Investors are positive about the outlook for Australian renewables, with Australian investors leading the way. Nearly two-thirds (65 per cent) of investors plan to increase investment in the next 12-24 months, with another 20 per cent saying their current level of investment will remain unchanged, according to a recent report from MinterEllison and Acuris.
“This compares favourably with sentiment prior to the onset of COVID-19, which, in 2019, was 68 per cent,” shared MinterEllison partner and Head of the firm’s Energy & Resources Group, Simon Scott.
“Our study revealed that 50 per cent of investors said COVID-19 is having no impact on their investment strategy, while another 35 per cent say they will renew investment within the next year,” Mr Scott added.
Investors are positive about renewable energy targets which are seen by investors as key factors in the development of clean energy projects in Australia.
Australia’s safe haven credentials are a key attraction to international investors. However, domestic investors, keen to move before foreign investors, remain the most enthusiastic, with 83 per cent of Australia-based respondents planning to increase the amount they invest.
Investors from Asia Pacific plan to increase their investment by 77 per cent, a considerable increase on 49 per cent in 2019.
MinterEllison Energy Partner, Joel Reid, said Australia ranks high among the countries offering the most supportive financing environment for renewables. 87 per cent of survey respondents predict that Australia will have the most supportive environment in 12 months’ time versus 68 per cent today.
“This performance is comparable with the likes of major renewables markets in Europe (Germany) and North America (Canada),” he said.
One of the positive factors shaping the renewables financing environment is the growth of ESG lending and investing. 2020 was a year in which some domestic and overseas banks and financial institutions reappraised lending on fossil fuel projects – while looking to back renewable energy projects.
Combinations of solar, wind and batteries could hold the key to providing reliable and consistent generation as existing thermal generation reaches the end of its life. 81 per cent of respondents think that hybrid solutions combining wind, solar and storage hold significant potential for Australia.
According to the report, risk-reward sentiment is also shifting in favour of hydrogen.
“In 2019, 47 per cent of investors said it was an opportunity sector, although 53 per cent said it was too risky. This study shows that 49 per cent now see it is an opportunity sector. Notably, just 31 per cent now say it is too risky. In short, positive momentum is building,” Mr Reid commented.
Within the next 10 years, as existing thermal generation reaches the end of its life, what will most likely meet system reliability requirements in Australia (Please rank from 1 to 11, where 1 = least likely and 11 = most likely):
Renewables developers are expected to be the most active investor group in the coming year, according to 99 per cent of respondents. 89 per cent believe power producers will play a greater role in the market, up from 82 per cent in the last study.
“The confidence in Australia’s renewable energy sector is strong but continues to face challenges in accessing a grid that has been developed at an earlier time for a thermal-based generation fleet. Improving our network issues – which could be assisted by the development of renewable energy zones in various Australian jurisdictions – will remove a significant risk for investors and their financiers,” Mr Reid said.
Funds – which include infrastructure, private equity and pension/superannuation funds – also ranked highly, with 80 per cent of respondents expecting these to be among the most active.
“Inbound infrastructure developers and investors could be an important factor here with 71 per cent of respondents citing regional renewables funds will be increasingly active and competitive in the Australian market in the year ahead,” Mr Scott noted.
The full, Australian Renewables Report 2021, can be found here.
About the survey
From September to October 2020, MinterEllison and Acuris Studios, the publishing division of Acuris, canvassed the opinions of 100 renewable energy investors to gauge their views on the investment opportunities, trends and challenges in Australia.
60 per cent were based outside Australia while 40 per cent were domestic Australian firms. All respondents had in the past 12-24 months developed/ funded/invested in at least one Australia-based renewable energy project.