Avoiding "Zombie" Projects
"zombie" projects that are approved but never built.
Tristan Edis, director of Green Energy Markets, warns that the government's capacity investment scheme is so ambitious that it could attract unviable projects.
To meet its 82% renewable energy target by 2030, the government needs to commit to a whopping 8 gigawatts of generation capacity every year until 2027. This is significantly higher than the current annual figure of 6GW.
Edis highlights the monumental task and risks associated with seeking such a large amount of new capacity. The government needs to assess various factors, including developer capability and environmental effects.
He points to examples of experienced renewable energy investors who have made mistakes in the Australian market, resulting in underperforming projects.
The Clean Energy Investor Group supports parts of Edis' report and raises concerns about the government's ability to cancel project approvals if developers fail to meet deadlines.
A spokeswoman for Federal Climate Change and Energy Minister Chris Bowen assures that the scheme has been carefully designed to avoid such pitfalls.
However, Edis warns that failure to properly vet projects could expose the scheme to "zombie" developments. He points to Victoria's experience with renewable energy tenders, where projects have faced delays due to grid constraints and lack of approvals.
To mitigate these risks, Edis suggests safeguards such as oversubscription of tender rounds, requiring projects to have necessary approvals, and keeping tenders national to encourage competition among states.
He emphasizes the need to structure the scheme to minimize the risk of "zombie" projects and reward bidders with commercially viable projects that can be delivered quickly.
Corbell agrees that requiring projects to have state planning and environmental approvals as a condition of tender eligibility is a sensible suggestion.
The government's ambitious green energy investment plan presents both opportunities and challenges. While it has the potential to accelerate the transition to renewable energy, careful planning and safeguards are crucial to avoid the pitfalls of "zombie" projects and ensure the success of the scheme.