Investors confident in Australian renewables sector: MinterEllison

Investors are "overwhelmingly confident" in the outlook for Australian renewables, with state and territory programs to stimulate renewable energy, according to MinterEllison.

MinterEllison has published the Australian Renewables Report 2021, which surveyed the opinions of 100 renewable energy investors on their views on renewable energy investment opportunities, trends and challenges in Australia. Sixty percent of respondents were based outside Australia while 40% 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.

According to the survey, 65% of investors say they will increase investments into Australian renewables in the next 12-24 months, with a further with 20% saying their current level of investment will

remain unchanged. Half of the respondents reported that COVID-19 is having no impact on their investment strategy.

Domestic investors are the most confident, with 83% indicating they will increase their investments in the sector and compete for assets. Confidence is driven by the country's climate and typography, greenfield opportunities, support for advanced technology and more.

Investors from Asia Pacific are also strong on Australian renewables, with 77% expecting to increase investment, compared to the last time MinterEllison studied the topic in 2019.

"Australia's safe haven credentials are a key attraction," MinterEllison noted.

However, only 35% of investors from North America  said expect investment in Australian renewable projects to increase, compared to 65% in 2019. MinterEllison pointed out that North American investors could be planning to invest in their home market, given US President Joe Biden's push to increase renewable energy in America.

The vast majority of investors - 86% said state policies will be supportive towards renewables in the year ahead, while 80% said the same about federal policies.

"2020 saw state and territory governments roll out ambitious programs to stimulate renewable energy," said Simon Scott, energy and resources lead at MinterEllison in the study's forward. "In Western Australia, for example, the state government has brought forward its renewable hydrogen target.

"Meanwhile, New South Wales has pledged to make the state a renewable energy superpower and has mandated the construction of 12GW of clean energy and 2GW of storage over the next ten years - potentially unleashing AU$32bn in private investment."

Solar, wind and batteries hold huge potential and are seen as the lowest risk and key to providing reliable and consistent energy generation.  However, top challenges include instability and lack of clarity around incentives, regulatory complexity and grid access. MinterEllison also cautioned that while sentiment is strong, there has been a drop off in projects in the last two years.

"Renewable projects of all types (greenfield, brownfield and refinancings) have declined since 2018  (AU$17.1bn and 49 transactions), with 2020 posting only 20 deals valued at AU$3.8bn," the study found. "Grid integration problems and transmission losses may be among the reasons for this declining investment.

"Pandemic restrictions also weighed on dealmaking throughout 2020. However, the trend toward progressively lower deal values is also linked to the massive improvement in the efficiency of renewable generation over the past decade."

Grid access is a challenge that investors say is getting more difficult. That isn't unique to Australia, MinterEllison said.

"Grids seldom get the investment they deserve," the study said. "In many developed economies, grids evolved to connect coal-fired power generation (often sited near coalfields) with cities But in most cases, the best sites for modern renewable generation are far from the traditional transmission network.

"More than half (53%) of respondents say accessing the grid is getting more difficult compared to a year ago."

Investor sentiment towards hydrogen is also rapidly shifting, and "more than two-thirds (69%) of respondents agree that developments in Australia's hydrogen economy will cross an inflection point in the year ahead and allow the country to become a primary supplier for energy markets within the next 12-24 months."

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