New net-zero investors are changing the game of renewable energy development in Australia – pv magazine Australia



Despite warnings imposed on investors by the ever-changing regulation of Australia’s electricity market and the difficulties of connecting new renewable energy projects to the grid, the latest research by the market analyst and the company of PwC consultancy, find larger players – state governments, oil and gas majors and large sophisticated investors – are committed to the energy transition and are changing the rules of engagement.

“Australia’s renewable energy supply is set to grow exponentially, and the ripples of change in today’s energy market will soon turn into waves,” said Danny Touma from PwC Australia, one of the authors of the report, The renewable energy market makes developers and investors think, released on Friday.

The title of the report may have both industries brace for the worst, but its highlights point to an unstoppable tide of change – and suggest how seasoned developers can ride it.

It shows that while investments in renewables by oil and gas companies accounted for only 2% of new projects in calendar years 2017-18; 2019-20 saw their commitment increase to 15%.

In addition, PwC research reveals that large energy users, such as businesses and utilities, are motivated by the need to strengthen their environmental, social and governance (ESG) credentials, in order to accelerate their transition. renewable energies via electricity purchase agreements.

These two factors alone signal investors that there is a healthy appetite for green energy, as technological developments also lower the cost of producing renewable energy, and energy storage proves its value for production. renewable variable with time shift.

The report cites the recent Clean Energy Council (CEC) tally that more than 100 large-scale solar and wind projects are either planned for construction or already have infrastructure from the fields. If all materialize, they will add 10 GW of renewable capacity to the national electricity market.

A match made under the sun

“The sector is ripe for partnerships between local developers who often struggle to access capital and negotiate regulatory hurdles to get projects off the ground, and companies looking to strengthen their net zero carbon footprint,” said Touma. , Integrated Infrastructure of PwC. partner, specializing in environmental transactions.

Among the emerging trends in partnership, PwC identifies a shift towards earlier engagement on projects from developers seeking to secure access to capital.

“The good news,” says Touma, “is that the investors are out there.” They are also, unsurprisingly, given the recent well-publicized difficulties in leading projects to successful commissioning and then unrestricted operation, seeking greater influence over project development.

“Utilities, oil and gas companies or infrastructure funds” are determined to “avoid“ cost of capital ”auctions at the ready-to-build stage, avoid costly individual selling processes “, And instead focus on” their need to decarbonize and manage a broader portfolio of renewable energies “, summarizes a statement accompanying the report.

Power coupling

With strategic investors and independent power producers entering the fray, PwC finds that the number of small store developer projects has increased from 30% in 2017 to 22% last year. The big end of town, it seems, has the leverage and resources to manage changing risk factors.

For example, given the greater involvement of state government in energy policy and markets, PwC says investors increasingly need to bring their expertise in government relations and lobbying to ensure positive results.

The range of stakeholders, from local communities and landowners to buyers and networks, also exerts a greater influence and demands to know more about project owners.

And network congestion remains a worrying challenge: PwC cites CEC 2021 Clean Energy Outlook Confidence Index survey findings which include: “Investors have consistently ranked the process of connecting to the grid as the top business challenge since July 2019.”

PwC also notes that “one of the consequences of network congestion has been the change in technical modeling requirements for producers in order to realize a connection offer. These changes have resulted in increased costs and delays for developers to achieve financial close on their projects. “

Financial close time has increased, according to ‘take a break to think ‘ report, from the shortest recorded average period of 1.4 years in 2018 to 2.3 years in 2020.

The prenuptial

As a result, always enthusiastic investors frequently seek to design one of two partnership structures, in which they buy either parts or the whole of a development company; or they buy a specific pipeline of projects.

Despite the greater degree of control that these structures offer to investors, it is still incumbent on the funder to respect the expertise, skills and methodology of the developer (otherwise why would you invest in this company?); “Be upfront about how and when they expect to be involved in decision-making”; ensure that the promoter’s proposals are validated; and understand the risk profile of the transaction. That is, such a deal “is likely to include a range of projects, of which only some will reach financial close,” PwC says in its report.

For the developer, the rules of engagement recommended by PwC include being prepared to articulate their core strengths and capabilities; identify where the contribution and expertise of a large investor can have a positive impact on results; and present realistic deadlines and expectations for connecting each project to the network.

The result is that shareholders and a climate-conscious market are increasing the pressure on the major players to demonstrate their commitment to the energy transition and to bring their weight, their capital and their expertise to the development of projects.

In the ever-changing renewable electricity landscape, this is unlikely to be an end state, but perhaps a welcome learning bridge over murky waters.

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