Reserve Bank Says Renewables Could Fuel Post-Pandemic Recovery
Australia’s Reserve Bank has published research detailing a steep fall in the number of investments into the renewable energy sector, suggesting that investment into renewables could fuel a post-pandemic recovery plan for industry nationwide.
According to research published by the Reserve Bank, renewable energy’s share of the national electricity market increased to nearly 20% in 2018, adding that “this share was higher in 2019 and is expected to continue increasing as projects that are currently under construction or have been recently completed begin generating output.”
Experts have said that the release provides substantive evidence of the Reserve Bank going “out of its way to make a point” in relation to the reiterating the importance of renewables playing a key role toward Australia’s economic recovery.
The RBA’s publication points out that “investment in large-scale renewable energy projects increased significantly between 2016 and 2019. It is estimated to have accounted for nearly 5 per cent of non-mining business investment at its peak in 2018.”
The research note goes on to explain, however, that the number of investments into large-scale renewable energy projects has dropped by around 50%, which could potentially represent an attractive vehicle for investment in a post-pandemic economic recovery.
It’s expected that the rate of investments into renewable energy will continue to stagnate in the absence of a new renewable energy target being released by the coalition, as well as the regulatory landscape slowing down the implementation of renewables into the national energy grid.
“Investments or financial guarantees for developments in the renewable energy zones are a safe bet, because we know that these investments will be needed, and they will be an excellent way to stimulate the economy.” Professor Frank Jotzo
The RBA’s note mentions that in spite of the fact that China is the world’s largest manufacturer of renewable energy componentry, anywhere between 20-40% of money spent on constructing renewable energy production facilities went directly to local suppliers.
John Hewson of the Australian National University's Crawford school of public policy and director of an energy storage company told The Guardian that the Reserve Bank had “gone out of its way to make a point,” relating to investment into renewable energy correlating to a robust recovery.
“There’s no doubt this is more than a nudge and a wink. It is saying this is where we going be going… With Covid, it’s even more important,” he said, adding that “it is an opportunity to take a long-term strategic view in the national interest and looking ahead to where the country should be going given its assets.”
According to that same report, “Hewson said the renewable energy industry did not require subsidies, but needed improved regulations and a clear policy framework that made clear fossil fuels would be phased out and the country would move to low greenhouse gas emissions over the next three decades. With renewable energy cheaper than its fossil fuel competitors, he said the grid could run on 100% renewable energy well before 2050 with the right support.”
Yale’s Environment 360 cites a report from the International Energy Agency stating that “while lockdowns, social distancing requirements, and financial uncertainties have put some new projects on ice, the underlying strengths of renewables remain strong, and analysts expect their economic advantage over volatile fossil fuels will only increase in the long term.”
The authors did concede that “COVID-19 could bump climate change down the list of leaders’ priorities,” but added that “they would benefit from upgrades that make power grids smarter and more flexible, and therefore better able to utilize renewables. Spending to expand electric vehicle charger networks is essential, too.”
“We don’t market and regulatory reform to get in the way of the benefits of cheaper and more efficient technologies,” Audrey Zibelman
Erwin Jackosn works as a policy director with the Investor Group on Climate Change, and said that the Reserve Bank’s publication shows that renewable energy investments were a vital part of economic growth in Australia, but partially fell apart due to policy stagnation.
Just a few weeks ago, we reported that Audrey Zibelman, Chief Executive at the Australian Energy Market Operator said Australia has the potential to operate at three-quarters renewable capacity, but warned of regulations stagnating progress.
“Australia already has the technical capability to safely operate a power system where three-quarters of our energy comes from wind and solar electricity generation,” she said, continuing to explain that “to do so requires changes in our markets and regulatory environments. Otherwise, AEMO will be required to limit the contribution of these wind and solar resources to 50 or 60 per cent of the electricity supply at any point in time, even though they are the lowest cost way of providing electricity.”
“We don’t want market and regulatory reform to get in the way of the benefits of cheaper and more efficient technologies,” Zibelman concluded.
Alan Rai, a former economist with the Reserve Bank and now director with Baringa Partners said the RBA was concerned about an absence of non-mining investment into Australia’s economy, which renewables have since filled.
“The fact that renewables have become such a big pipeline of non-mining investment and then fallen drew their attention… it’s important to the country on a macroeconomic level,” he said.
Professor Frank Jotzo, director of the ANU’s Centre for Climate and Energy Policy told The Guardian that renewables have brought down the electricity sector’s emissions by 7% compared to 2019 figures.
“If the COVID economic trouble turns into a prolonged recession, this could also pull the rug from under planned wind and solar power investments,” he said, adding that “that means a risk that there may not be sufficient renewable power available to easily cover for the next coal plant shutting down.”
“It also means that we would see an end to big annual emissions reductions from the power sector, making it harder to achieve the 2030 emissions target,” in relation to the figure set out by nations in the Paris Climate Agreement.
“Public investments or financial guarantees for developments in the renewable energy zones are a safe bet, because we know that these investments will be needed, and they will be an excellent way to stimulate the economy.”