Deployment of Renewable Energy and Utility-Scale Batteries in Australia: Lessons Learned and Policy Implications for Other Countries

Abstract

The huge potential of renewable energy to reduce greenhouse gas emissions has already been demonstrated in Australia, which is positioned well at the forefront of the renewable energy transition despite often changing energy policy. This chapter reviews the most recent trends and outcomes of renewable energy utilization in Australia’s National Electricity Market (NEM). The purpose of this review is (1) to update the most recent renewable energy and battery developments in the NEM, (2) to describe the energy dynamics in South Australia, the most advanced Australian state in terms of penetration of wind and solar PV generation, (3) to summarize current and future cost projections of renewable generation technologies in Australia, and (4) to summarize the main policy support schemes used in Australia to facilitate renewable energy investments. This chapter could help inform energy and climate policy decision making in Australia and other countries, including in Southeast Asia.

1 Introduction

Approximately 78% of human-caused global greenhouse gas (GHG) emissions between 1970 and 2021 were due to fossil fuel combustion (Bergero et al. 2021). In Australia, GHG emissions in 2021 are estimated at 488 Mt CO₂−e, down 23% (145.7 Mt CO₂−e) from 1990, but up 0.8% (4.1 Mt CO₂−e) from 2020 (DCCEEW 2022). Electricity generation produced 32.9% of the total. Emissions per capita were 18.95 t CO₂−e, 48.9% lower than 1990 levels. While only a few countries in the world have higher per capita emissions than Australia, the country has such distinctive characteristics as vast, sparsely populated territory, with several big urban settlements far from each other and predominantly close to the coastline. Australia also has a big, energy-hungry, export-oriented resource-extraction industry.

Renewable energy is one of the best and cheapest candidates to replace fossil fuel-based energy sources and thus reduce anthropogenic GHG emissions. It can be derived from various sources such as solar, wind, hydro, geothermal, or tidal. In Australia the main sources of renewable energy are hydro, wind, and solar. Hydropower has been used for a long time and, except for hydro-based pumping storage, there are not many acceptable locations for new reservoirs or hydropower stations. Utility-scale wind and solar PV generation capacities have grown significantly over the last decade, however.

Many authors (Jones 2010; Lang and Miller 2011; Nelson et al. 2021; Simpson and Clifton 2014; Simshauser and Gilmore 2022) have studied the role and characteristics of renewable energy policies in Australia. The aim of these policies is to promote renewable energy investment, increase the share of renewable generation in the electricity generation mix, and ultimately reduce GHG emissions from fossil fuel-based generation. The main questions for these policies are what framework to implement and how much government support is required to develop a renewable energy industry (Simpson and Clifton 2014). An example Australian policy framework is the renewable energy target legislation, which the federal government enacted in 2000 as the Renewable Energy (Electricity) Act 2000 (Australian Government 2022). The mechanism of this policy obliges electricity retailers to source some of the electricity delivered to their customers from “clean” generation technologies by purchasing renewable energy certificates, which are created when renewable energy is generated by a specified type of generator, such as wind or solar farms. The level of support in this policy is defined by the specific proportion of renewable energy that retailers must achieve.

Bergero et al. (2021), Pablo-Romero et al. (2021), and Praveen et al. (2020) provide an international perspective of renewable energy target policies for different groups of countries. Bergero et al. (2021) use qualitative comparative analysis to investigate the policy diffusion in 187 countries between 1974 and 2017. Their analysis demonstrates that there are multiple paths for renewable energy target adoption.

Byrnes et al. (2013) provide a good overview of Australian renewable energy policy. The authors briefly describe the Australian governmental and energy systems, and offer a comprehensive diagram of the energy regulatory environment that includes all important categories of market players and stakeholders. The paper identifies the following barriers to deployment of renewable energy in Australia: administrative hurdles, costly procedures for grid connection, policy instability, lack of social acceptance, cost competitiveness, and government support for existing electricity generators. Martin and Rice (2015) discuss administrative hurdles in detail, providing information about planning and approval of renewable energy projects in Australia. The paper presents a block diagram for a renewable energy project planning and permitting framework associated with the roles that federal, state, and local governments play in these processes. The authors also list policies, legislation, and regulations that a company trying to develop a renewable energy project has to comply with.

Feed-in tariffs (FiTs) is a very popular policy tool used in Australia and other countries to stimulate uptake of residential renewable energy, especially solar PV. Poruschi et al. (2018) provide a good relatively recent review of FiTs in all states and territories in Australia, analyzing the number of small solar generation units installed by state/territory, average cost of residential solar PV systems, and historical information about the rate of FiTs in each jurisdiction, and investigates the link between FiTs and disconnections from the grid. Other relevant papers discussing FiTs in Australia are Chapman et al. (2016), Li et al. (2021), and Martin and Rice (2013).

Martin and Rice (2021) provide a comprehensive literature review on energy storage systems (ESS). The authors explain the importance of ESS services across the energy supply chain and for future renewable energy growth. Four main groups of literature related to ESS are identified and reviewed: benefits, technical applications, technology cost and economics, and policy support. This research suggests that ESS-related policies have received less attention than renewable energy policies. The authors discuss ESS supporting policies and regulatory options in the Australian context.

McGreevy et al. (2021) comprehensively describe the renewable energy transition in South Australia between 2004 and 2018. This state has demonstrated a highly successful, sustainable transition to a low-GHG emission energy system. The paper claims that when renewable energy achieves a critical uptake, it produces a path-dependent trajectory, which is difficult to change even by governments with different ideologies. As South Australia’s renewable energy transition has been prominent overseas as well as in Australia with its challenges and achievements, we dedicate a whole section to it in this paper.

