targets.

The world-leading volatility of Australia’s two main grids has spawned a big opening for utility scale battery investments, to give just one example.

As David Dixon, head of renewables and power markets research at Rystad Energy, told the Clean Energy Council’s Queensland summit this week, investors are marching right in.

Battery boom

Australia’s deployed grid-scale battery capacity per capita exceeds that of the nearest challenger - the United Kingdom - by a factor of almost three times on a per capita basis.

*Australia leads the world in utility battery deployment. Source: Rystad Energy*

Long-winded

The pipeline of proposed projects is huge, at nearly half the total of 90 GW and around half the approved project pipeline of around 23 GW in 2024, according to slides Dixon presented at the Clean Energy Council summit.

More alarmingly, though, average approval times have more than doubled in a decade to about 18 months, with some wind farms especially taking an unacceptably long two to three times that average figure to win their approvals.

“Wind is taking too long right now to get through planning,” AGL Energy CEO Damien Nicks told an American Chamber of Commerce event in Melbourne on Tuesday, and although this is starting to improve, battery approvals are coming through more quickly and easily.

Nicks said that while AGL intended to have a broad mix of wind, solar, batteries and pumped hydro in its 12 GW clean energy project pipeline, the assets it is getting approved and built right now are the big batteries with their smaller footprint and flexible location (often with network sub-stations in gritty industrial areas).

*Batteries dominate NEM capacity approvals but approvals take longer.* *Source: Rystad Energy*

Battery prices have also halved in a few years, both Nicks and Dixon noted, although AGL’s expenditure is still a substantial $1.5 billion on the two largest battery projects it has under way. Utility battery deals struck more recently by other developers have extended these price declines, making the technology even more competitive.

At the same time solar panel prices have fallen substantially from their prices of a decade ago, thanks to China’s massive — and unprofitable — production surge, while wind turbine prices in most of the world (excluding China) have increased substantially, throwing more sand in the gears for wind farm developers.

*Utility battery and solar capex costs fall sharply. Source: Rystad Energy*

As one door closes...

As wind farm development falls further behind — no new wind farms received final investment approval in the first six months of the year — these developments are combining to create opportunities for a growing pipeline of “hybrid” solar and storage projects, Dixon said.

Examples include Quinbrook's proposed solar and storage projects to power green iron and silicon production at Gladstone and Townsville in Queensland, and Edify Energy’s big battery and solar plans to repower Rio Tinto’s Boyne Island Gladstone alumina refinery and smelter.

*Wind's woes are an opportunity for solar plus storage. Source: Rystad Energy*

Not fast enough

Nicks, along with Alinta CEO Jeff Dimery, are excited by the expansion of consumer energy resources, especially home batteries to firm up the vast rollout of rooftop solar. This might mean AGL’s 12 GW rollout of grid scale assets only needs to be 10 GW, with huge savings across the grid if this becomes a general pattern, Nicks said.

There’s the potential for electric vehicle batteries — typically five times as large as residential batteries — to shore up the grid via vehicle-to-grid technology. And the halving in utility battery prices, especially if it extends to residential batteries, might also help Australia to hit its climate targets.

It's tough sledding. Approvals backlogs have only just started to shift. Dimery noted the lead time to order gas turbines to firm up the power supply during long wind droughts, cold winters and steamy summers — never mind install and commission them — has blown out to several years.

And while we encourage customers to invest in their own energy resources to wean themselves off the grid, it would be “a travesty”, Dimery said, if the huge investment in new transmission means we “reinstate their bills” via higher fixed charges.

Australia is moving quickly — but not quickly enough. *Eight months to August.
Source: Rystad Energy

Yet all three, including Blair Thomas, chairman and CEO of former Origin Energy suitor EIG, labelled themselves optimistic on Australia's transition.

Dixon’s assessment is that things have picked up enough for renewables to exceed 50% of the NEM by 2027, but they're still not moving fast enough to hit the target of 82% by 2030.