The Clean Energy Investor Group (CEIG), which represents 18 local and international investment firms, has released a list of suggestions it says could attract new capital and save $7 billion from Australia’s clean energy transition over the next 20 years.
Calling itself “the voice of capital” CEIG represents members with a combined renewable energy portfolio of over $24 billion in Australia, including Andrew Forrest’s Squadron Energy, Macquarie Group and BlackRock.
According to CEIG, a disproportionate amount of risk in Australia’s renewable energy market compared with overseas is pushing the price of equity in projects higher.
“Clean Energy Investors currently face significant risks in the National Energy Market (NEM), which is holding back the capital needed,” CEIG board chair and chief executive, Simon Corbell said.
“To unlock an investment pipeline worth up to $70 billion we need effective market reforms and policy certainty, which could also save up to $7 billion in capital costs, or up to 10 per cent of the cost of Australia’s clean energy transition.”
Key risks affecting Australia’s (NEM) include the federal government’s lack of commitment to meeting transition targets and hesitancy in shutting down traditional thermal power generators.
CEIG’s investor members determined that the Step-Change Scenario from the Australian Energy Market Operator’s Integrated System Plan should be adopted for best results.
“Focusing on reforms which address the need for timely and secure access to the grid, greater revenue certainty, contestability in transmission development and fit for purpose NEM governance will deliver the investment confidence needed — and at a cheaper cost,” Mr Corbell said.
The CEIG delivered a list of five principles intended to guide reform:
- Align National Electricity Market (NEM) development with global markets
- Redesign governance for transformation
- Improve revenue certainty
- Allocate risk effectively
- Build investable and innovative markets
Based on modelling by sector consultants, Rennie Partners, the principles aim to reduce risk and open up the capital required to build 51 GW of new renewable projects and 15 GW of new storage capacity before 2042.
Investors say if the principles were adopted, the cost of equity could be reduced by 100-250 basis points, saving up to $7 billion in capital costs over the period of the transition.
Mr Corbell said the CEIG was ready to commit to a $70 billion investment pipeline.
“Australia’s clean energy future can be realised at a significantly cheaper cost if key investor risks are tackled, and we plan for a future electricity market which is aligned with our international commitments and global investor sentiment,” he said.