Overcoming these challenges will help Australia scale electrification and fill the void left by the decommissioning of coal power plants. It requires, however, governments to step in and play a direct role in facilitating and encouraging take-up at both the macro and micro levels, Aleemullah says. The latter, for example, has seen success from financial incentives.
"Australians have generally done a good job of installing rooftop solar, encouraged by government rebates, with which there's a direct correlation," he says.
In 2019, when Queensland’s government offered generous grants and interest-free loans for switching to solar, installation almost trebled. In 2020, when these measures were removed, installation fell below 2018 levels.10
Similar patterns emerged with battery installation. In South Australia, the state government offered a $A6,000 subsidy for such installations in 2020 before progressively reducing this to $A2,000 by early 2022. As this happened, battery installations in the state fell by 55 per cent.11
"If this transition is to succeed, we need support from governments and government agencies through incentives, the formation of new markets, and clearer revenue streams for the services that energy assets can provide," Aleemullah says. "We also need to address some of the real underlying issues, like workforce skills and barriers to entry.12
"More than anything, however, we need a coordinated approach between the state governments and the Commonwealth with energy market participants and investors. Otherwise, innovation may be slowed at the micro-level and infrastructure projects will face complexity as they deal with the challenges of development."
Aleemullah says there is a real opportunity across Australia to focus on developing initiatives that support the build-out of grid-scale medium and long duration storage assets. However, unlike wind and solar farms, these assets can be more challenging for private capital as they require long lead times and come with development risks and higher costs.
For this reason, encouraging private investment requires providing some level of certainty around revenue. By providing supporting mechanisms, such as capacity payments or downside revenue protections, governments can help firm a project’s development now rather than in five to ten years’ time.