Crowley and Jayawardena (2017) discuss energy disadvantages in Australia, linking energy pricing, energy policy, climate change impact, and disadvantage in the country. As of early 2022, the topic is even more important in the context of high energy prices related to Russia’s invasion of Ukraine, high inflation, and post-pandemic supply chain disruptions. The authors point out that energy poverty and disadvantage are not only third-world problems, but also impact poor, elederly, indigenous, remote, and other disadvantaged citizens of Australia. This paper claimed that renewable energy has a role to play in alleviating energy poverty, listing a number of policy recommendations to this end.

The purpose of this paper is to review the most recent trends and outcomes of Australia’s renewable energy policies, with a focus on the country’s National Electricity Market (NEM). Section 2 presents recent updates on renewable energy and battery developments. Section 3 describes in more detail the energy dynamics in South Australia, the most advanced Australian state in terms of penetration of wind and solar PV generation. Section 4 summarizes current and future cost projections of renewable generation technologies in Australia. Section 5 discusses the main policy support schemes used in Australia to facilitate renewable energy investment. Some policy recommendations are discussed in the last Section. When discussing issues herein, we apply the complex system science approach where possible (Batten and Grozev 2006). When applying this approach to electricity markets, we treat them as complex interactions between physical infrastructure, i.e., electricity grids with supply and demand, economics, i.e., price, cost, and market players, and environment, i.e., greenhouse gas emissions, resource use, etc., including policy and regulation.

As Australia is in an advanced stage of renewable energy uptake and related policies have faced many challenges and zigzags, this experience presents useful lessons for policy makers not only in Australia but in other countries as well, specifically in Southeast Asia.

2 Renewable Energy Uptake in the NEM

2.1 Energy and Generation Capacity

Since commencing operations on December 13, 1998, Australia’s National Electricity Market (NEM) has grown to encompass the five states of Queensland, New South Wales (NSW), Victoria, South Australia (SA), and Tasmania, together with the Australian Capital Territory (ACT) (AEMO 2022b; Hu et al. 2005; Nepal and Foster 2016). While the NEM operates on one of the largest electricity grids in terms of geographical area coverage and distance, however in terms of connectivity, it is sparsely connected by transmission lines, usually having only one or two transmission interconnections between any two adjacent market regions, which conform to the states. The NEM is a real-time, energy-only, gross pool market, operating on 5-min settlement periods since October 1, 2021, versus 30-min settlement periods prior to this date. Simshauser (2022) provides a detailed analysis of microeconomic reform of electricity utilities in Australia and an excellent overview of NEM performance, achievements, and challenges.

Black and brown coal generators have long dominated NEM generation capacity. In the NEM’s early years, coal-fired generation contributed more than 90% of total electricity generated. In recent years this contribution has dropped to approximately 60%. Current generation capacities in the NEM, more than 59 GW, and electricity produced in 2021, are presented in Table 1 and Fig. 1 (Open NEM 2022). The following dispatchable firm capacities are currently available, based on Australian Energy Market Operator (AEMO) considerations (AEMO 2022a): 23 GW from coal-fired generation, 11 GW from gas and liquid fuels, 7 GW from hydropower, excluding some pump hydro, and 1.5 GW from dispatchable energy storage, i.e., battery storage and pump hydro.

Table 1 Generation capacity (2022) and energy (2021) in the NEM

Fig. 1

Proportions of generation capacities (a) and generation (b) in the NEMFootnote

Battery and bioenergy-based generation are less than or equal to 0.1% of the total, and are thus displayed as 0% on the pie chart.

Shi et al. (2022) studies the role of gas-powered generation in the NEM and claims that it is negatively related to generation from VREs and positively related to electricity demand gap and electricity prices.

2.2 Distributed Solar PV and Decreasing Daily Electricity Demand

Australia has one of the highest uptakes of residential solar PV installations in the world, and more deployment is expected in the near future (Young et al. 2019). Approximately 30% of detached homes in the NEM regions have solar PV panels with 15 GW aggregate capacity (AEMO 2022a).

Two policies have substantially supported residential solar PV uptake, the Renewable Energy Target at the federal level, and FiTs at state level; see Sect. 5 for particulars. Uptake is expected to continue to grow in the coming years.

The increase of distributed and utility-scale solar PV changes the operational electricity demand profile significantly. With growing distributed solar PV generation during the day when the sun shines, operational electricity demand decreases significantly during the same period, with the biggest reductions occurring around midday, when solar irradiation is strongest. Operational demand must be balanced by supply from all other generators, including utility-scale solar PV. In 2012, the California Independent System Operator (CAISO) first used the term “duck curve” to label changes in electricity demand due to solar PV contributions (California ISO 2016). Figure 2 provides an example related to this phenomenon, presenting several daily electricity demand profiles in Victoria over the preceding seven years. Days selected are weekdays in January, when solar irradiation is usually high. From Fig. 2, the trend of declining operational demand close to midday is clear as the valley of the curve, or the “duck belly”, becomes bigger and lower. The operational demand curves show several other changes as well. The minimum electricity demand declines, rapidly, potentially occurring during midday instead of early in the morning, i.e., nearer to 4:00 am, as in prior times. The usual afternoon peak demand related to air conditioning use in summer is moving to early evening. This summer peak electricity demand used to be a key driver for network investment, so its reduction benefits network utilities. Close to sunset, when solar irradiation disappears and solar PV generation becomes null, electricity demand sharply shifts, increasing quickly toward the evening peak. All these changes require new approaches to electricity supply management.

