Solar and windfarm investment is drying up – and Australia needs a wake-up call on the future of the electricity grid | Adam Morton (2024)

This week should be a wake-up call on the future of the electricity grid, but we seem in danger of collectively drawing the wrong conclusions about which way to go.

The main problem is straightforward – investment in large-scale solar and windfarms has dried up to next-to-nothing just as it is supposed to be moving into overdrive.

According to a report by the Clean Energy Council on Wednesday, in the three months to the end of June investors made financial commitments on only four renewable energy projects. And these projects are not particularly big, adding up to just 348 megawatts of new capacity – a fraction of one coal power plant.

This is not a one-off. The first three months of the year were even worse. It’s the slowest start to a year since the council started recording this data in 2017.

This has obvious ramifications, including putting targets for renewable energy and greenhouse gas emissions reduction in doubt, if not out of reach. It also increases the risk of the electricity grid failing unless decisive steps are taken to address the slump. At the moment, there is little sign that is happening. If anything, the focus is in the opposite direction.

In New South Wales, the Sydney Morning Herald has reported that a “reality check” commissioned by the Minns Labor government advised it to negotiate with the owner of Eraring, Australia’s largest coal plant, to extend its life beyond its planned closure date in two years.

By any measure, this is a ridiculous situation for the state to find itself in. Eraring is 40 years old, ready for decommissioning, and it is expected it will cost hundreds of millions of taxpayers’ dollars to prop it up a little longer.

A broadly similar scenario is playing out in Victoria. In 2021, the Andrews government made a deal to keep the Yallourn brown coal generator open until 2028. This week it announced an agreement to ensure another plant, Loy Yang A, remains available until mid-2035. These deals will cost taxpayers an undisclosed, but presumably substantial, sum.

There is an argument that these decisions are now unavoidable. We obviously can’t shut coal plants before replacement generation is ready, and it’s possible some generators should be kept on the books to be switched on only if needed. In Victoria’s case, it’s at least tied to a goal of 95% renewable energy – and, therefore, no coal – by 2035.

But it’s notable how much political and media discussion is focused on the risks of moving past coal, and not the solutions that can speed up an inevitable transformation needed to address the climate crisis. The idea that renewable energy is not up to doing the job persists no matter what the evidence says, or how often it’s presented.

No one is building new coal power plants in Australia, and most recent problems in the grid were caused by outages at old coal units, not solar or windfarms. The risk of that repeating grows the longer they run.

As challenging as the rollout is, we have the technology to replace them more rapidly. The move to clean energy is faltering due to governments and public agencies, not because the machinery can’t do the job.

The biggest government failure has been well documented. For nearly a decade, the federal Coalition tried to slow or block the shift away from fossil fuels, and made any serious climate policy political poison. It deserves much of the blame for the disorderly transition happening now.

But there are other deeply ingrained problems. They include the idea that the market will drive the shift to a renewables-dominated system just because solar and wind energy generation is cheaper than fossil fuels.

Labor came to power attached to this thinking. It was backed by a report by the consultants RepuTex that suggested the country would reach 82% renewable energy by 2030 if the government offered $20bn in low-cost finance for the private sector to build electricity transmission lines. We now have evidence that this isn’t going to be enough.

The scale of what’s being attempted is massive – a near complete rebuild of the power grid. Just as the existing grid was mostly built and managed by governments before being privatised, the rebuild will need clearer direction from the top to succeed.

The only credible option that can rapidly cut emissions is a system that runs on solar and wind plus back-up – batteries, inter-regional transmission, pumped hydro and, initially at least, some fast-start gas plants. Despite what the Coalition and its backers claim, there is plenty of evidence this mix can provide what is needed, and there are no available or affordable alternatives.

The Albanese government and most states have started down the renewables-plus-firming path to varying degrees, but it’s a messy picture.

What’s missing is a policy that acknowledges that the energy transition is a race – to meet science-based climate targets and ensure there is enough new generation to replace coal plants ASAP, but also to win an increasingly competitive battle for global clean industry investment. Last year’s US Inflation Reduction Act kicked that into overdrive.

What’s needed, badly, is something that drags large-scale renewable energy into the system faster. Options could include a revamped renewable energy target, an expanded safeguard mechanism that effectively puts a carbon price on coal energy, and a front-loaded underwriting program.

It would need to run alongside a plan to streamline the construction of transmissions links, including an evolving assessment of where they should and shouldn’t be built, factoring in cost blowouts and local concerns.

A more concerted effort to improve energy efficiency to cut how much grid electricity we use and limit power bill increases wouldn’t hurt, either.

The climate and economic benefits would be significant. They could include avoiding having to spend wads of cash propping up a dying, polluting industry – a step that, presumably, everyone can get behind.