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‘Greater uncertainty’: Renewable investment boom tipped to slow

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“There’s greater uncertainty at the moment around that issue and that will mean the lenders are more cautious,” Mr Daley said.

Earlier this year, a number of renewable projects also suffered big cuts in their revenue because of changes to ratios used by the regulator in an attempt to apportion how electricity is lost as it flows through the distribution network.

Mr Daley said some generators were likely to make less revenue than projected, which was causing banks to be more cautious in their lending decisions.

“What that means for projects now is that it’s much, much harder to get finance unless there’s a strong contract,” he said.

MUFG Bank was the world’s largest arranger of renewable energy finance in 2017, according to Bloomberg New Energy Finance.

Industry figures show 2017 was a record-breaking year for renewable energy investment in Australia, with more than $10 billion in projects reaching financial close. But Mr Daley said there would be a “slowdown in the speed of investment”.

The director of energy finance studies at the Institute for Energy Economics and Financial Analysis, Tim Buckley, said some slowdown in renewable investment was inevitable, but it was likely to be a “pause.” There had been “massive solar boom,”  he said, but little planning around where the projects would be located.

“There’s no over-arching plan. If you don’t have an over-arching plan, renewables will swamp parts of the grid,” Mr Buckley said.

“The willingness of the investment community to invest in renewables in Australia is going to wind back, because we need to take a pause. We’ve had five years of energy policy chaos which means the grid isn’t yet prepared to accommodate ever more renewables.”

Brett Redman, interim AGL chief executive.

Brett Redman, interim AGL chief executive.Credit:Louie Douvis

The government’s energy policy was thrown into disarray with the change of prime minister in August. The government has dumped the National Energy Guarantee which aimed to address the problems of high  power prices, carbon emissions and grid reliability.

National Australia Bank’s global head of energy, Andrew Smith, acknowledged the bank was monitoring issues raised by grid congestion closely, but he said this was not unique to Australia. “It’s certainly an area of focus for banks,” he said.

Mr Smith said the issue had not dented the availability of finance for renewable projects. “Certainly now there’s significant demand for banks to participate in these projects,” he said.

Speaking at the AFR National Energy Summit, AGL interim chief executive Brett Redman said renewable energy investors are concerned about the country’s changing policy landscape and the falling investment costs of renewable generation.

“If I talk about offshore investors, they get very worried over the stability of long-term targets,” Mr Redman told Fairfax Media

Mr Redman said the “biggest issue” for investing in renewables was that costs of developing projects were coming down rapidly.

“So the wind farms we built 10 years ago now look really expensive compared to what it would cost you to build wind now; the solar we built three to four years ago looks really expensive now.

Clancy Yeates writes on business specialising in financial services. Clancy is based in our Sydney newsroom.

Covering energy and policy at Fairfax Media.

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