Fig. 2

Operational electricity demand in Victoria on selected weekdays in January 2015–2022

2.3 Variable Renewable Energy

The proportion of renewable energy in the NEM has increased steadily in the past several years. Simshauser and Gilmore (2022) define the period from 2016 to 2021 as an investment super-cycle for the NEM, in which AUD26.5 billion was invested across 135 projects, mostly for wind and utility-scale solar PV with 16 GW aggregate generation capacity. Another 6 GW is expected to be operational in the next several years in either committed or anticipated projects (AEMO 2022a).

According to AEMO data (AEMO 2022e), instantaneous renewable generation reached 64.1% of total generation in the 30-min interval ending at 11:30 am on September 18, 2022. Total NEM generation includes generation from all big generators plus distributed, i.e., residential, solar PV. Renewable generation includes output from all renewable generators, battery generation, and distributed solar PV. Figure 3 presents the trends in minimum, average, and maximum instantaneous renewable generation in the NEM for the preceding four years (minus one quarter).

Fig. 3

Instantaneous renewable generation in the NEM (based on AEMO 2022e)

Variable renewable energy (VRE) is a term adopted by industry specialists to classify the fastest growing component of renewable energy. While it includes wind and solar PV generation, for example, it excludes hydropower. VRE produced in the NEM has also increased significantly over the preceding several years. Generation from utility-based wind and solar set multiple records over this period, with the latest records from the third quarter of 2022 listed in Table 2. During the 30-min interval on September 18, 2022, with the highest instantaneous renewable generation share of 64.1% of total generation, the distributed solar PV contribution was 32% of total generation and that of VRE was 29%. The average VRE generation in this quarter reached 4465 MW, which was 483 MW higher than the corresponding generation in Q3 2021 (AEMO 2022e).

Table 2 Records of renewable generation in the NEM (based on AEMO 2022e)

2.4 Batteries

Martin and Rice (2021) and Arraño-Vargas et al. (2022) provide a comprehensive review of the Energy Storage Systems (ESS) literature. They describe benefit realization, technical applications, technical performance, technology cost, and popular policy support for ESS applications. Battery technologies are versatile and need to be adapted to many different technical applications based on such characteristics as type, capacity, response time, and discharge duration. Common technical applications of ESS are for energy storage, peak shaving, emergency backup power, renewable energy integration, i.e., intermittency mitigation, power quality maintenance, grid stability, spinning reserves, transmission and distribution grid deferral, and end user applications and services.

A list of grid-scale energy battery systems in Victoria, Queensland and NSW in given in Table 3, and for SA in Table 5. This list is extracted from AEMO’s Registration and Exemption List Excel spreadsheet (AEMO 2022c). The total current NEM battery capacity is 841 MW. More information about battery ESS grid services and existing and proposed battery ESS is provided by Arraño-Vargas et al. (2022).

Table 3 Registered energy battery systems in Victoria, Queensland, and NSW—June 2022

The Victorian Big Battery is the largest lithium-ion battery in the Australia and one of the largest in the world. Commissioned in 2021, its maximum capacity is 300 MW/450 MWh, although its registered capacity is 360 MW (DELWP 2022). During the summer months of November to March, 250 MW of its capacity is reserved for the System Integrity Protection Scheme (SIPS), with the remaining 50 MW available for commercial NEM participation. At other times, the whole capacity of the battery can be operated on a commercial basis. During the summer months the battery stabilizes the grid in case of unscheduled power outages, allowing AEMO more time to resolve the impact of such outages and potentially avoiding widespread blackouts. The battery thus helps increase the import power flow limit of Victoria to NSW interconnectors by up to 250 MW.

Snowy 2.0 is the largest multi-billion dollar renewable energy project currently in construction in Australia with government support. It is a pump-based hydro extension of the existing Snowy scheme, which consists of nine power stations and 16 major dams, located between Melbourne and Sydney. Snowy 2.0 will use existing dams and its estimated capacity will be 2 GW/350 GWh, or 175 h of operation (Snowy Hydro 2022). It will have six generating units, the first of which is expected to provide power in 2025. Snowy 2.0 will provide firm, dispatchable generation capacity and bulk, long-term storage, which could utilize excess renewable energy and provide electricity on demand.

3 Renewable Energy Dynamics in South Australia

Australia’s NEM is experiencing one of the fastest-growing VRE transitions in the world, raising new challenges to system security and reliability.

South Australia has demonstrated a highly successful, sustainable transition to a low-GHG emission energy system (McGreevy et al. 2021). It leads Australia in this transformation with significant wind and solar PV generation capacity, installing the first utility-scale lithium-ion battery in 2017, and more recently, commissioning four synchronous condensers in November 2021. One of the latest policy decisions underpinning these developments was the Government of SA's enactment of a new energy policy in 2017 (Government of SA 2017).

South Australia is a state in the southern, central mainland Australia with territory of 983,482 km² and a population of 1.8 million according to the 2021 Census (Australian Bureau of Statistics 2021). 80% of the population live in the capital Adelaide and its surrounding metropolitan areas. There are four other large population settlements in this vast territory, with landscapes including deserts, mountain ranges, and agricultural land, as well as a coastline of more than 3700 km.

