by Australian Energy Council
Renewables go from strength to strength
The latest Clean Energy Regulator Carbon Market Report provides further reinforcement of the rapid rate of deployment of renewable generation in the National Electricity Market (NEM).
A record 32 per cent of electricity generated came from renewable sources in the third quarter while on 24 September the Australian Energy Market Operator (AEMO) reported instantaneous renewable generation of 61.4 per cent in the grid – the highest level recorded. The CER expects across the calendar year the contribution of renewable generation will be around 30 per cent, double the 15 per cent reported just four years ago. The increase in the contribution from renewable sources (capacity has grown by an average of 6GW each year between 2018 and 2020) has led to the emissions intensity of electricity supply in the NEM and SWIS falling from 0.79t CO2 in 2017 to 0.66t CO2 to end Q3 2021.
Figure 1: Annual renewable generation by type and emissions intensity 2005-2021
Source: CER
During the third quarter 603MW of new large-scale renewable energy capacity was approved taking the year’s total to date to 1.2GW, which while it is down on 2.7GW approved in the same period in 2020, this is partly because of the timing of accreditation for several power stations which were expected to come online early this year, but actually began generation in late 2020. Over the first nine months 184 power stations have been approved. There is expected to be 2GW accredited this year with more than 1.4GW under application in the last quarter.
Table 1: Power stations accredited
Source: CER
Investment is trending up for large-scale renewables with final investment decisions for 1.1GW in the third quarter and taking the total in 2021 to the end of September quarter to 1.9GW. This compares to only 44MW in the first quarter and 725MW in the second quarter.
A similar result to the Q3 outcome is expected by the CER in the final quarter and if achieved it would see FID capacity exceeding the 2.7GW reported in 2020.
Figure 2: Capacity committed per quarter and for quarter moving average (Q1 2016-Q3 2021)
Source: CER
The siting of committed and probable renewable projects across Australia is shown in figure 3.
Figure 3: Committed and probable projects
Source: CER
Wind farms were the main source of renewable generation in the quarter, but utility-scale solar had the biggest year-on-year growth – up 34 per cent from Q3 2020. The overall mix has stayed fairly stable with each of the large-scale sources contributing a similar proportion of generation between 2020 and 2021 (see figure below).
Figure 4: Renewable generation (NEM) over first three quarters 2020 and 2021
Source: CER
Wind generation accounted for 37 per cent of renewable generation and the CER believes that offshore wind represents significant potential to increase the scale of wind generation in Australia.
Large-scale certificate (LGC) spot prices increased significantly in the September quarter reaching $40.40, which is the highest price since January this year and according to the CER this matches the historical pattern as retailers secure supply ahead of the surrender date of 14 February 2022.
The CER expects LGC supply and demand to stay tight to at least 2023 as voluntary cancellation continues to increase and 17 million certificates are needed to claim $1 billion in shortfall charges from previous years.
Supply is expected to be at the top end of the regulators range forecast of 37-40 million. LGC supply in the third quarter was 9.2 million taking the total to the end of September to 26.4 per cent, a 22 per cent increase from the corresponding period in 2020. Further growth is expected in the Q4 which is typically the peak period and there could be increased LGC created from hydro generation based on the expectation of a wetter than average November to January period.
Not so small-scale
This year new large-scale generation capacity is expected to be beaten by the installation of 3.2GW of rooftop solar capacity, which would be a new record. The third quarter result for rooftop PV exceeded expectations with 755MW installed and the period also saw an increase in the average system size reported (8.42kW). While the installed capacity was the lowest quarterly result for this year it was achieved despite restrictions and limitations on installation work as a result of COVID-19 lockdowns in New South Wales, Victoria and the ACT.
Strong growth earlier in the year has meant installed capacity has increased by 2.3GW in the year to date, a 14 per cent increase over the same period last year and if the seasonal pattern for the last quarter follows that of previous years it would reach the forecast 3.2GW record for the full year. There is now a total capacity of 15.6GW of rooftop solar and with the increased capacity there has been record generation from rooftop solar.
Related Analysis
Integrated System Plan – What Should We Expect?
The release of an expert study of last year’s autumn wind drought in Australia by consultancy Global Power Energy[i] this week raised some questions about the approach used by the Australian Energy Market Operator’s in its 2024 Integrated System Plan (ISP). The ISP has been subject to debate before. For example, there has previously been criticism that some of the ISP’s modelling assumes what amounts to “perfect foresight” of wind and solar output and demand[ii], rather than a series of inputs and assumptions. The ISP is produced every two years and with the draft of the next ISP (2026) due for release soon, it is useful to consider what it is and what it is not, along with what the ISP seeks to do.
Getting it right: How to make the “Solar Sharer” work for everyone
On paper, the government’s proposed "Solar Sharer Offer" (SSO) sounds like the kind of policy win that everyone should cheer for. The pitch is delightful: Australia has too much solar power in the middle of the day; the grid is literally overflowing with sunshine: let’s give households free energy during 11am and 2pm. But as the economist Milton Friedman famously warned, "There is no such thing as a free lunch." Here is a no-nonsense guide to making the SSO work.
Nuclear Fusion Deals – Based on reality or a dream?
Last week, Italian energy company ENI announced a $1 billion (USD) purchase of electricity from U.S.-based Commonwealth Fusion Systems (CFS), described as the world’s leading commercial fusion energy company and backed by Bill Gates’ Breakthrough Energy Ventures. CFS plans to start building its Arc facility in 2027–28, targeting electricity supply to the grid in the early 2030s. Earlier this year, Google also signed a commercial agreement with CFS. These are considered the world’s first commercial fusion-power deals. While they offer optimism for fusion as a clean, abundant energy source, they also recall decades of “breakthrough” announcements that have yet to deliver practical, grid-ready power. The key question remains: how close is fusion to being not only proven, but scalable and commercially viable, and which projects worldwide are shaping its future?
Send an email with your question or comment, and include your name and a short message and we'll get back to you shortly.