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Australia is perfectly positioned to lead in renewable energy generation, particularly solar and wind power; however, slow approvals, social opposition, and financing concerns have stalled progress.
In pursuing its energy goals, the country’s renewable energy sector has seen significant growth in the last decade. This is largely due to the Albanese government setting ambitious climate goals, aiming to reduce emissions by 43% by 2030 compared to 2005 levels.
The government is engaged in this effort as part of its broader strategy to transform the country’s energy sector into a more sustainably based industry.
Even so, things aren’t moving fast enough.
In addition to increasing costs, other factors are slowing down the transition, including regulatory challenges, grid integration problems, and social licensing concerns.
Rob Hammond, Director at TBH, helps us understand what’s slowing down the transition and what can be done to expedite the process.
Developing and Promoting Renewable Energy.
The “Powering Australia” plan developed by the Australian government, intends to overhaul the country’s energy landscape to achieve net-zero emissions by 2050.
Based on 2023 data, Australia is currently generating between 30 and 35 percent of its power from renewable sources such as wind, solar, and hydro power. This means that on the current trajectory the government’s program will not be able to meet its first target (82% renewable energy by 2030).
Complex Regulatory and Planning Processes
In Australia, our regulatory and planning processes for renewable energy development applications (DAs) are especially complex and protracted, particularly in New South Wales (NSW). For example, the planning approval process for large-scale renewable energy projects in NSW is significantly slower and more expensive than in other Australian states. It takes two-three times longer (four-seven years) and is 25 times more expensive for developers compared to Queensland.
According to recent findings, a typical large wind project in NSW costs more than $4 million simply to apply for approval to build a 1.5-gigawatt project.
In contrast, Queensland boasts the swiftest planning approval system for a typical large project, taking only one to two years and costing just $30,000 to apply.
In NSW, average approval times range from 492 days for Critical State Significant Infrastructure (CSSI) projects, including hydro and transmission, to a staggering 3,488 days for wind projects.
These delays not only affect the deployment of new renewable energy projects, such as solar (705 days average approval time) and battery storage systems (530 days average approval time) but they also impact the broader goal of reducing carbon emissions and hinder the state’s ability to meet its renewable energy and emissions reduction targets.
For instance, projects that are critical to replacing the capacity of retiring coal plants like Eraring Power Plant have been stuck in the planning stages. This is a major challenge for NSW, as the state aims to add at least 12 GW of new renewable energy capacity by 2030 – and the delays risk prompting uncontrollable price spikes for end users if plants like Eraring close before the renewable energy capacity is ready.
Prolonged approval times can also lead to increased project costs for investors due to inflation, changes in technology prices, and holding costs. This can make renewable energy projects less economically viable and deter financing in the sector over the medium to longer term.
To streamline approvals, clean energy projects may need to invest in tools to identify the most suitable locations for new projects considering wind and solar conditions, environmental sensitivities, and the proximity of these sites to communities and existing grid infrastructure. In this way, developers can select sites with fewer obstacles right from the start, saving time and money on costly feasibility studies and making the process clearer and more reasonable for all parties.
Grid Connection Holdups
An integral part of managing the inherent unpredictability of renewable energy is securing grid connection agreements and assessing the impact of new projects on the existing grid infrastructure.
The process of securing grid connection agreements is often complex and time-consuming, and involves navigating technical, regulatory, and logistical challenges at both the pre- and post-connection stages which can take months or even years
Transmission Infrastructure Adequacy
Unlike Europe, Australia’s eastern grid is a long line along the coast, making it more vulnerable to disruptions. The rapid growth of renewables projected to reach 35,000 MW by 2030, necessitates innovative solutions for monitoring, coordinating, and aggregating these resources to ensure a secure, stable, and reliable energy supply.
AEMO (the Australian Energy Market Operator) identified a need for more than 10,000 km of new transmission lines by 2050 under the ‘Step Change’ and ‘Progressive Change’ scenarios, noting that if Australia pursues more transformational scenarios like Green Energy Exports – twice as much transmission will be needed, and delivered at a much faster pace than we are seeing right now.
This extensive development is crucial to connect new and diverse generation and storage capacities to towns, cities, and industries across the National Electricity Market (NEM). To help speed up this delay, the AEMO has been working on reforms to improve the efficiency and pace of the grid connection process.
