Renewable energy investment in Australia will carry on booming over the coming year, according to a survey by law firm MinterEllison, with competition for assets set to intensify as a result.
MinterEllison surveyed 100 renewable energy investors from Australia and overseas for its Australian renewable energy investment trends and outlook report. Sixty eight percent of respondents said they would increase their level of investment in the next 12 months. None of those surveyed said they would decrease investments.
A clear majority – 93 percent – said Australian government policies would be supportive of investment in the space in the year ahead, with 81 percent citing political and regulatory stability as one of the country’s top advantages.
Although policy is set to remain consistent following the coalition government’s recent re-election, the findings are surprising considering the ongoing absence of a federal energy policy, which investors are concerned about.
Clay Wohling, a partner at MinterEllison and one of the report’s authors, said: “Whilst the exponential take-up of renewable generation has raised a number of challenges, governments, regulators and the industry have all recognised that systems need to quickly evolve to meet these challenges. This will lead to greater regulatory and legal certainty as some of the challenges which have negatively impacted on renewable generation projects in the past are addressed.”
However, the survey did find that Australian investors were increasingly concerned about the regulatory environment in their country, with only 36 percent seeing the policy environment as supportive.
MinterEllison suggested that European and Asian investors with a more positive outlook on Australia may have spotted something domestic investors are missing.
“European renewables investors have been active for much longer and perhaps know that while supportive policies are desirable, the plummeting cost of renewable energy means that government indifference is no longer a deal-breaker,” the report said.
The strength of the US dollar, combined with tax and trade policies in the US, meant 84 percent of investors believed that the US and Canada would increase their levels of investment in the sector over the next 12 months, with increasing inflows of capital leading to more competition over greenfield projects. Almost all investors – 98 percent – thought the level of investment from the Asia-Pacific region would increase too.
Excessively high valuations were cited by 62 percent of investors as the most significant barrier or challenge to investment in Australian renewables. Uncertainties in grid transition were cited by 58 percent and instability around incentives and feed-in tariffs by 57 percent. Political and regulatory uncertainty was named the most significant challenge by just 12 percent of investors.
David Scaysbrook, co-founder and managing partner of Australia-based Quinbrook Infrastructure Partners, told Infrastructure Investor this week that there was “a lot of naïve investing” in Australian renewables thanks to uncertainty around marginal loss factors, among other issues.
Data published by Australia’s Clean Energy Council showed that a total of 25 wind and solar projects had reached financial close last year, with a total value of A$6.3 billion ($4.4 billion; €3.9 billion). MinterEllison said this equated to approximately A$252 per head of the population in 2018. This put Australia just behind the US, but well ahead of Europe and China.