How do you achieve 100% renewable energy target without setting a price on carbon emissions? Australia’s ACT (Australia Capital Territory) region is attempting to achieve this feat in the next one year. The country's constitution prohibits from the region from pricing CO₂ emissions from industry.

To set the context, Australia is a coal-rich country and about meets about 75% of its electricity needs with coal. It also exports natural gas and is abundantly sunny for solar energy to become a competitive energy source. ACT is home to Canberra, Australia’s capital, and is part of New South Wales (NSW), which is home to five functioning coal plants. It is only about 900 square miles in area and does not have large industrial complexes that emit carbon dioxide, making the 100 percent target a viable achievement .

The region’s march towards 100 percent renewable energy comes amid a perfect storm for the energy industry in Australia. Demand for power fell in the country in the last decade due to slow economic growth and policies that encouraged integration of renewable energy sources in the grid. Coal plants were shuttered and their capacity declined. Given Australia’s resources, natural gas was expected to take its place but the fuel’s price tripled as a majority of it was exported to Japan. Consumers footed the bill for inefficiency with increased electricity prices.

How Does ACT Plan To Achieve 100 Percent Renewable Energy?

The ACT government has employed multiple strategies to achieve its goal. There are three main renewable energy sources in ACT: solar, biomass, and wind. The territory has implemented reverse auctions in electricity markets to ensure a level playing field for renewable energy producers. Such auctions lowered costs of new wind generation by as much as 10% as compared to projects in the surrounding New South Wales (NSW) territory. Community solar is also being encouraged to ensure that renters and people who live in apartment blocks can contribute to the initiative. The government has also constructed a “solar highway” consisting of 177,000 solar panels spread across 50 kms (31 miles) around the city. Four solar farms capable of powering 11,000 homes have been set up and they generate 85,000 MW in power. According to government data, wholesale electricity costs, which increased by 17 percent between 2017 and 2019, are forecasted to decrease by an average of 5.4% till 2021 in the region.

So What’s the Catch?

The catch, if you consider it that, lies in the details. The economics of the effort is largely subsidized by government assurances and guarantees that it will purchase energy produced from renewable energy sources. For example, the solar farm project is supported by a 20-year government commitment to provide tariff support payments worth $2.3 million each year. The ACT region’s government has offered to buy electricity from large-scale solar projects and supply them to apartment blocks. Sheep farmers around the ACT region receive income from the government to install wind turbines on their land. An Axios report states that the government pays $15,000 annually for each turbine which, in some cases, can amount to as much as 35% of a family’s overall income during this period.

Even as wholesale electricity costs are artificially decreased, regulated network costs for the region will continue increasing. Between 2017 and 2019, a period during which renewable energy was integrated into the region’s grid, they increased by 12.5%. A further increase of 4.9% is expected from 2018 to 2021. The government report states that increase in network costs is primarily driven by increasing distribution and transmission costs. It is not hard to pinpoint a source in renewable energy for those distribution and transmission costs.