Australia:

why it’s such a hot market

Australia: why it’s such a hot market

Introduction – will Australia go “pure green”?

The current level of investment in Australian renewable energy - nearly AU$ 12.5billion and in excess of 1GW of new utility scale power projects coming on line since 2017¹ - is unprecedented and has made the sector one of the most sought after investment territories for the green dollar. It appears that a combination of factors, including:

high irradiance

consistent wind resources

an abundance of greenfield development locations

good grid connections

supportive governmental policies

high demand

has created ideal conditions for investment.
Although there is some uncertainty around continuing strength of political support – given the country’s historically heavy dependence on coal - it’s now become a real possibility that renewable energy could replace many coal fired power stations as they reach the end of their natural operational life over the next decades and further frustrate investment in new carbon infrastructure.

Indeed, an analysis by the Australian National University Australia indicates that if this trend continues for the next 5-10 years, Australia could become a pure green economy with 100% reliance on Renewable Energy².
Australia embraces BESS

In addition to the large swathes of open land and considerable levels of irradiance associated with Australia, in 2017 in excess of 1 gigawatt of roof mounted solar photovoltaic was added to the grid - in addition to more than 700MW of renewable energy projects being completed and successfully commissioned, with a further 2.5 GW under construction³. Australia has also fully embraced large scale Battery Energy Storage Systems (BESS), becoming a global leader in this previously nascent technology with the successful commissioning of the 100MW Hornsdale Power Reserve that was famously delivered by Tesla to owner Neoen.

Positive government approaches

The positive domestic approach of by individual state governments introducing various initiatives with targets has played an important role in the strength and speed of deployment of renewable energy in Australia:

The Australian Capital Territory government legislated a target to achieve 100% of its energy from renewable energy sources by 2020⁴
Similarly, Tasmania’s Government States has set goals to achieve 100% of its power from only renewable energy sources by 2022⁵
South Australia has certainly led the charge, and is now one of the leading States with nearly 45% of all electricity being produced from renewable energy sources towards the end of 2017⁶- however with a change in government, many investors are keenly waiting to see what impacts may be felt to the current trajectory being followed
The recent approval of the 800MW Clarkes onshore windfarm in late 2018⁷ demonstrates how the market and infrastructure remains supportive of ever larger utility scale systems

The positive domestic approach of by individual state governments introducing various initiatives with targets has played an important role in the strength and speed of deployment of renewable energy in Australia.

OEM interest – but domestic insurance market faces capital challenges

The new unbridled market opportunities are attracting keen investment from the Original Equipment Manufacturers who are keen to deploy their latest operating platforms, especially where new design efficiencies are anticipated or streamlined supply chains are established from Asia. However, this has coincided with a broad hardening (due to restrictions capital supply) within the Australian insurance markets which, together with a limited experience of underwriting renewable energy on profitable terms and conditions supported by deep engineering data, has created an opportunity for the more developed European insurance markets to seek out projects offering preferential terms.Conclusion – leading by example

Moving into 2019, the success and optimism of 2018 is being carried through with developers, investors and the government remaining confident that the current investment trend will continue at the current pace. As the effects of climate changes becomes even more apparent, despite some challenges Australia is leading by example, embracing the principles of COP 21 and has rapidly embarked on a new journey plotting its course away from historical reliance on fossil fuels to a cleaner future.

John Abraham is an Account Executive in the Renewable Energy division at Willis Towers Watson in London.

¹https://assets.cleanenergycouncil.org.au/documents/resources/reports/clean-energy-australia/clean-energy-australia-report-2018.pdf
²https://www.researchgate.net/publication/315745952_Burden_of_proof_A_comprehensive_review_of_the_feasibility_of_100_renewable-electricity_systems
³ Source: Clean Energy Australia report 2018
⁴https://www.environment.act.gov.au/energy/cleaner-energy/renewable-energy-target-legislation-reporting
⁵https://www.climatecouncil.org.au/uploads/9a3734e82574546679510bdc99d57847.pdf
⁶http://arena.gov.au/blog/booming-renewables-breaking-records/?utm_medium=email&utm_campaign=ARENA%20WIRE%20210618&utm_content=ARENA%20WIRE%20210618+CID_2c905b9d042d25823fc3c810793d6588&utm_source=enews&utm_term=Read%20more and https://www.abc.net.au/news/2017-02-13/sa-liberals-pledge-to-scrap-renewable-target/8264704
⁷http://www.goldwindaustralia.com/national-environmental-approval-secured-billion-dollar-800-mw-clarke-creek-wind-farm-central-queensland/