Melbourne Summit: Conflicting state and federal policies creating renewables uncertainty

The uncertainty in Australia’s regulatory environment has not been helpful for investors, the Clean Energy Finance Corporation’s infrastructure lead has said.

Speaking at Infrastructure Investor’s Melbourne Summit today, Julia Hinwood said: “We want to be a catalyst and encourage investment, whatever the policy situation – but the discrepancy between federal and state politics doesn’t help in an investment environment.”

Hinwood was speaking as part of a panel discussing the energy transition in Australia and said that, despite the lack of consistency between the different levels of government, there was momentum in the renewables space to push ahead with projects regardless. “The regulatory environment makes a difference – good or bad – but there’s a momentum now to work through that regulation and make these projects happen, and get to a point where they’re viable on their own,” she said.

The Australian government is in the late stages of producing the National Energy Guarantee, its flagship energy policy designed to legislate for lower carbon emissions while also guaranteeing reliability of supply. Further details of the proposed NEG were revealed late last week, including a pledge that the 100 biggest users of electricity, or those with a peak load of more than 5 megawatts, would be responsible for the reliability of supply.

This draft design is now out for public consultation prior to a final design being presented to the COAG Energy Council on 10 August, which will determine the policy’s fate.

Charlie Reid, managing director at Blackrock, said on the panel that while regulation could help enable projects, the transition to renewable energy would happen with or without the successful development of the NEG.

“Regulation is clearly important, but given the cost [of renewables technology], it’s no longer required to sustain the industry,” he said. “The NEG at the moment is slowing down progression due to the uncertainty, but in the long term, renewables will continue to be built out at scale as they have been in the US and Europe.”

One of Australia’s largest proposed renewable projects is the pumped-hydro extension to Snowy Hydro, known as Snowy 2.0, which is one of the Australian government’s priority infrastructure projects, although the final go-ahead has not yet been given.

Mark Schneider, founder of Megawatt Capital, commented that the untested nature of that project had also produced uncertainties for investors in renewable energy.

“A project of the scale of Snowy 2.0 can make a huge difference, to build in the resilience in the network that enables it to take wind and solar in even larger volume,” he said. “The problem is that the project itself hasn’t been tested commercially in the way that [most investors] test our projects.

“As a developer, the problem that creates is whether we build our projects out expecting the Snowy project will eventuate, or whether we don’t, and the dilemma becomes quite a practical one, when we contemplate whether we invest in boutique pumped hydro opps or the installation of batteries. There’s little point in investing in boutique pumped hydro opportunities or the installation of batteries if Snowy 2.0 comes along, because that benefit we’re offering to the network, and that we hope to turn into money, will no longer be required.”