In 2019 sufficient capacity was delivered to exceed the Large-scale Renewable Energy Target of 33,000 gigawatt hours in 2020.
Across Australia a record 4.1 gigawatts of new renewable energy capacity was delivered under the Large-scale Renewable Energy Target in 2019, up 17 per cent from the previous record of 3.5 gigawatts set in 2018.
28,300 gigawatt hours of eligible renewable electricity was generated in 2019 compared to 23,400 gigawatt hours in 20182.
Generation from large-scale renewables incentivised by the Large-scale Renewable Energy Target is estimated to have delivered 22 million tonnes of carbon dioxide equivalent abatement in 2019, an increase from
18 million tonnes in 20183. The carbon abatement calculation is a conservative estimate based on the emissions intensity of the National Electricity Market in 2019 which has decreased by eight per cent compared to 2018. The emissions intensity of the grid will continue to reduce as the penetration of renewables increases.
In addition to decarbonising the grid, investment in large-scale renewables helped deliver lower electricity prices for consumers in 2019. The Australian Energy Market Commission found the renewable capacity delivered across the year contributed to
decreasing wholesale electricity prices; and residential bills started to decline in part due to declining total costs of the Large-scale Renewable Energy Target4.
The Clean Energy Regulator expects approximately 3.4 gigawatts of new utility- scale renewable capacity to be delivered in 20205. A minimum 34,000 gigawatt hours of eligible renewable energy generation is expected in 2020, exceeding the 33,000 gigawatt hours Large-scale Renewable Energy Target. The estimated generation could increase substantially if there is an above average hydro generation year.
Since January 2016, a total of 12.5 gigawatts has been built or is under construction. This is 6.1 gigawatts more capacity than the 6.4 gigawatts required to meet the 2020 target.
This 6.4 gigawatt threshold was passed in September 2019 with the accreditation of Goldwind’s Cattle Hill Wind Farm in Tasmania.
Of the 4.1 gigawatts of large-scale projects delivered in 2019, 3.9 gigawatts from
utility-scale wind and solar projects and 175 megawatts of mid-scale commercial and industrial sized solar PV systems (100
kilowatts to five megawatts) a strong growth of 51 per cent compared to 2018.
The increased penetration of renewables in the National Electricity Market has placed downward pressure on both wholesale electricity prices and large-scale generation certificate prices.
Large-scale generation certificate spot prices fell from around $48 in January to $39 at the end of December 2019, with forward spot prices also easing from $39 in calendar 2019 to $15.50 for calendar 2022.
Certificate spot prices are expected to continue to moderate in 2020 and beyond as the supply of large-scale generation certificates increases against the static legislated demand of 33,000 gigawatt hours.
Annual surrender of large-scale generation certificates reduced to 76.6 per cent
of liability set by the renewable power percentage for 2019. This was down from
86.1 per cent for 2018 as a larger amount of large-scale generation certificate liability was taken as shortfall. High differentials between spot and forward certificate prices provides a commercial incentive to utilise
shortfall charge mechanisms as entities can pay the shortfall charge and redeem that with lower price certificates in the future.
The announcement by the Government in the 2019–20 Mid-Year Economic and Fiscal Outlook, that it will amend the law
retrospectively to clarify that no tax is payable on the refund of large-scale generation certificate shortfall charges, likely encouraged greater use of the shortfall provisions for the 2019
assessment year and into the future.
In the context that the 2020 target will be exceeded, the Clean Energy Regulator views the use of shortfall charge to be reasonable in the expectation that the majority of shortfall charges
will be redeemed in the allowed three-year period.
According to the Australian Energy Market Commission6, costs associated with the Large-scale Renewable Energy Target accounted for an estimated average of
$8.85 per quarter in 2019 average household electricity bills, a $1 reduction per quarter compared to 2018. This is related to the decline in large-scale generation certificate prices.
In 2019, it became clear that substantial investment in new transmission capacity is required to enable the full delivery of the large pipeline of renewable energy projects while maintaining a secure and stable grid. Grid constraints are leading to curtailment of generation for some operating renewable power stations and delaying connections in some locations. Transmission investment is underway with significant announcements made in 2019 and 2020 for new and upgraded interconnectors7; as well as the development of renewable energy zones that will support the connection of new renewables.
Longer term, the Australian Energy Market Operator’s Integrated System Plan—expected to be finalised in mid-2020—will provide
a roadmap for necessary transmission upgrades to enable the transition of Australia’s grid to allow a higher proportion of renewables.
New renewables investment is now driven primarily by commercial factors and increasingly by corporations entering into power purchase agreements to both
hedge electricity prices and meet emissions reduction goals. The pipeline of projects tracked by the Clean Energy Regulator at the end of 2019 includes 1.2 gigawatts of projects with a signed power purchase agreement.
Beyond this there is 37 gigawatts of projects with development approval8 across Australia, which provides the potential for solid future investment if the transmission network is upgraded to support this additional capacity.
The economic impacts arising from the COVID-19 pandemic became apparent in mid-March 2020, after the year to which this annual statement relates. However, prior to finalisation of this full report it appeared the large-scale renewables industry was holding up well. No material delays were anticipated with projects under construction. While getting new investments to financial close may be more difficult, the announcements in the first quarter were strong at 837 megawatts and the Clean Energy Regulator believes there are strong prospects of more
capacity reaching financial close in 2020 than the two gigawatts in 2019.
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The Clean Energy Regulator is a Government body responsible for accelerating carbon abatement for Australia.