Renewables Investment

Senator VAN: It has been claimed by commentators that investment in renewables has collapsed. I notice in your reporting this year that you say that such claims, you believe, are misleading. Where do you see investment in 2020 relative to last year?

Mr Parker: We are seeing investment in 2020—that is, actual investment on the ground—is pretty much the same as last year. This story of the collapse has been around for a couple of years. A number of commentators have pointed to it and looked for it. Some claim to have found it. But in our view, it is not true. We monitor the pipeline for renewables investment very closely. It is certainly true there was a boom a couple of years back, in 2018, as the industry built towards the renewable energy target. The renewable energy target has more than enough capacity now built to meet that. Some commentators said, 'Oh, well, that means things will collapse.' Our view has long been to the contrary, and the evidence strongly supports the view that industry is getting on and investing, basically because renewables are effectively commercial at this point. It's a very lumpy thing, so you can either measure investment at the end when the thing is built or as it is being built or as it is intended to be built. Some of the commentators who have talked about a collapse have been looking at the investment intention stuff. But in our view, they have not measured it in history very well. We monitor that pipeline very closely. We said earlier in the year, where it looked like things were a bit soft, that we expected between two and three gigawatts of investment to get past the investment intentions point this year. Obviously that was in the teeth of COVID, with exchange rates moving all over the place and so forth. So there was a bit of a slowdown in investment intentions at that point; that was earlier in the year. We said at that time that we expected between two and three gigawatts of capacity to get past the investment intention, final investment point this year. There was a fair bit of scepticism by some of those commentators. I can tell you we are now at 2.6 gigawatts past the financial investment decision at this point already this year. So there's nothing like a collapse going on. The industry has settled back a little in terms of large scale after those boom years, but with very substantial levels of investment. The rooftop sector is going from strength-to-strength, meaning that Australia is actually investing, in terms of what is ahead, roughly about 10 times the average of industrial countries and four or five times the next highest level of investment. That degree of investment is incredible taken in that global context. It is so fast that it is raising some challenges for the grid operator AEMO. They are working through those. This is a leading-edge challenge, if you like. Other countries are looking at what is happening in Australia, to see how we handle that very high level of investment.

Senator VAN: How does Australia's level of investment compare to other countries? You mentioned it was racing ahead, but can you give us a comparison?

Mr Parker: I will ask Mark Williamson to give you the details.

Mr Williamson: The Australian National University published their last article on this on 3 September 2020 and, as Mr Parker said, in terms of per capita installation—watts capacity per capita—they've said 10 times faster than the global average and four times faster per capita than in Europe, China, Japan or the USA. That's on 2019 data. They've got our estimates in that paper for 2020, which are the same as 2019. We'll need to wait and see. IRENA is the data ANU uses to compare with. I guess they'll be able to do the next comparison after the end of this year. Other countries would have to race well ahead per capita to get anywhere near the rate that Australia is at. At this stage, we think next year, 2021, looks to be at a similar level as this year and last year. For this year and last year, a total of 6.3 gigawatts was added. To put that into context, back in 2016, the total was just over 1.2 gigawatts and next year is looking to be a similar order of magnitude as for this year and last.

Mr Parker: Which is over six gigawatts.

Senator VAN: Even with COVID and restrictions—more in some states than others—has there been any slowdown in household solar installations? Mr Williamson: After the first quarter of this calendar year, which was largely before COVID had hit—and COVID really got pronounced in the middle of March—installations had already been locked in. It was early days for COVID. Things were up about 30 per cent year on year from 2019. During the second quarter and COVID— and this has been maintained—it's really jumped to over 40 per cent year on year. COVID appears to have accelerated the uptake. Last year there was a total Australia-wide of 2.2 gigawatts, or 2,200 megawatts, of rooftop solar. This year we believe rooftop solar in the small-scale scheme will hit 2.9 gigawatts, and that includes with the Victorian lockdown. Installations will be able to be done in the metropolitan area of Melbourne starting soon, with the easing of some of the restrictions, but there is, in fact, a big backlog of jobs in metropolitan Melbourne. We understand that could be about three months. I think, if it hadn't been for the lockdown in Melbourne, rooftop and small-scale scheme would have hit the three gigawatt mark. If you count rooftop solar in the bottom end of the large-scale scheme, it will go past three gigawatts this year. Essentially, the insight I can give there is that payback periods are quite short in most capital cities. A crude average is about four years. But, if you're working from home, you've got a lot more load at the time of generation during the day, so that probably pulls the payback period into about three years. That may explain why there's probably been an uplift as a result of COVID. Home improvements generally are up.

Senator VAN: Thank you.

