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Marion Rae

Feds 'supercharge' clean energy build to keep lights on

There are calls to extend a scheme to include consumer energy resources such as rooftop solar. (Lukas Coch/AAP PHOTOS)

Australia's creaking electricity grid will get more government support under an expansion of a taxpayer-funded capacity investment scheme.

Federal investment in partnership with states and territories, subject to them investing in their own capacity, will also help replace the nation's fleet of increasingly unreliable and costly coal-fired power plants.

The package, announced by Energy Minister Chris Bowen on Thursday, builds on pilot arrangements in NSW, Victoria and South Australia and is intended to share the risk of building new assets and avoid price spikes for consumers.

Other challenges include long approval times for projects, a shortage of engineers and tradies and supply chain challenges as rival nations race to electrify.

Coal-fired power plant file image
Investment will help to replace increasingly unreliable and costly coal-fired power plants.

"This investment will supercharge available power in the energy grid, delivering the long-term reliable, affordable and low-emissions energy system Australians deserve as our grid changes," Mr Bowen said.

Grassroot organisation Rewiring Australia has strongly endorsed the decision to accelerate the transition to cleaner, cheaper renewable energy.

But spokesman Dan Cass urged governments to extend the scheme to include consumer energy resources such as rooftop solar, batteries, electric vehicles and hot water heat pumps.

"Australia cannot deliver credible emissions reductions without doubling-down on its love for rooftop solar and investing heavily in household electrification," Mr Cass said.

Nexa Advisory CEO Stephanie Bashir said shoring up renewables and storage would "go a long way" towards meeting Australia's 2030 climate targets.

"Importantly, it ensures reliable and secure replacement generation is in place as ageing and unreliable coal power stations shut," she said.

Federal Labor is aiming for 82 per cent renewables by 2030 - up from about a third at present - to achieve net zero emissions by 2050.

Mr Bowen conceded Australia was doing well but not well enough.

"We've had some very good progress but we need more progress after making up for a decade of delays," he told ABCTV.

"It's also an indication that we are competing in a world very hungry for capital."

The revenue of generators in the national electricity market is becoming more uncertain as the price of renewable energy falls and projects are falling short, prompting fresh government support to avoid failure.

The capacity investment scheme guarantees companies a pre-agreed floor for revenue when committing to projects but also allows taxpayers to share in benefits when prices soar.

Energy Minister Chris Bowen
Energy Minister Chris Bowen conceded Australia was doing well but not well enough.

Leading clean energy and investor groups said the announcement was a "huge step-change in ambition".

The expanded scheme will include 32 gigawatts of capacity or about half the current national electricity market, with competitive tenders to be run for clean renewable generation projects.

About half the scheme's new capacity will be subject to states meeting reliability criteria and improvements to approvals and permitting.

"Capacity may be reallocated from any jurisdictions that don't make agreements to those that do," Mr Bowen warned.

States can continue to invest in new gas generation under their own capacity plans, but not under the federal scheme.

The Australian Pipelines and Gas Association said the exclusion of gas would make the road to net zero more challenging and likely more expensive for consumers.

The cost to taxpayers of the revenue underwriting scheme is not being released ahead of the auctions but it is expected to be negligible in the early years and ramp up later this decade.

"This is an auction and if you're selling your house at an auction, you don't announce in advance what you expect to get," Mr Bowen said.

"So we're not going to signal to the bidders."

Clean Energy Investor Group CEO Simon Corbell said it had been hard for superannuation funds to support investment in renewable energy at the scale needed.

"This new policy will help unlock a wave of new clean energy investment across the country," he said.

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