Ongoing Renewables Investment "Crisis" in Australia

Guest essay by Eric Worrall

Aussie Greens are lamenting that banks are still unwilling to lend to green projects, because they are worried about the reliability of political support, and the continuity of the generous government subsidies which make green projects possible.

Confidence in renewable energy sector ‘evaporated’ after Abbott cut: Bloomberg

Investment in large-scale renewable energy in Australia remains stagnant almost two years after the Abbott government began a review of the sector, according to an annual survey by Bloomberg New Energy Finance.

Investors spent just $15 million since February 2014 on big wind, solar or other clean energy projects that were not otherwise supported by government programs such as the Australian Renewable Energy Agency.

The Abbott government’s repeal of the carbon tax in July 2014 – which removed long-term price support – and a mishandled review that led ultimately to a cut of about one-fifth in the 2020 Renewable Energy Target (RET) meant “confidence evaporated” in the sector, said Kobad Bhavnagri, head of Bloomberg New Energy Finance in Australia.

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“It can’t be understated that the actions of the Abbott government have destroyed confidence in the renewable energy market,” Mr Bhavnagri said. “Lenders in the market are almost all of the view that the political risks in the RET … have made it too risky to invest in.”

The picture is not all gloomy, however, with the capacity of new rooftop solar photovoltaic systems rising in 2015.

Even though Tony Abbott has been toppled by the much greener Prime Minister Malcolm Turnbull, Abbott is still in parliament. Abbott still enjoys a lot of support. If Turnbull stumbles, Abbott could be back.

In my view, this tells us all we need to know, about the possibility that green energy will achieve grid parity with fossil fuels. The merest hint of a threat that green subsidies could be cut again, at an unspecified time in the future, seems to be enough to demolish confidence in green energy investment.