The South Australia electricity system was privatized in 1999 and the state-owned monopoly vertically disaggregated into separate businesses. The state has transformed its energy system, increasing its renewable energy share from 1% to more than 68% over the preceding 15 years (Government of SA 2022). The state has a goal of 100% net renewable energy by 2030. In 2021 the daily electricity generated by renewable sources exceeded the daily demand on 180 days, almost 50% of the time. Registered and maximum generation capacities, as well as generation in South Australia in 2022, are presented in Table 4 and Fig. 4. With its consistent energy policy, South Australia has attracted more than AUD6 billion investment in large-scale renewable and storage projects over this period and has a pipeline of projects surpassing three times this historical investment.

Table 4 Registered and maximum generation capacity in South Australia in 2022

Table 5 Registered energy battery systems in South Australia—June 2022

Fig. 4

Proportions of registered generation capacity (June 2022) (a) and generation (FY2021–22) (b) in South Australia

This recent energy development in South Australia has involved challenges, bold policy decisions, innovations, and some unexpected market phenomena, some of which are briefly described hereinafter.

3.1 2016 Black System Event

On September 28, 2016, South Australia experienced a so called “black system event”, a sequence of cascading events resulting in loss of electricity supply to all customers in the state (AEMO 2017). First, several tornados with wind speed up to 260 km/h damaged three transmission lines. After that nine wind farms reduced their output or disconnected from the grid due to grid instability, reducing generation by 456 MW in less than seven seconds. The Victoria-SA Heywood interconnector tripped due to a sudden increase in imported power and the SA power system separated from the rest of the NEM. All supply to SA (except Kangaroo Island) was lost at 4:18 pm with 850,000 customers losing power for several hours, some of them for several days. AEMO suspended the market in SA for twelve days.

The main question this event raises is how to adapt and make resilient the aging electricity infrastructure, grid and transmission towers and lines alike, against increasingly frequent climate change-influenced extreme weather events. A secondary question is how to better integrate renewable generation into the electricity grid. Wind farms, like other renewable generators, are asynchronous and use different control systems to ride out disturbances. In the black system event, several wind farms had the same default settings for riding out disturbances, causing simultaneous disconnections that exacerbated the problem. The Australian Energy Regulator (AER) subsequently sued four wind farm operators for not complying with generator performance standards for riding out grid disturbances (Australian Energy Regulator 2019).

3.2 100 MW Battery in 100 days

Approximately six months after the black system event in 2016, Elon Musk, boss of Tesla and Space X, announced that Tesla could install a big battery in South Australia to fix its power system problems (ABC 2021). Interestingly, he offered to build a 100 MW battery in less than 100 days or deliver it for free. Four months later, the SA government announced an agreement with Tesla to build a 100 MW battery near Jamestown.

The Hornsdale Power Reserve, the world’s first large lithium-ion battery, at 100 MW/129 MWh—was completed on schedule on December 1, 2017 (Hornsdale Power Reserve 2022). In 2020, its capacity was expanded by 50% and a functional was implemented allowing inertia support services to the grid.

During the two South Australian power system separation events, as described hereinafter, the three grid-scale batteries installed there provided a high degree of Frequency Control Ancillary Services (FCAS) support and generated approximately AUD50 million in spot FCAS revenue (AEMO 2020). It was also reported that the Hornsdale Power Reserve had delivered AUD88 million earning (EBITDA) in the first two and half years of operation, making it practically pay for itself (Renew Economy 2020).

A list of grid-scale energy battery systems in South Australia in given in Table 5, extracted from AEMO’s Registration and Exemption List Excel spreadsheet (AEMO 2022c). Each battery is registered twice, once as “generator” and once as “load”, and the respective registered capacities may vary. Total registered battery capacity as generators in SA stands at 221.36 MW.

3.3 Grid Separation Events

Two high-voltage transmission lines link South Australia with Victoria: the 275 kV AC Heywood interconnector with 650 MW bidirectional capacity and the Murraylink 220 MW High-Voltage Direct Current (HVDC) link. These transmission lines are the only links between SA and the NEM. A full outage of the Heywood interconnector would lead to system separation of SA from the NEM as Murraylink, being an HVDC interconnector, does not provide system strength or inertia support.

On January 31, 2020, a severe storm brought down the 500 kV transmission line in Western Victoria, leading to an 18-day separation of the South Australian and Victorian power systems (AEMO 2020). There was another separation event on March 2, 2020, lasting approximately 8 h.

Major separation events have an impact on the strength of the electrical parameters of the grid, requiring additional intervention by the market operator to stabilize the grid. Separation events lead to price volatility and additional system cost. For the NEM, the system cost is related to (1) FCAS, (2) Direction compensation, (3) the Reliability and Emergency Reserve Trader (RERT) function, and (4) Variable renewable energy curtailment (AEMO 2020). While system cost is recovered from retailers and generators, generators also receive some of it themselves.

The two separation events in South Australia, together with one separation event in NSW on April 1, 2020, caused by bushfires, contributed AUD229 million to the system cost, or 74% of total system cost for the January–March 2020 quarter (AEMO 2020). Total system cost for the quarter thus amounted to 8% of the energy cost, well above the typical 1–2% range.

3.4 Negative Wholesale Electricity Prices

The renewable transformation has caused many extended periods of negative spot prices and increased uncertainty and variability of electricity prices in South Australia and other NEM regions (Grozev et al. 2022; Havyatt et al. 2022). Negative price frequencies in South Australia and Victoria reached record high values in October 2021, as shown in Fig. 5. While the proportion of negative prices eased in 2022 due to the NEM introducing the aforementioned 5-min settlement period on October 1, 2021, and renewables firms accumulating more bidding experience, such events still occur frequently.

