Australia playing 'catch-up' with the market
Wednesday, 2 September 2009 — The passing of the amendments to the Renewable Energy Target (RET) to deliver 20%1 renewable energy by 2020 gives investment certainty for many developed and emerging technologies in Australia. The biggest challenge for most is accessing capital to develop their technology and the renewable energy certificate is fundamental to their economics. The RET confirmation is moving the renewable sector forward, with the sector entering the early phases of what is likely to be the next booming industry.
However, the level of support needed for developed versus emerging technologies is not the same, and the attractiveness of Australia for future investment will become more important for emerging technologies in the next few years. “Many countries are still seen as relatively more attractive from an investment point of view, in the area of renewable energy development.” says Jon Dobell, EY Climate Change and Sustainability Services Leader.
Dobell says “Without doubt, the more mature wind technology is going to be a major beneficiary of the RET. There needs to be more support to accelerate the development and implementation of newer, less mature technologies like geothermal, wave and other emerging technologies. This is the way to ensure a secure and diversified energy sector.”
Australia's relative attractiveness for renewable energy investment is likely to remain unchanged after the passing of the RET legislation. At the moment Australia is ranked 13 out of 25 developed nations2, with countries such as Greece, Ireland and Portugal seen as more attractive for investment capital. In a post financial crisis environment, the path to recovery will be highly competitive and other countries appear to be more successful in attracting major renewables development.
Dobell says “There are at least two reasons why the recent legislation is unlikely to change Australia's position in the rankings.
Firstly, the expanded RET translates into 10,600 MW of new generation capacity by 2020. This is assuming the generation plant being used is running for approximately 35% of the time. However, the current development pipeline for wind alone already has 14,000 MW of projects. These are projects either at the evaluation stage (exploring feasibility), development stage (seeking planning approvals), or under construction. This means that the entire expanded target could be soaked up by wind. This also suggests that legislation is playing 'catch-up' with the renewable energy investment community.
Secondly, on its own it is unlikely to bridge the gap in incentive mechanisms needed to get other emerging technologies to market, for example geothermal. In addition to the emerging nature of the technology, issues such as the remoteness of locations and transmission cost will continue to be problematic for investors in these projects.
Whilst the Federal Government must be commended for the support provided to date around renewable energy, there is still a need to provide ongoing support to emerging technologies and the organisations that are seeking investment.
The renewable energy space provides a very substantial market for Australian entrepreneurship and employment. Clearly there are a number of factors that influence the relative attractiveness of renewable energy investment, and based on our ranking in the Renewables Attractiveness index, it is an area that other countries appear to be responding to better than Australia.”
1 20% is the accepted description, however the actual target has been set at 45,000GWh
2 Renewable energy country attractiveness indices, Issue 22, Ernst & Young, August 2009
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