Investment in Australian renewable energy projects by oil and gas majors has grown seven fold in three years, according to an analysis by PwC Australia’s Integrated Infrastructure team.
The report entitled Renewable energy market gives developers and investors pause for thought, explores the risks and rewards emerging from the rapidly-growing energy market in Australia, especially when it comes to partnerships between developers and investors.
The report sets a blueprint for how developers and investors can partner together to bring projects from the concept phase to completion.
Over the 2017/18 calendar years, investment by oil and gas companies was virtually non-existent - at just two per cent of renewable energy projects - but by 2019/20 that figure had risen to more than 15 per cent.
According to the Clean Energy Council, there are currently in excess of 100 large-scale wind and solar projects either under construction or planned to start construction soon.
If all are successful, they will pave the way for more than 13,000 Australian jobs and an additional 10GW of capacity into the National Electricity Market (NEM), according to PwC Australia Integrated Infrastructure partner Danny Touma.
“Australia’s renewable energy supply is set to expand exponentially, and the ripples of change in today’s energy market will soon turn to waves,” he said.
“When developers and investors are prepared to ride those waves, they set themselves up for long-term growth and higher returns, but those who fail to see what’s coming might not be so buoyant.”
Spurring on the appetite for investment in renewable energy infrastructure projects in Australia is the rise in non-traditional investors and utilities majors, who are increasingly seeking to decarbonise in order to improve their ESG credentials.
“The sector is ripe for partnerships between local developers who often find it challenging to access capital and negotiate regulatory hurdles to get projects off the ground, and corporates who are seeking to build their net zero carbon credentials,” Touma said.
“While these partnerships have potential benefits for both parties, there are steps that should be taken to ensure they are successful.
“Developers are facing steep challenges to close projects - and investors can help As the report finds, while the rates of change are increasingly making the Australian market more complicated, there are a number of discernible trends including grid congestion.”
This is the increasing number of new generators seeking grid connection is placing additional pressure on the power system and is causing substantial delays for developers.
“Ultimately, these market challenges spell higher costs for developers, and it’s particularly problematic for those who are finding it hard enough as it is to access capital or navigate difficult approval processes,” Touma said.
PwC Australia’s analysis found close to 22 per cent of renewable energy projects in Australia in 2020 that achieved financial close were developed by smaller boutique developers, down from 30 per cent in 2017.