In Short : Australia’s renewables growth faces a setback as rooftop solar reaches saturation, according to the International Energy Agency (IEA). The surge in rooftop solar installations poses a challenge, requiring strategic adjustments to sustain and diversify the country’s renewable energy expansion.
In Detail : Australia’s booming rooftop solar growth is forecast by the International Energy Agency to stutter as the grid struggles to effectively integrate panels into the power system, contributing to a pullback in expectations for renewable energy growth in the country.
Rising costs, insufficient federal incentives for renewable energy projects, slower onshore wind expansion and grid bottlenecks were also named by the Paris-based agency as the drivers for a more than 10 per cent cut in forecast renewable energy additions in Australia by 2028.
“In Australia, a lack of new federal incentives and rising investment costs have delayed the development of new projects,” the IEA said in a report on renewables that found the expansion is lagging the tripling of capacity by 2030 that was agreed at the COP28 climate summit in December.
The report points to “policy uncertainty” due to the early achievement of Australia’s original renewable energy target, without mentioning the Albanese government’s expanded Capacity Investment Scheme announced in November. “Notably, [rooftop solar], which has been the primary source of growth in Australia in recent years, is forecast to experience a faster-than-anticipated decline in installations due to saturation of the power system and increasing grid integration challenges,” it reads.
Australia is one of 118 countries that signed up to the pledge in Dubai last month to boost renewable energy capacity three-fold by 2030 to at least 11,000 gigawatts and double energy efficiency improvements to help limit warming to well below 2 degrees and reach net zero emissions by 2050.
Installations of rooftop solar systems in Australia set a record in 2021 and expectations that 2023 may break the record failed to materialise according to solar and storage consultancy SunWiz. Still, more than 3GW of small-scale solar was installed last year, up 14 per cent on 2022 and only just shy of the record, said managing director Warwick Johnston, who still expects rapid growth in 2024 driven by elevated power prices.
“The rapidly escalating uptake of electric vehicles will also spur on demand for solar power systems, as solar power is the cheapest way to refuel your car,” Mr Johnston said.
Rooftop solar has been squeezing large-scale solar and wind out of the National Electricity Market on low-demand days, as well as forcing coal power stations to ramp down during daylight hours.
Need for better planning
Matthew Rennie, a former EY partner who now provides advice to companies on their energy transition plans, said the IEA’s forecast was “a welcome finding” and would hopefully focus attention “on the dire need for markets to be created in grid edge integration, and for the technology which solves these problems to be valued properly”.
Mr Rennie said Australia’s annual rooftop solar expansion paled in comparison to the load that the grid would need to deal with once electric vehicle charging began to grow, underscoring the need for better planning.
The IEA remains bullish on solar power as a whole, forecasting that solar and wind will account for 95 per cent of renewable expansion. Renewable power is set to overtake coal in early 2025 to become the largest energy source for electricity generation globally.
However, the IEA said the development of the wind industry outside China – including in Australia – was slower than anticipated, due to supply chain disruptions, higher costs and long timelines for approvals. Offshore wind has been hit hardest, with investment costs surging more than 20 per cent from a few years ago. Some 15GW of offshore wind projects in the United States and United Kingdom were cancelled or postponed last year.
‘Extraordinary’ China
China represents by far the biggest growth engine in global renewables, bringing online as much solar power capacity last year as the rest of the world did in 2022.
The country is also the principal driver for the IEA’s total 728GW upward revision in forecast five-year growth in renewables capacity since its last report in December 2022.
“While the increases in renewable capacity in Europe, the United States and Brazil hit all-time highs, China’s acceleration was extraordinary,” the agency’s report reads, describing China as “the world’s renewables powerhouse”. The country will account for almost 60 per cent of renewable generation coming online worldwide by 2028.
But squeezes in the power grid were slowing the expansion of renewables in developed countries in Asia-Pacific, including Australia, the IEA said, calling for efforts to overcome grid bottlenecks, to streamline “lengthy” permitting processes and to enhance grid flexibility to be prioritised.
Meanwhile, the increase in requests by renewable energy plants to connect to the grid has dragged out project lead times.
“Even projects nearing completion can still be subject to delays: In Australia for instance, commissioning processes can be a year or longer,” the IEA said.
‘Grid queues’
The IEA estimated that over 3000GW of renewable energy capacity worldwide is today tied up in “grid queues” because of insufficient investment in grid infrastructure, where development lead times are much longer than for wind and solar projects.
The report comes as mining billionaire Andrew Forrest announced an intention to add 14GW of new renewable energy and storage capacity in Australia by 2030, and as planning approvals for new wind and solar projects in NSW have picked up in pace, signalling a potential acceleration in the country’s green energy build-out.
On green hydrogen, the IEA gave a “reality check” on development, noting that despite announcements on plenty of new projects, progress in realising them has been slow. Forecasts for hydrogen production have been cut for all regions except China, with the IEA citing a lack of buyers for hydrogen and the impact of higher costs.
“To fully convince investors, ambitious project announcements will have to
be followed by consistent policies supporting demand,” the IEA said.
Still, the IEA said that by 2028, potential export countries could account for over one-fifth of hydrogen-driven renewable capacity deployment, led by Saudi Arabia, Australia, Oman and the UAE.
It is forecasting the first green hydrogen export project will come online by 2025, in Saudi Arabia, followed by capacity the following year in the EU, led by Spain, Denmark and Germany.
The IEA said that more than 360GW of electrolyser projects with start dates before 2030 had been announced but only 3 per cent of these had reached financial close.
“The forecast is also less optimistic for Asia-Pacific, mostly due to uncertainty in Australia over the future of stalled projects,” the IEA said of hydrogen. “One project’s environmental permit had lapsed before it reached financial close, and plans for projects in Bell Bay have been put on hold due to high water and transmission congestion.”