Continued uptake of large-scale renewables under support schemes for clean energy at state level has prompted a reduction in wholesale energy prices, Australian renewable energy market analysts Reputex found.
It noted that with Australia's federal renewable energy target set to expire in 2020 – and no plans to replace it – state policy will attract investors in the national energy market in the future.
Reputex expects state targets – such as those in Queensland (20.5TWh by 2030) and Victoria (3.5GW by the same date) – to prompt further falls in wholesale prices.
However, the continuing absence of a federal energy policy framework is likely to lead to a "boom-bust renewable energy investment cycle", with wholesale prices rising periodically to encourage new capacity investments, Reputex added.
A fall in wholesale electricity prices from around A$85/MWh (US$58/MWh) towards A$70/MWh over the next three years could make coal- and gas-fired power less competitive, and renewables, by comparison, more attractive, the analysts forecast.
Reputex predicts 3GW of new wind and 3GW of new solar PV projects will come online by the end of next year, even in the absence of a new renewable energy policy.
As more wind farms are commissioned, wind power generation and total market share is set to increase: from 18.5TWh (9.1% of total generation), to 33.8TWh by 2022-23 (16.2%), 39.6TWh by 2026-27 (17.4%), and then to 40.6TWh by 2029-30 (17.3).
However, the uptake of renewable energy and achieving the 50% share of generation in Australia’s national energy market by 2030 will be dependent on several factors. These include the deployment of the Snowy 2.0 pumped hydro project in 2024-25, the country’s transmission system being significantly upgraded, and state support schemes being met, Reputex said.
The addition of a large amount of energy storage would likely benefit utility-scale solar and wind energy, making the "least-cost" technologies more appealing as "firming would ensure predictability for buyers", according to the firm.
Australia’s support scheme for renewable energy projects expires beyond 2020.
Energy minister Angus Taylor said in September there are no plans to replace the renewable energy target scheme – by which support is offered to projects coming online before 2020. This policy vacuum has damaged investor confidence in Australia, according to a survey.
Reputex added that without a "robust policy framework to incentivise new investment prior to large coal-fired generation retirements", it expects energy investment to slow. This could also trigger a return to elevated wholesale prices above A$100/MWh to encourage new capacity beyond 2030.
The analysts warned: "The long-term absence of a federal energy policy framework is likely to be felt in the form of elevated wholesale prices and increased volatility in the future, with wholesale prices fluctuating around a boom-bust renewable energy investment cycle, determined by fossil fuel retirements rather than an orderly transition plan."