Australia’s new Labor government has secured a majority in parliament. This is expected to provide a tailwind for renewable energy investment in Australia as the Labor party campaigned on a strong environmental agenda, under its Powering Australia plan.
A record vote for independents and minor parties had made it uncertain whether Prime Minister Anthony Albanese would govern in his own right. But Albanese now has the 76 lower house seats needed following the election on 21 May.
About a third of Australians voted for candidates outside the major parties, with support surging for the Greens and independents running on climate platforms.
Now, as a result of Labor’s victory, analysts at Fitch Solutions see a significant upside risk to their renewable energy forecasts, including solar, wind, hydrogen, and storage.
“Given the Labor Party’s strong support for the sector, we expect the policy environment to improve going forward, with greater certainties and financial support that will drive up further investments into the sector. This is particularly true as state-level support has remained mostly resilient and have already become an increasingly important mechanism in driving growth in the renewable energy sector over recent years, amid the policy vacuum. As such, greater policy coherence from both the federal and state level will provide an added boost for the sector,” Fitch said in a recent report.
Notable features of the Powering Australia plan include:
– A carbon emissions reduction target by 43% by 2030 (from 2005 levels)
– Increase renewable energy capacity to 26GW, and have renewables account for 82% of on-grid generation by 2030
– Upgrade the electricity grid through a A$20 billion (US$14.4 billion) Rewiring the Nation plan
– Allocate up to A$3 billion from the National Reconstruction Fund to invest in green metals, clean energy component manufacturing, hydrogen electrolysers and fuel switching
– Roll out 85 solar banks and 400 community batteries
– Provide financial support for improving energy efficiency
– Restore the Climate Change Authority and introducing new annual Parliamentary reporting by the Minister.
The greatest challenge for a rapid renewable build-out in Australia stems from uncertainty in increasing grid connection issues with larger-scale projects, cautioned Fitch. Over the past few years, the transmission network in Australia has not been able to keep up with the renewables capacity surge that the market has enjoyed during the past decade.
“This has weighed on renewables growth as the existing grid capacity was insufficient to incorporate all the new capacity in the pipeline, which led to some curtailment. Connection and commissioning delays on power projects, particularly for new wind and solar farms, have grown increasingly common due to technical issues and a growing complexity of connection requirements in Australia,” added Fitch.
However, the A$20 billion Rewiring the Nation plan to upgrade the transmission network, if passed, will offer some respite. Moreover, rapid progress with green hydrogen and energy storage facilities, could also support this renewables growth momentum. Australia currently leads the world with its robust green hydrogen pipeline and is also one of the few markets in the world where large-scale battery storage facilities have already become commercially viable, said Fitch.
These facilities are expected to support its renewables growth momentum and replace retiring thermal power stations over the coming decade, added the firm.
Krishan Pal Birda, an upstream analyst at consultancy Rystad Energy told Energy Voice that for now “the Labor government has no plans to phase out coal or gas production and exports. The new government considers gas as a transitional fuel which is a slight step down for gas, from being the focus of recovery following the pandemic for the previous government.”
“With the Labor government and the independents, new oil and gas projects to be sanctioned will likely have to meet relatively higher ESG standards,” he cautioned.
“The concern for the oil and gas industry is how to create a framework where fossil fuels are not demonised against the green renewables. With the new government, it will get even tougher,” warned Birda.
Recommended for you
