Lack of cohesive policy holding back renewable energy in Australia

Policy uncertainty is holding Australia back from realising its enormous renewable energy potential, according to Datamonitor.

In a new report the independent market analyst claims that despite having abundant renewable energy resources the country will not make significant progress until legislative clarity is achieved.

Frederik Dahlmann, Datamonitor analyst and author of the report, said: “Australia’s renewable energy market has great potential due to its tremendous natural resource availability. However the country is also blessed with abundant and cheap fossil fuels, which have locked it into a high-carbon energy future. A lack of a cohesive national policy on renewable energy development is preventing it from breaking out.

“Developers and utilities will struggle to make the most of renewable energy resources and finance and develop new capacity until a more joined up approach is taken.”

Australia has some of the world’s best wind resources along its southern coastlines, which have the potential to play a significant role in the future energy mix of the country. Australia also has the highest average solar radiation per square metre of any continent in the world, as well as good potential in the biomass energy market. Meanwhile tidal and wave power, as well as geothermal energy, offer promise.

In the short-term the country will continue to rely on federal, state and territory-based incentives and regulatory frameworks to increase its renewable energy development. The Climate Committee is due to publish findings on how Australia can mitigate carbon emissions at the end of 2011, but until then renewable energy developers will have to continue to deal with legislative uncertainty and will need to lobby the government for action.

“Australia is not going to wean itself off fossil fuels any time soon,” continued Dahlmann “however it must start laying the foundations for renewable energy development sooner rather than later so an increase in investment can begin.”

Datamonitor estimates that around A$45bn of private investment will be required to develop the 20GW of renewable energy capacity that is currently under development. Two thirds of this investment is for wind energy, for which no federal funding provision has been made so far. In fact, government funding allocated to proposed renewable capacity is negligible when compared to the total amount of capital necessary. Datamonitor also calculates that, in order to meet the Large-scale Renewable Energy Target (LRET) requirements of an additional 41,000GWh/year of renewable energy output by 2020, around 14GW of new renewable energy capacity need to be installed.”

According to Dahlmann, the political landscape in Australia is a major factor. He said: “Julia Gillard’s minority government will be heavily reliant on the political support and goodwill of every single MP to pass legislation that allows progress to be made.

“In addition the new climate change committee is likely to recommend a different approach to pricing carbon emissions to those put forward by Gillard’s predecessor Kevin Rudd. Proposals for a carbon tax are favoured by the Green Party, who could threaten to destabilise Gillard’s government by withdrawing support in parliament if their demands are not met.

“As a result, energy firms and green businesses can expect to endure at least another year of the same policy uncertainty that has consistently undermined low-carbon investments for the last five years.”