Fig. 5

Proportion of time with negative wholesale electricity prices in the NEM, 2021 and Q1–Q3 2022

Electricity price volatility assessment and management had been a major challenge for the NEM even before the energy crisis that began in 2022. It relates to the intermittent character of VRE, which makes it harder to balance the variable by nature demand with frequently changing supply. While renewable energy generation has zero-fuel cost and thus helps to reduce electricity spot prices, higher spot price volatility can result in higher wholesale contract prices and therefore higher prices for end consumers, offsetting some or all initial price reductions.

3.5 The Role of the Synchronous Condensers in System Cost

Successful testing and commissioning of the four synchronous condensers in SA was completed in November 2021, allowing the grid to operate with fewer synchronous generators (at least two gas generators in SA) and leading to lower system strength curtailment. System strength curtailment in the region fell from 62 MW in Q3 2021 to zero in Q4. System security direction cost in South Australia stood at AUD6 million for Q2 2022, the lowest level since Q2 2019 (AEMO 2022d).

Another important phenomenon associated with renewable generation is restricting renewable power quantities from time to time for grid security and stability. On several occasions, VRE curtailment in SA reached more than 1000 MW, a substantial proportion of renewable generation there. In case of curtailment energy is wasted, however, upgrading the grid to accommodate all possible renewable energy could be very expensive.

4 Costs of Renewable Generation Technologies and Storage in Australia

Renewable energy technologies provide the fastest growing energy sources in Australia and globally alike. They currently represent some of the least expensive abatement opportunities for reducing greenhouse gas emissions, and their role is likely only to increase significantly over the next several decades (Graham et al. 2022).

In Australia, the Commonwealth Scientific and Industrial Research Organisation (CSIRO) and AEMO have established a project to annually estimate and update electricity generation and storage cost data (Graham et al. 2022). Aurecon has supported this work by providing characteristics of current generation technologies and electricity storage (Aurecon 2021). The project applies a scenario modeling approach combined with technology learning rates to estimate future generation technology and storage costs. Learning rates based on historical data aim to determine cost reductions for each doubling of cumulative capacity deployed (Graham et al. 2022). The report was finalized in response to feedback from a wide range of Australian stakeholders and experts.

The future costs of generation technologies and storage are modeled based on the following scenarios:

• Business as Usual (BaU);

• Global Net Zero Emissions by 2050 (Global NZE by 2050); and

• Global Net Zero Emissions post 2050 (Global NZE post-2050).

The BaU scenario is characterized by a slow uptake of renewable energy and having the highest technology cost. The Global NZE by 2050 scenario is consistent with the International Energy Agency’s (IEA) report “Net Zero by 2050” (IEA 2021), which defines the most technically feasible and cost-effective roadmap to reach net zero emissions by 2050. The Global NZE post-2050 scenario sits between the other scenarios.

Australia and other countries are currently in an inflationary cycle. The uncertain nature of the inflation cycle, in terms of duration, scale, and coverage, makes it a challenging factor to account for in capital cost modeling of renewable energy generation and storage. The approach that CSIRO’s report (Graham et al. 2022) takes is to assume that the real cost of technologies in the first projection year (2022) would be flat, without high inflation, instead of decreasing under normal conditions. The report does not assign a more specific level of change after 2022 due to uncertain future inflationary impact.

Obviously, technology costs depend on local as well as global conditions. Technology cost reductions due to learning by doing could be larger for some regions with greater uptake of given generation technologies. One example is China, where such costs can be substantially lower (Graham et al. 2022). Including local as well as global learning models in CSIRO’s approach allows the cost of deployment of new technologies in a given region or country to quickly approach the cost of similar technologies in other regions with larger-scale investment experience. In that sense, the cost projections for Australia are a good starting point for Southeast Asian countries with similar conditions.

Table 6 summarizes current (2021) and projected (2030, 2040 and 2050) capital costs for the following renewable generation technologies per the abovementioned scenarios (Graham et al. 2022):

Table 6 Current and projected renewable generation technology capital costs in 2021–22 AUD/kW

• Large-scale solar PV;

• Rooftop solar PV;

• Onshore wind; and

• Offshore wind.

These estimates are shown graphically in Fig. 6, while Table 7 and Fig. 7 present current and projected total battery costs for 1-h, 2-h, 4-h, and 8-h storage per to the abovementioned scenarios. Total capital cost for batteries includes battery cost and balance of plant cost, i.e., the cost of support components.

Fig. 6

Current and distribution of projected renewable generation technology capital costs by scenario in 2021–22 AUD/kW

Table 7 Current and projected total capital cost for batteries by scenario in 2021–22 AUD/kWh

Fig. 7

Current and projected total capital cost for batteries by scenario in 2021–22 AUD/kWh; Total capital cost = Cost of battery plus Balance of plant cost

Levelized cost of electricity (LCOE) is an important comparison metric when evaluating investment in generation technologies. It is the total cost a generator must recover to meet all its costs, including return on investment (ROI) over its lifetime. It is usually measured in dollars per MWh (AUD/MWh) produced by large generator units. One contribution of CSIRO’s report is estimating the additional integration cost of variable renewables (Graham et al. 2022). The cost to support a combination of solar PV and wind generation in 2030 is estimated at AUD16–28/MWh, depending on the level of renewables. The LCOE for solar PV, wind, and offshore wind, as the report estimates for 2021, 2030, 2040, and 2050, is presented in Table 8, and graphically in Fig. 8. For these technologies, the LCOE of solar PV is lowest, while the LCOE of offshore wind is 2–3 times higher than that for onshore wind. Despite the higher cost of offshore wind, it could play a crucial role for countries with good wind resources, relatively shallow coastal depth, and competition for onshore land use. In August 2022 Australia’s federal government selected the first six offshore wind energy zones, with consultation underway for the first wind zone off the Gippsland coast in Victoria.

