Grid congestion is threatening to choke a 67GW pipeline of renewable energy projects in Australia, warned analysts at Wood Mackenzie.
Growth of wind and solar serving Australia's National Electricity Market (NEM) is under threat unless a plan is put in place to spur investment in grid infrastructure, said the research group in a note.
“With about 5GW of wind and solar installations added last year, Australia is a major market for renewables investments in the Asia Pacific region. However, looking beyond 2021, new investment is drying up,” said Robert Liew, WoodMac principal analyst.
New renewables investments in Eastern Australia plunged more than half to US$2.9bn last year from US$6.9bn in 2018 as grid limitations, such as system strength issues in Victoria, New South Wales, and Queensland, and low spot prices for large-scale generation certificates have caught up with the rapid growth of renewables, said the analysts.
The NEM wholesale market interconnects Australia’s six eastern and southern states and territories and delivers around 80% of all electricity consumed in Australia. Its 67GW project pipeline comprises 6GW under construction and 61GW in announced projects.
WoodMac said over 30GW of new renewables capacity will be required by 2040 but existing transmission infrastructure can only accommodate 13GW. Hence, reliability and power system security of the grid will need to be built up.
Under the current grid system, developers have been warned that even renewable energy projects that are under construction might not be able to connect to the grid on time, especially in western Victoria, with delays of upwards of nine months. As such, WoodMac expects renewables deployments are likely to be driven more by grid availability than resource potential.
“Despite these barriers, the levelised cost of electricity for renewables is expected to remain competitive. Even hybrid battery storage systems that are charged by renewables could match gas-fired power within the next five years,” said the research group.