What’s next after the RET?

The recent extended drought and catastrophic bushfires have highlighted the growing effects of climate change and the need for a net-zero carbon future for Australia. A renewable energy transition is key since other industries will rely on electrification to decarbonise their processes. The Renewable Energy Target (RET) scheme gave renewable projects a boost when renewable technology prices were non-competitive. However, this economic reality shifted when renewable technologies such as wind and solar reached parity with thermal generation. With renewable technology prices falling, the industry experienced an investment boom with 14 gigawatts (GW) of new renewable projects being accredited under the RET from 2001 to 2019. From August 2019, renewable energy represented 23.5% of Australia's total electricity generation (by capacity, GW), achieving the RET.

Investment in new build generation of all technologies has slowed since the RET was achieved, despite the pipeline of scheduled closures for coal-fired power stations and Australia’s emission reduction commitments under the Paris Agreement. These facts highlight the need to overcome current investment barriers. In this paper, we have explored key market issues and have given the voice to industry perspectives in order to unlock Australia’s renewable energy investment potential.

PwC interviewed over 50 industry participants across the value chain including investors, developers, electricity retailers and large electricity consumers. Participants shared their views anonymously on a range of industry and market topics. Regulatory bodies were not interviewed for this paper in order to produce an industry only view. We have identified the following key challenges:

• Transmission and distribution underinvestment – resulting in extended connection delays, reductions in marginal loss factors (MLF), curtailment and system strength issues
• Dealing with carbon – there is an absence of a prescriptive carbon policy and pricing and a need to link renewable energy generation to carbon abatement certificates.

Tackling these challenges is extremely important to stimulate investment in order to achieve emission reduction goals and support the economic recovery from the COVID-19 crisis