Table 8 Current and projected renewable generation technology LCOE (2021–22 AUD/MWh)

Fig. 8

Current and projected renewable generation technology LCOE (2021–22 AUD/MWh)

5 Public Policy

5.1 Renewable Energy Target

The Renewable Energy Target (RET) policy has been the most successful and enduring climate change policy for stimulating renewable technologies uptake in Australia (Nelson et al. 2021; Martin and Rice 2015; Byrnes et al. 2013). The federal government adopted it in 2000 as the Renewable Energy (Electricity) Act 2000, and it applies from January 2001 to December 2030 (Australian Government 2022).

Initially the Act was introduced at the national level as the Mandatory Renewable Energy Target (MRET), aiming to produce an increase of 2% or 9.5 TWh per annum of renewable electricity supply by 2010 from a 1996–97 baseline of 10.5% (Simpson and Clifton 2014). After substantially exceeding the initial target, in 2009 the Australian government expanded it to 20% of Australia’s electricity by 2020, or approximately 41 TWh (Clean Energy Regulator 2022a).

In 2011, important modifications in the scheme were implemented, splitting the 10.5% into Large-scale RET (LRET) and Small-scale RE scheme (SRES) (Australian Government 2022). Under the LRET scheme, large-scale generation certificates (LGCs) are created relating to electricity generation by accredited power stations. Renewable energy power station from 19 energy sources can be accredited to create tradable LGCs, one for every 1 MWh generated. These energy sources include hydro, wind, solar, wave, tidal, and others as specified in the Renewable Energy (Electricity) Act 2000 (Australian Government 2022).

Under the SRES scheme, small-scale technology certificates (STCs) are created relating to installation of small generation units, e.g., solar PV, and solar water heaters. Wholesale purchasers of electricity, mainly electricity retail companies and some major electricity users, are required to source a percentage of their electricity from renewable sources annually. “Liable entities” do this by buying LGCs and STCs based on defined percentages by regulator. These companies must surrender these certificates to the Clean Energy Regulator (CER) annually, in quantities based on a percentage of the volume of purchased electricity each year or pay a penalty.

According to the CER, in January 2021 the RET of 33 TWh of additional renewable energy was achieved on a 12-month rolling basis (Clean Energy Regulator 2022a). Achieving this target has not slowed renewable energy investment since 2020. Between January 2016 and July 2022, the CER accredited 15.6 GW renewable capacity, and an additional 5.4 GW capacity was committed.

5.2 Carbon Pricing

In 2011, the federal government introduced the Clean Energy Act 2011, which applied to Australia’s bigger emitters of GHG emissions (Clean Energy Regulator 2022b). While designed as an emission trading scheme, for the first several years it introduced a fixed carbon price for large emitters, i.e., liable entities. The Act was only active in FY2012–13 and FY2013–14, as the next government repealed it effective July 1, 2014.

The Act covered approximately 60% of Australia’s total GHG emissions and a range of businesses and industrial facilities from several sectors, including electricity generation, stationary energy, wastewater, industrial processes, and fugitive emissions.

For each fiscal year, liable entities had to surrender one carbon unit for every tonne of carbon dioxide equivalent (CO₂−e) emissions they produced. These carbon units could be purchased from the Clean Energy Regulator for a fixed price, which this price was AUD23/unit in FY2012–13 and AUD24.15 in FY2013–14. If a liable entity did not purchase and surrender enough carbon units, it was penalized for 130% of the price of the carbon unit multiplied by the number of units in deficit.

5.3 Feed-In Tariffs, Rebates

Feed-in tariffs (FiTs) is another popular stimulus that governments in many parts of the world use to promote residential solar photovoltaic (PV) system installations, reduce GHG emissions, and improve energy security (Li et al. 2021; Poruschi et al. 2018; Chapman et al. 2016; Martin and Rice 2013). With the highest solar radiation per square meter of any continent, Australia has some of the best solar energy resources in the world (Geoscience Australia 2022). Australia leads the world with total installed solar PV capacity of 1 kW per capita, ahead of the Netherlands and Germany which have less than 800 W per capita (Australian PV Institute 2022). According to the Australian PV Institute (2022), there are over 3.19 million PV installations in Australia with combined capacity of 27.2 GW as of June 2022, including large commercial and utility-scale installations. Small-scale solar led renewable energy growth in 2021, setting a record for new installed capacity for the fifth year in a row with 3.3 GW new capacity (Clean Energy Council 2022). New large-scale solar and wind capacity stood at 3 GW in 2021.

In Australia, state and territory governments implement FiTs, in contrast to the RET policy, which the federal government carries out. The first FiTs, introduced in 2008 varied across states and territories by design and payments. By definition, a FiT is a payment that electricity customers receive from retail companies or governments for the electricity they send into the grid using small-scale generation, comprising solar PV, wind, hydro, biomass, or battery equipment (Essential Services Commission 2022).

There are two main types of FiTs operated in Australia chiefly implementing net and gross FiTs (Chapman et al. 2016). With the latter, all electricity generated in a household is purchased by a retail company at a set tariff, while with the former, only electricity generated in excess of household consumption is purchased. Under the gross FiT scheme consumers pay for all electricity they consume. Net FiTs are prevalent in Australia. Only NT provides gross FiTs currently. NSW and ACT have discontinued them.

