Green energy faces winds of uncertainty

The renewable energy world faces unprecedented uncertainty. Increased awareness surrounding the impact of climate change and dependence on fossil fuels has prompted policymakers and scientists to rethink their strategies.

The renewable energy industry has been both a benefactor and victim of these changing tides, as increased investment and support has been offset by delayed implementation and political populism. The Federal Government’s mandatory Renewable Energy Target (RET) that aims to have 20% of the country’s electricity generated from renewable sources by 2020 is a good indicator of its commitment to a clean energy future. However, the economics of coal-fuelled electricity considerably outweigh that of renewables and measures such as an emissions trading scheme have been postponed due to a fickle political climate.

Hydropower continues to be the largest source of renewable energy but has been affected by poor rainfall and drought conditions. Wind and solar power have exhibited dramatic growth over the decade, but their contribution to overall output remains small.

The introduction of the carbon tax on July 1, 2012 will see the industry benefit from significant assistance in the form of grants and concessions, but still remains at the mercy of its infancy and expensive cost structure. In the five years leading up to 2012-13, industry revenue is estimated to grow at an annualised 5.6% to total $5.24 billion. Revenue in 2012-13 is expected to post an increase of 35.2% from the previous year.

The future prospects of the industry are inextricably tied to the level of government support and the willingness of end users to wear higher costs. Initiatives such as interest free Green Loans and the Renewable Energy Development Fund aid investment in technology that will eventually make clean energy affordable.

Industry at a Glance

However, support from consumers and industry is equally important in setting a precedent for change.

The next five years will be critical in determining whether Australia’s abundant natural resources can indeed be harnessed and set a world example for a decarbonised future. To this end, IBISWorld estimates that industry revenue will increase by an annualised 10.8% until 2017-18 to total $8.77 billion.

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