But the CER, which administers the target, said “2018 was the year in which commercial factors became a stronger driver for ongoing investment in renewables” than incentives under the target.
The regulator drew this conclusion because almost 3800 megawatts of renewables projects were committed to between May and December last year, despite the 23.5 per cent target having already been met and the price of certificates generated under the scheme falling rapidly.
The CER report said by 2020, an additional 40,000 gigawatt hours of electricity from renewable sources would be generated compared with 1997 levels – well above the target of 33,000GWh.
In 2015, the Abbott government legislated to cut the original target of 41,000GWh because it said the goal would displace coal and drive up power prices. The lengthy review preceding the revised target triggered deep uncertainty in the sector and a sharp dive in investment.
In its latest report, the CER said after 2020, the extent of renewables projects likely to be built “is necessarily more uncertain”.
But it noted a number of factors that would help maintain the momentum: state-based renewables targets, lower-cost technology and the growth of power purchase agreements, whereby companies buy power directly from a renewable supplier over a fixed term at an agreed price.
Cereal maker Kellogg’s Australia is the latest company to sign such a deal. The company announced on Wednesday it had struck a deal with the Beryl Solar Farm, near Mudgee in NSW, to offset its manufacturing energy use for the next seven years – during which time 630 million boxes of cereal would be produced.
Bloomberg New Energy Finance’s head of Australian research, Leonard Quong, said power purchase agreements were “a very big driver of large-scale renewable energy” as companies became more concerned about both their exposure to the wholesale electricity price and corporate climate obligations.
Mr Quong said renewable energy investment would inevitably slow after the renewable energy target expired, but was unlikely to grind to a complete halt because “the economics of renewables are now very compelling”.
However, risks lay on the horizon, including the challenge of moving renewable energy where it was required.
“Australia is an extremely spread-out country and more often than not some of the best [places] to build new renewables in are very far from demand in a very spread-out transmission structure,” he said.
Green Energy Markets director Tristan Edis said despite renewables having reached cost-competitiveness with newly built fossil fuel generation, “I think the investment is going to drop off materially”.
“The wholesale price is going to drop to a point where people are not going to invest in new [renewables] plant,” he said.
While lower power prices were “great news for consumers”, a fall in renewables investment would lead to fewer emissions reductions and less readiness for the inevitable closure of ageing coal plants, he said.
Nicole Hasham is environment and energy correspondent for The Sydney Morning Herald and The Age.