Table 9 summarizes the current FiTs in the states and territories of Australia. As mentioned, net FiTs dominate. In contrast with the initial payment rates, which were significantly above retail electricity prices for residential customers, these rates are currently only a fraction of these prices. More information about the history of FiTs in Australia can be found in Australian PV Institute (2021), Clean Energy Council (2018), Li et al. (2021), Poruschi et al. (2018), Chapman et al. (2016), and Martin and Rice (2013).

Table 9 Current state and territory government feed-in tariff schemes in Australia

Advantages

Residential solar PV plays an important role in many countries, generating renewable energy and offsetting fossil fuel-based generation, thereby reducing GHG emissions (Chapman et al. 2016). It is particularly beneficial to Australia, where electricity generation is marked by high levels of GHG emissions. In addition to some of the best solar energy resources, Australia has some of the highest per capita uptake of residential solar PV. Many Australian households have realized significant financial and energy GHG benefits by installing residential solar PV, supported by the federal and state renewables policies. In the NEM, a 1 kW residential solar PV system has average generation potential of 1460 kWh per annum (Chapman et al. 2016). Many of the initial FiT contracts with such high rates as AUD0.60/kWh or AUD0.44/kWh are still effective. The average size of rooftop solar system increased to 8.5 kW in 2021, a more than threefold increase over the previous decade (Clean Energy Council 2022). The installation price of solar PV systems has also decreased significantly over the past two decades. The price for solar systems between 1.5 and 3 kW in 2004 was as high as AUD15/W installed, decreasing to AUD3/W in 2012 (Chapman et al. 2016). In 2021, the cost of a typical 5–10 kW roof-mounted, grid-connected PV system was on the order of AUD1.5/W (Australian PV Institute 2021).

Annual direct full-time employment (FTE) in roof-top solar PV systems in FY2018–19 is estimated at more than 13,000 jobs, including jobs related to hot water systems and small-scale batteries (Australian Bureau of Statistics 2020), an increase of almost 90% versus the same category in FY2009–10. According to Australian PV Institute (2021), there were more than 25,000 FTE positions in the PV industry, with many newly created jobs in installation and maintenance, followed by sales, design, and engineering, and significantly fewer in manufacturing, research, and development (Chapman et al. 2016).

Disadvantages

Sudden changes in renewable energy policy, particularly changes to FiTs in the early stages of their implementation, have not well served the interests of Australia’s PV industry. Lacking significant PV manufacturing, Australian PV-related employment was lower than in Europe or the United States, although Australia does have similar levels of installation and maintenance jobs per MW installed to some European manufacturing nations (Chapman et al. 2016). Total PV-related jobs in Germany were on the order of 20 FTE/MWp installed in 2012, almost twice that of Australia (Chapman et al. 2016).

There are several, sometimes adverse aspects related to the energy-social justice nexus, which pertains to the impact of FiTs and other energy policies on different groups of electricity consumers (Poruschi et al. 2018). While FiTs as subsidies can benefit early adopters, it is essential to consider latecomers as well. An undesirable aspect of FiTs that many authors cite is cross-subsidization from non-solar households to solar households in the form of increased electricity prices and bills for non-participants (Poruschi et al. 2018; Chapman et al. 2016; Nelson et al. 2011). This was particularly significant in the early stages of implementation, when a majority of non-solar PV owning customers supported premium FiTs. It has also been more difficult for customers who rent to install solar PV panels and receive FiT benefits, although some jurisdictions have recently introduced options for them as well (Solar Victoria 2022). Solar PV and battery storage distributed generation options provide opportunities for some customers to disconnect from the grid, potentially leaving grid-dependent customers to pay more for the essential service of delivering electricity (Poruschi et al. 2018).

The diversity of FiTs across Australia, combined with the lack of unified datasets on FiTs, hinders efforts to deriving comprehensive knowledge that could be used to tune the parameters of FiT policy (Poruschi et al. 2018). Martin and Rice (2013) provide a critical analysis of the seven-year Solar Bonus Scheme (SBS) that the NSW government initiated in 2010, with a fixed FiT rate AUD0.60/kWh in gross metering arrangements for systems with 10 kW maximum capacity. In the first 6 months of the SBS, more than 28,500 investors had installed solar PV systems with 53 MW total capacity. Subsequent reviews suggested that the SBS scheme would achieve 1000 MW installed capacity by the end of 2016 at a cost to the government of AUD2.6 billion. In October 2010, the NSW government decided to reduce the FiT rate for new participants to AUD0.20/kWh beginning November 18, 2010. By the new deadline, there were many new investors. Due to continuously surging demand for new PV systems and rising cost to government, in April 2011 the NSW government decided to close the SBS to new participants beginning June 2011. Due to poor initial financial modeling, the NSW government underestimated investor participation by a factor of 2.2. The SBS also lacked such simple operational controls as caps on total capacity and cost.

6 Conclusion and Policy Recommendations

Reaching high levels of renewables in the power system brings many systems integration issues that require a comprehensive policy approach (Browne 2017). The transition from fossil fuel-based power to renewables requires changes to technology, policy, markets, consumer practices and culture, infrastructure, and science knowledge (McGreevy et al. 2021). While such overwhelming transitions happen frequently, in human history, they typically take 50 or more years. Australia, especially South Australia, has demonstrated a highly successful, sustainable transition to a low-GHG emission energy system. This raises the question of what policy lessons the Australian experience over the last two decades might be learned to guide this change into the future and help other countries, such as those in Southeast Asia, aiming to transform their power systems. Here we group some of these recommendations into technical, economic, political, and social implications.

