MARKET UPDATE: Renewable Generation Powering Down?

Australian large-scale renewable generation is likely to be 40 per cent lower in 2020 on the repeal of the carbon tax and revisions to the Renewable Energy Target, while the resulting market conditions are likely to bring relief for black coal generation.

In this Market Update, we analyse the impact of repealing the Carbon Price Mechanism (CPM) and the introduction of a reduced Renewable Energy Target (RET) of 20 per cent by 2020 (down from a fixed target of 41,000 GWh by 2020) on the National Electricity Market (NEM), with findings indicating that an ill wind is blowing for renewable generation.

Despite likely gains for fossil fuel generators, analysis indicates that relief may only be temporary, with large-scale renewables likely to continue to experience cost reductions, while the government’s new ‘baseline and credit’ mechanism, the Direct Action Plan, may further dampen the electricity demand outlook for coal generation and place ongoing pressure on profit margins.

Here we preview our Carbon Market Update for April:

 

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