Research by the Reserve Bank of Australia (RBA) showing renewable energy investment fell sharply last year is fuelling calls for federal and state governments to back changes to help the industry rebound and drive a post-pandemi9c recovery.
Renewable energy surged to make up nearly five per cent of non-mining business investment across Australia in 2018, according to the research note by RBA economists, but the number of large-scale clean energy projects reaching the point of commencement slumped about 50 per cent last year.
Guardian Australia reports investment is expected to fall further over the next year or two, in part due to the national renewable energy target being filled and not replaced.
In addition, there is the challenge in integrating solar and wind farms in remote parts of the national grid.
The conservative Liberal-National government has defended criticism of its response to the climate crisis in part by saying record levels of wind and solar power were added to the grid last year as investment in 2018 flowed through.
Guardian Australia reports it is yet to acknowledge the subsequent fall.
The note says the renewable energy industry had supported activity and employment, particularly in regional areas.
While most components used in solar and wind farms are imported, the RBA found 25-40 per cent of spending went to local suppliers in some cases, and manufacturing companies had reported stronger demand for locally produced electricity generation equipment.
Professor John Hewson, a former Liberal Party leader now at the Australian National University’s Crawford school of public policy and a director of an energy storage business, said the RBA had “gone out of its way to make a point” about the importance of renewable power to the economy.
“There’s no doubt this is more than a nudge and wink. It is saying this is where we should be going,” he said.
“With Covid-19, it’s even more important. 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 [solar and wind] assets.”
Guardian Australia reports the RBA note was published online on March 19, before the impact of the Covid-19 imposed economic shutdown.
Since the pandemic there has been a growing push internationally and in Australia for policymakers to use stimulus programs designed to help the economic recovery to also address the climate crisis.
Professor Hewson said the renewable energy industry did not require subsidies, but needed improved regulations and a clear policy framework that made it 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 per cent renewable energy well before 2050 with the right support.
Erwin Jackson, policy director with the Investor Group on Climate Change, said the RBA note showed renewable investment had been an important contributor to economic growth but had fallen, in part due to policy paralysis.
“The critical implication of the analysis is that the industry faces the risk of a boom-bust cycle,” he said.
“Governments can help stimulate new investment, and in turn new jobs and growth, by prioritising a net zero emissions transition and clean energy plans in a sustainable recovery from Covid-19.”
The RBA research echoes assessments by industry group the Clean Energy Council and consultants Bloomberg New Energy Finance, which both found investment in renewable energy projects was cut in half last year.
The report found the longer-term outlook for clean energy investment was more positive, but would depend on government policy, electricity grid considerations and wholesale electricity prices holding up.
Prices have fallen in recent months and are expected to stay low if the economic impact of the shutdown is extended.
Professor Frank Jotzo, director of ANU’s Centre for Climate and Energy Policy, said the renewable energy boom had helped bring down electricity prices in the wholesale market and cut emissions.
Electricity sector emissions were seven per cent lower in the first quarter than at the same in 2019.
“If the Covid-19 economic trouble turns into a prolonged recession, this could also pull the rug from under planned wind and solar power investments,” he said.
Professor Jotzo said federal and state governments should step into the breach and contract for the construction of wind and solar parks in identified renewable energy zones.
“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, especially in the regions.”
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