Hopefully these reforms will expedite the connection process, making it smoother and faster, to support a quicker scale-up of renewable energy projects across the country.
Insufficient Skilled Workers
For Australia to meet the target of 82% renewable energy by 2030, we would need to build around 40 wind turbines (7 megawatts) every month and install 22,000 solar panels (500 watt) every day.
In order to build at this level, a skilled workforce and materials would be needed – however, finding appropriately qualified staff and materials isn’t easy – particularly if we consider existing competition for skilled labour in other sectors, such as transportation, healthcare, defence, and education, as well as global supply chain pressures.
The current labour shortage in Australia is one of the energy sectors’ most problematic issues right now. The industry requires an additional 35,000 skilled workers by 2025 to meet demand. For critical roles such as engineers, electricians, and project managers, the skills shortage is even more acute, with at least 43,200 (51%) of the 85,000 workers required by 2030 in these occupations.
The AEMO 2024 Integrated System Plan (ISP) acknowledges many of the holdups are directly connected to increased costs for transmission, generation, and storage, driven by global supply chain issues and workforce shortages.
With so many industries competing for the same talent pool, we will likely need to look beyond our borders for assistance, and it is crucial for government and industry to collaborate and coordinate in order to prioritise initiatives like apprenticeships, training programs, and upskilling initiatives.
Supply Chain Issues
Transmission project costs have risen by approximately 30% since 2022. While these costs are significant, they are expected to continue increasing – a situation that necessitates adaptations in planning and execution of all actionable projects to ensure the feasibility of the 2030 target.
AEMO’s 2023 Transmission Expansion Options Report updated its approach to forecasting transmission costs on projects recognising “heightened delivery costs” currently being experienced by the industry are increasing “beyond the rate of general inflation due to competition for labour and materials”. AEMO’s sensitivity analysis also noted that supply chain constraints may lead to “missing the 2030 target and result in the NEM (National Electricity Market) overshooting its 2029-30 emissions reduction targets by around 155Mt CO2-e”.
There is no easy fix for this, because so much is going at once.
The government is simultaneously spending and commissioning infrastructure, education, healthcare, defence, and transportation projects. This high volume of activity across the Australian economy means everyone is competing for the same scarce labour and materials. There’s a price to be paid for that.
How much are we willing to spend? Should we work with international partners to ensure reliable access to critical materials? Should we diversify supply sources and create strategic stockpiles of essential items to mitigate disruption risks?
How far are we willing to go to secure materials?
Opposition to renewable energy projects.
Another issue holding up the renewable transition is opposition from local communities due to the complexities of grid integration.
In my experience, while most people support renewable energy in principle, the construction and expansion of new projects can cause conflicts – especially in rural and semi-rural areas where agricultural land is used or valued for its aesthetic value.
NIMBYism (“not in my backyard”) is a global trend of local communities resisting having renewable installations near their homes. This community resistance can lead to delays in the permitting and construction of renewable energy projects and increase the overall timeline for project completion. Addressing NIMBYism is not easy. In some cases, the level of opposition can be so significant that it results in the cancellation of renewable energy projects altogether.
When people cannot see the direct benefits of renewable energy, getting them on board is very difficult. Whether it is down to aesthetics, noise, or environmental concerns, it’s difficult to find a way to make everyone happy.
Mitigating Opposition
Involving the public directly impacted (e.g. those with infrastructure on their property) as well as the broader community (e.g. visually impacted) when designing and developing benefit-sharing programs and grants can help build trust, increase community buy-in, and help renewable projects gain public support.
Placement of projects in less contentious locations or better visual design of transmission lines might help reduce opposition. We may also need to negotiate with private landowners about the placement of turbines/panels and the location of infrastructure, cabling, and other components needed to connect to the grid and get power from A to B. The earlier stakeholders can be engaged, the greater the chance of finding potential solutions.
Putting cables underground is expensive and can cause ecological disruptions, but running cables over ground creates a visual impact. Either way, there must be a trade-off – so overcoming NIMBY attitudes is complex.
Maybe the smartest thing we can do is use the biggest asset that Australia has, which is the scale of its land or coastlines?