Senator VAN: It has been claimed by commentators that investment in renewables has collapsed. I notice in your reporting this year that you say that such claims, you believe, are misleading. Where do you see investment in 2020 relative to last year?

Mr Parker: We are seeing investment in 2020—that is, actual investment on the ground—is pretty much the same as last year. This story of the collapse has been around for a couple of years. A number of commentators have pointed to it and looked for it. Some claim to have found it. But in our view, it is not true. We monitor the pipeline for renewables investment very closely. It is certainly true there was a boom a couple of years back, in 2018, as the industry built towards the renewable energy target. The renewable energy target has more than enough capacity now built to meet that. Some commentators said, 'Oh, well, that means things will collapse.' Our view has long been to the contrary, and the evidence strongly supports the view that industry is getting on and investing, basically because renewables are effectively commercial at this point. It's a very lumpy thing, so you can either measure investment at the end when the thing is built or as it is being built or as it is intended to be built. Some of the commentators who have talked about a collapse have been looking at the investment intention stuff. But in our view, they have not measured it in history very well. We monitor that pipeline very closely. We said earlier in the year, where it looked like things were a bit soft, that we expected between two and three gigawatts of investment to get past the investment intentions point this year. Obviously that was in the teeth of COVID, with exchange rates moving all over the place and so forth. So there was a bit of a slowdown in investment intentions at that point; that was earlier in the year. We said at that time that we expected between two and three gigawatts of capacity to get past the investment intention, final investment point this year. There was a fair bit of scepticism by some of those commentators. I can tell you we are now at 2.6 gigawatts past the financial investment decision at this point already this year. So there's nothing like a collapse going on. The industry has settled back a little in terms of large scale after those boom years, but with very substantial levels of investment. The rooftop sector is going from strength-to-strength, meaning that Australia is actually investing, in terms of what is ahead, roughly about 10 times the average of industrial countries and four or five times the next highest level of investment. That degree of investment is incredible taken in that global context. It is so fast that it is raising some challenges for the grid operator AEMO. They are working through those. This is a leading-edge challenge, if you like. Other countries are looking at what is happening in Australia, to see how we handle that very high level of investment.

Senator VAN: How does Australia's level of investment compare to other countries? You mentioned it was racing ahead, but can you give us a comparison?

Mr Parker: I will ask Mark Williamson to give you the details.

Mr Williamson: The Australian National University published their last article on this on 3 September 2020 and, as Mr Parker said, in terms of per capita installation—watts capacity per capita—they've said 10 times faster than the global average and four times faster per capita than in Europe, China, Japan or the USA. That's on 2019 data. They've got our estimates in that paper for 2020, which are the same as 2019. We'll need to wait and see. IRENA is the data ANU uses to compare with. I guess they'll be able to do the next comparison after the end of this year. Other countries would have to race well ahead per capita to get anywhere near the rate that Australia is at. At this stage, we think next year, 2021, looks to be at a similar level as this year and last year. For this year and last year, a total of 6.3 gigawatts was added. To put that into context, back in 2016, the total was just over 1.2 gigawatts and next year is looking to be a similar order of magnitude as for this year and last.

Mr Parker: Which is over six gigawatts.

Senator VAN: Even with COVID and restrictions—more in some states than others—has there been any slowdown in household solar installations? Mr Williamson: After the first quarter of this calendar year, which was largely before COVID had hit—and COVID really got pronounced in the middle of March—installations had already been locked in. It was early days for COVID. Things were up about 30 per cent year on year from 2019. During the second quarter and COVID— and this has been maintained—it's really jumped to over 40 per cent year on year. COVID appears to have accelerated the uptake. Last year there was a total Australia-wide of 2.2 gigawatts, or 2,200 megawatts, of rooftop solar. This year we believe rooftop solar in the small-scale scheme will hit 2.9 gigawatts, and that includes with the Victorian lockdown. Installations will be able to be done in the metropolitan area of Melbourne starting soon, with the easing of some of the restrictions, but there is, in fact, a big backlog of jobs in metropolitan Melbourne. We understand that could be about three months. I think, if it hadn't been for the lockdown in Melbourne, rooftop and small-scale scheme would have hit the three gigawatt mark. If you count rooftop solar in the bottom end of the large-scale scheme, it will go past three gigawatts this year. Essentially, the insight I can give there is that payback periods are quite short in most capital cities. A crude average is about four years. But, if you're working from home, you've got a lot more load at the time of generation during the day, so that probably pulls the payback period into about three years. That may explain why there's probably been an uplift as a result of COVID. Home improvements generally are up.

Senator VAN: Thank you.