Grid congestion drags renewable investments in eastern Australia

New investments in Australia plummeted to $2.9b in 2019.

Grid limitations such as system strength issues in Australian states Victoria, New South Wales, and Queensland, as well as low spot prices for large-scale generation certificates have caught up with the rapid growth of renewables in Eastern Australia, according to Wood Mackenzie.

Australia’s renewables project pipeline in the National Electricity Market (NEM) stood at 67GW capacity, with 6GW under construction. However, new investments plunged by more than half to $2.9b in 2019, from $6.9b in 2018.

“Australia needs a well-defined road map to address investments in grid infrastructure if renewables growth is to continue,” Wood Mackenzie principal analyst Robert Liew said.

Liew suggests building up reliability and power system security of the grid, as over 30GW of new renewables capacity will be required by 2040 but only 13GW can be accommodated by existing transmission infrastructure.

The average marginal loss factors (MLF) for wind and solar projects are declining, which could indicate a growing risk of lower revenues. With more projects planned to come online, MLFs could decrease even further, which adds uncertainty to investment planning.

Wood Mackenzie expects renewable deployment to be more likely driven by grid availability, rather than resource potential. Developers have been warned that even renewable projects under construction might not be able to connect to the grid on time.Western Victoria, in particular, has seen delays of over nine months.