Australia’s vast arid lands could potentially generate 27 times its current electricity needs from solar, and wind energy. Using this land for large-scale renewable energy projects could enable faster development with less community opposition, despite the challenges of longer transmission lines and higher initial costs.
Similarly, the fact that 85% of the Australian population live within 50km of the coast, together with the vastness of the coastline means that offshore wind farms are likely to be an important part of the solution. The trend towards offshore wind farms is being seen internationally enabling faster manufacturing and delivery timeframes to be achieved.
Initiatives Australia is offering to Bolster Transition
The Federal Minister for Energy and Climate Change, Chris Bowen stated late last year that “Investment from the private sector is crucial to Australia’s transformation to net‑zero, stating: “Collaboration is key. The Government cannot do it alone; this must be a whole of economy effort.” The Australian government is offering some notable financial initiatives to help speed up the pace of the renewable energy transition and encourage new investment in renewable capacity:
The Clean Energy Finance Corporation (CEFC) is an Australian government-owned green bank that invests in clean energy projects to help Australia achieve its national goal of net zero emissions by 2050. As of June 2023, the CEFC has committed more than $7 billion to various renewable energy initiatives, significantly enhancing the country’s solar and wind generation capacity and facilitating increased flows of finance into the clean energy sector. This substantial investment will not only incentivise the physical expansion of renewable resources throughout Australia, but it will also help drive economic growth by creating jobs and promoting technological innovation in the green energy sector.
Established on 1 July 2023, the Net Zero Economy Agency (NZEA) was legislated to help manage Australia’s net zero and sectoral plans, with a strong focus on regional engagement and transition planning. The establishment of the NZEA marks a strategic move by the Australian government to enhance private capital investment in decarbonisation efforts.
The Capacity Investment Scheme (CIS) is a national framework established by the Australian government to encourage new investment in renewable energy capacity and clean dispatchable capacity like battery storage to level out the inherent fluctuations of renewables. The Australian government’s expansion of the scheme is working to reverse the downward trend seen recently in renewable energy investments by delivering an additional 32 gigawatts of capacity by 2030. The CIS will provide revenue underwriting for successful projects, offering a long-term revenue “floor” and “ceiling” to decrease financial risks for investors and the scheme will be rolled out from 2024-2027 through regular competitive tenders.
In Conclusion
Despite challenges, Australia’s transition to renewable energy presents many exciting opportunities for innovation and collaboration. In contrast to other countries, we have a unique opportunity to develop new export industries in the form of energy, such as SunCable; which will harvest and store solar energy for Darwin as well as international markets on 12,000 hectares in the Northern Territory.
Australia also has some of the best conditions for renewable energy generation and, importantly, abundant unpopulated space in which to locate generation assets.
In addition, Australia has an opportunity to pursue the advanced manufacturing policy that our governments have been trying to implement for a long time. Applying some of the innovation policies announced in the recent federal budget to address some of the above challenges will give Australia the potential to lead as a nation in developing strategies and technologies essential to global and domestic transformation.
TBH Advisory Services
TBH offers expert advice on renewable energy procurement, and delivery. Our international team support investment decision makers with assurance services to ensure that their investments are likely to achieve the desired outcomes in a timeframe and for a cost that is acceptable to them.
During project delivery, our extensive experience in project delivery provides clients with visibility of emerging risks or issues or opportunities to optimise the approach. These insights support proactive decision-making and ensuring accountability and coordination across all stakeholders involved in the project.
TBH’s experience working on some of the largest transition projects in the APAC region collaborating with key players in both the public and private sector over the last 60 years provides our clients with a wealth of knowledge. Our team of specialists facilitate innovation and achieve sustainability goals, demonstrating a systematic approach to supporting businesses in their transition to more sustainable practices in a commercially pragmatic manner.
By streamlining approval processes, improving grid infrastructure, and increasing community support, Australia can accelerate its transition to a renewable energy future. TBH are excited to be able to support this vitally important initiative.
About Rob Hammond
Rob Hammond is a Director at TBH, with 26 years’ experience. He is an expert in project controls and planning for large-scale, complex, or high-risk projects and leads the business’ Strategic Advisory Services.
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