6.1 Technical Implications

It is possible to transform a power system from a traditional centralized, one-directional grid to accommodate intermittent VRE and more distributed energy resources. Australia’s NEM has achieved 64% instantaneous renewable generation in 30-min time intervals, while renewable generation in South Australia routinely exceeds operational demand. AEMO is planning to be ready to run the NEM at 100% renewable energy generation by 2025.

While high levels of renewable energy are achievable, doing so requires new system integration approaches. One example is the aforementioned installation of the four synchronous condensers in South Australia in November 2021, which allows the grid to operate with fewer synchronous generators. The NEM has well demonstrated the valuable role of storage systems with the installation of several big batteries. They help integrate renewables, storing excess renewable energy and fulfilling multiple roles in grid stability. Snowy 2.0 is a pump-hydro bulk storage project under construction in Australia that is expected to play a significant supporting role for renewables when it comes online. Many more battery storage projects are also planned for the near future. The Australian Renewable Energy Agency (ARENA) will provide up to AUD100 million competitive funding to new battery energy storage projects for grid support (ARENA 2021).

Solar PV generation, both residential and utility-scale, has seen significant uptake in Australia, and it is accordingly playing a greater role in overall electricity supply. South Australia has powered its grid entirely by solar energy at several times. Solar generation offsets operational demand, particularly on days with high solar irradiation. This impact must be considered in grid operations, in terms of reduced baseload generation and reduced firming generation supporting the grid.

Network stability and security management is more difficult to achieve with intermittent and distributed generation. The grid must be able to supply electricity even when wind and solar conditions are not favorable for renewable energy. Improving diversity of supply, including geographical diversity of renewable generators, may help, together with increased battery storage and demand-side response. Countries like Australia and Southeast Asian states with frequent extreme climatic and weather events must develop more resilient networks.

The growth of distributed energy resources cannot fully replace the energy provided by utility-scale solar and wind. Nor does it diminish the critical role of transmission lines. To properly integrate utility-scale renewable generators, new transmission lines must be built, connecting to zones with high wind and solar resources which are frequently at distance from major population centers and consumers. Appropriate planning and assessment are required for such capital-intensive investment projects to extend transmission grids.

6.2 Economic Implications

Investment in renewable power systems is highly capital-intensive. Successful renewable projects must satisfy many conditions, especially if they are to attract private investors. These include policy stability, long-term revenue certainty, government support, and market transparency. South Australia is a good example of a privatized, market-based system receiving financial support from state government and how public policy may help investors (McGreevy et al. 2021). The SA state government frequently used bulk purchasing agreements for its own energy requirements to underwrite private investment. It was also the first Australian state government to support wind farm development. Renewable technologies were not competitive with fossil fuel-based technologies in the early stages of uptake and required such government support as RETs and FiTs to become attractive to investors and households.

A good example of focused support that the Australian government is providing for renewable energy projects is the creation of ARENA in 2012. Since its establishment, it has supported more than 600 projects with close to AUD2 billion in grant funding and attracting additional AUD7 billion funding (ARENA 2022b). A recent battery project supported by ARENA is the AGL Broken Hill grid-forming battery (50 MW/50 MWh) (ARENA 2022a).

Long-term investment requires comprehensive information about current market performance and long-term understanding of electricity demand. The NEM provides a good example of how to implement transparency well, with AEMO regularly publishing extensive market data daily, weekly, monthly, quarterly, and annually. As market operator, AEMO has comprehensive reporting and planning duties and procedures, publishes regular reports on the NEM, including “Electricity Statement of Opportunities”, with 5–10 year estimates and forecasts, “Quarterly Energy Dynamics”, with recent market dynamics and trends from the previous quarter, and “Integrated System Plan”, with roadmaps through 2030, 2040, and 2050 (AEMO 2022a).

6.3 Political Implications

The discontinuity of climate change policy in Australia has been a major weakness and an obstacle to steady investment in new, low-emission generation technologies (McGreevy et al. 2021; Simshauser and Gilmore 2022). Climate change policy is the responsibility of the Commonwealth (federal) government and the two main parties have been very confrontational on this issue. Several policies have been established only to be repealed or substantially modified within a short period of time. In contrast to climate change policy, energy policy is the main responsibility of the states and examples of poor working relationships and different ideologies between the state and federal governments led to suboptimal results in integration of climate change and energy policies. The renewable energy target policy is one of these examples with too many changes and modifications implemented, specifically at the early stages of its lifetime. Establishing long-term support from the main parties and stakeholders is critical for the success of deep societal changes such as the low-emission, energy transition.

6.4 Societal Implications

Renewable energy transitions require complex engagement with all stakeholders, with civil society perhaps most important (Browne 2017). Current and future users must be educated about and engaged with sustainable energy practices if they are to accept and adopt new technologies, consumption patterns, tariffs, and new ways to buy and sell energy.

Closing coal-fired power stations may create significant regional unemployment and other social dislocations. This is particularly important for regions such as Latrobe valley in Victoria, where two of four coal-fired power stations and one gas-based generator remain operational. Government support for new industries, possible renewable energy projects, and engagement with local populations may mitigate social impact. A complex environmental task following the closure of coal-fired generators is rehabilitating open-pit mines and other areas used by power stations.

As discussed regarding FiTs, some policies may reward early adopters excessively, while penalizing late comers. New policies must consider impact variations on higher and lower socioeconomic groups (Chapman et al. 2016). Transition processes must acknowledge and mitigate fuel poverty and energy injustice (Poruschi et al. 2018). It is crucial not to futher degrade vulnerable groups with new energy policies, as such populations have limited capacity to adapt to climate change.