Australia’s Transition to a Low Carbon Power Sector Gains Pace

According to a new report from Fitch Solutions Country Risk & Industry Research, Australia's policy momentum for a low-carbon power sector is accelerating, supporting the expansion of renewables and giving developers and investors increasing clarity and certainty for policy support in the renewables sector.

Power companies are also expediting the phasing out of conventional thermal power plants under their portfolio, presenting opportunities for renewables expansion. And coupled with a falling baseload and dispatchable conventional thermal power generation, the report says Australia's exploration of hydrogen production and energy storage will help it to overcome the irregularity of renewables.

In September this year, Australia’s two legislations on climate change were enacted, the Climate Change Act 2022 and the Climate Change (Consequential Amendments) Acts 2022.

This legislates the market’s 43% emission reduction target by 2030 (in comparison to 2005 levels) and net-zero carbon emissions by 2050, by adding them to various acts, including those concerning the Australian Renewable Energy Agency (ARENA), building energy efficiency, carbon credits, and renewable energy technologies.

In addition to these targets, the government has also been increasing financing for the renewables sector through ARENA and the Clean Energy Finance Corporation (CEFC) through the 'Powering Australia' and 'Rewiring The Nation' plans.

Both of these have witnessed the commitment of funds to projects that support the growth of renewable energy. Notably, last month the government announced an investment of A$500 million in the Powering Australia Technology Fund to support the commercialisation of renewables and clean energy technologies through the CEFC.

The report's authors believe that including emission targets in legislation and increased commitment to drive capital toward renewables development will provide certainty and clear direction to industry players on what the government will have to achieve.

This will present an uplift for the renewables sector while placing downward pressure on conventional thermal power growth.

Total non-hydropower renewables generation will expand from 61.0TWh in 2022 to 97.6TWh in 2031, at an annual average growth of 5.6%. Non-hydropower renewables will make up about 34% of 2031’s power mix.

These forecasts are a revision from last quarter to indicate the increasing developments in the sector as Australia will grow to be a strong regional performer in terms of renewables.

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