Federal Government Aims to Avoid 'Zombie Projects' in Green Energy Scheme

The Australian federal government's multi-billion dollar plan to spur investment in renewable energy faces the risk of creating 'zombie projects' that never get built, according to Tristan Edis, director of Green Energy Markets. The government has set an ambitious target of achieving 82% renewable energy by 2030, which will require contracting almost 6 gigawatts (GW) of new variable renewable energy capacity each year through its Capacity Investment Scheme (CIS).

However, there are concerns that the CIS tenders could attract unviable projects with no realistic prospect of success. To mitigate this risk, experts suggest implementing safeguards such as oversubscribing tender rounds, requiring state planning and environmental approvals as a condition of eligibility, and keeping tenders on a national basis to encourage competition among states. The Clean Energy Investor Group supports making state approvals a prerequisite for tender eligibility to ensure only well-prepared projects are selected.

Delivering on the 23GW target by 2030 presents significant challenges, as it represents a substantial increase from historical levels of renewable energy project commitments in Australia. The federal government will need to structure the CIS carefully to minimize the risks of zombie projects and prioritize commercially viable projects that can be delivered quickly. Lessons can be learned from the Victorian government's renewable energy tenders, which experienced delays in project commitments due to a lengthy evaluation process.

Why this matters: The success of the federal government's green energy scheme is crucial for Australia to meet its renewable energy targets and transition to a cleaner energy future. Avoiding zombie projects will be key to ensuring the efficient allocation of resources and maintaining investor confidence in the sector.

Tristan Edis warns that the CIS could attract "projects that have no prospect of actually getting built because they don't have the land, they don't have the connections sorted out, and they don't have the equipment." The federal government faces an even greater challenge than Victoria due to the larger scale of the CIS, and will need to implement a thorough evaluation process to select viable projects. As Edis notes, "It's going to be a real challenge for the federal government to manage this."

Key Takeaways

• Australia's federal govt plans 82% renewable energy by 2030, requiring 6GW new capacity/year.
• Experts warn CIS tenders could attract unviable 'zombie projects' that never get built.
• Safeguards proposed: oversubscription, state approvals, national tenders to encourage competition.
• Delivering 23GW target by 2030 is a substantial challenge, requiring careful CIS structuring.
• Avoiding zombie projects is crucial for meeting targets and maintaining investor confidence.