Let’s get the bad news out of the way first. Australia has fallen another spot in the latest EY Renewable Energy Country Attractiveness Index (RECAI), taking 7th place in the biannual ranking of the world’s top clean energy markets. Australia’s potential to become a global renewables powerhouse remains hindered by a lack of regulatory clarity and clear climate policy at a federal level.
The good news is that the latest drop is only a marginal one – and that we are already seeing investment pick up across Australia’s renewable energy sector following a modest year in 2020, where very few renewable energy projects (contributing just 449 MW) reaching financial close.
This year, we’ve seen much stronger activity with several wind and solar projects reaching financial close this year, including Queensland wind projects financed by established developers including Acciona and NEOEN. In the earlier stages of the development lifecycle, momentum is growing too, with increasingly competitive processes and high valuations for those project developers with deep pipelines of assets, such as Powering Australia Renewables Fund’s acquisition of Tilt Renewables.
This growing demand for well-located, earlier stage projects is a clear sign from investors that the energy transition to renewable energy gaining pace. We expect that 2022 will be a turning point for our country’s green energy sector, as a wave of new projects and commitments across solar, wind and green hydrogen production accelerate Australia’s energy transition.
Australia emerges as a leading PPA market
As reported in RECAI, power purchase agreements (PPAs) are a key driver of clean energy investment, giving an organization an ability to demonstrate their green credentials while providing developers with the ability to secure financing and create viable new projects.
This latest RECAI includes our first ever corporate PPA Index to analyse and rank the growth of PPAs. Australia ranks 5th in the Index, and we expect PPAs to become even more prominent here as some of Australia’s biggest companies double down on decarbonisation. It feels like corporate Australia has undergone a sudden gear shift, perhaps driven by the cumulative pressures of the ESG agenda and the need to transform for a world changed by the pandemic. The race to a national collaborative commitment is on – the business world is uniting to accelerate Australia’s energy transition and PPAs are set to play a big part in this change.
However, PPAs are complex transactions to get right, particularly because of the Australian electricity market’s volatile pricing. EY teams are supporting many corporate clients implement PPAs that balance risk with reward in this challenging market. For example, a team led by Director from Ernst and Young LLP Jomo Owusu helped Woolworths broker a 10-year PPA that will enable the supermarket giant to avoid almost 158,000 tonnes of carbon emissions each year.