Australia misses out on ‘mountain of global cash’ as renewable target uncertainty continues

Australia is missing out on a “mountain of global cash” looking for alternative energy investments, a new report has found, thanks to continued renewable energy policy uncertainty, and the effect this has had on the sector’s ability to secure long-term power off-take agreements.

The report, Ernst and Young’s latest Renewable Energy Country Attractiveness Indices (RECAI), released today, notes that Australia’s renewables sector currently faces the task of developing around 5GW to 6GW to meet the 33,000GWh RET.

Ironically, this race to meet the modest 2020 renewable energy target after “many months of uncertainty” and “little progress” during 2014-15, has had the overall effect of boosting Australia’s investment attractiveness to number 10 in the EY 2016 ranking, up from 13th spot in September 2015 – although still well below the #4 position Australia achieved in 2013.

But the report stresses that while state government schemes – such as the ACT’s highly successful large-scale renewables auctions – and corporate off-take potential have helped drive new optimism, few long-term “bankable” power purchase agreements have come to market.

The report points to a number of factors behind this PPA roadblock, including prolonged policy uncertainty, price slumps in Large-scale Generation Certificates (LGCs), vertical integration and the short tenor of the retailers’ own commercial and industrial customers, that have led to few long-term PPAs being signed with third-party developers.

Overall, it notes, “with declining time before the RET ends in 2030, the case for long-term PPAs for 15 years or more appears increasingly difficult without long-term policy certainty.

EY Oceania Power & Utilities Leader Matt Rennie says the “mismatch” between the 3-5 year PPA terms being offered and the 15 year terms that developers can bank, is holding back a “mountain of global cash” looking for alternative energy infrastructure investments.

“It is difficult to comprehend the sheer volume of global pension fund money that needs to be invested in energy infrastructure, and particularly non-conventional energy,” he said.

“Ultimately, more far-reaching energy policy measures will be critical to take Australia’s renewable sector beyond recovery and into long-term growth,” the report says.

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