Renewable Hotspots Planned to Wean Australia State Off Coal

(Bloomberg) -- Australia’s most populous state plans to fast-track its transition away from fossil fuels by encouraging investment in renewable-energy clusters.

New South Wales on Friday put out a call for $12.7 billion ($8.8 billion) in investment to build solar and wind generation. It’s the second of three planned renewable energy zones to get the green light as the state seeks to move away from polluting coal, which still provides four-fifths of its power, after the worst drought in a century and the most damaging bushfire season in its history highlighted the importance of tackling climate change.

“Environmentally speaking, the past 12 months have been the toughest in living memory for the people of New South Wales,” state Energy Minister Matt Kean said earlier this week in a conference hosted by the Clean Energy Council, a renewables lobby group. “The case is well and truly made for investment in climate-friendly infrastructure to boost growth and create new jobs and the economic trauma flowing from the pandemic has made the task more urgent and more important than ever before.”

The state seeks to build as much as 8 gigawatts of solar and wind generation, almost equivalent to its coal-fired capacity, in the New England region. The zones aim to address the problem of how to accommodate a surge in solar and wind generation in a power grid based around coal by coordinating the development of renewable facilities in the same location, making it more cost effective to build the transmission infrastructure to connect them to the network.

Australian clean energy investment tailed off in 2019, after surging in the prior two years, in part due to grid congestion which has forced the market operator to curtail the output of some solar and wind farms to safeguard the stability of the network. Those issues persist, with Tilt Renewables Ltd. saying on Friday that the newly commissioned Dundonnell wind farm in Victoria state had been limited to operating at about one-third of its capacity due to concerns raised by the operator.

Read: Australia Power Grid Seen Challenged by Renewables Surge

While the states are increasingly seeking to court clean energy investors, policy uncertainty at a national level has hampered growth in the sector. Most states are targeting net zero emissions by 2050, but Canberra has resisted adopting the goal. A long-term target for renewable generation was achieved last year, with no new incentive to replace it. Instead, the government is working on a plan that promotes technological innovation to lower carbon emissions.

New South Wales’s Central-West Orana REZ, announced in June, drew interest for developing ninefold the available 3 gigawatts of capacity, with total investment proposals valued at A$38 billion. A third REZ is planned for the state’s southwest.

“Announcing a REZ is only a first step,” Stephen Panizza, head of renewable energy at Federation Asset Management, said by email. “Renewable investors like us need to see commitment to transmission capacity to connect the REZs to the National Electricity Market at scale, and we need to understand the terms of gaining access to that capacity.”

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