Australia has become one of the most sought after renewable energy destinations for global investors but it is being held back by a lack of long-term contracts.
An Ernst & Young (EY) report shows Australia’s global ranking as a desirable country to invest in renewables projects jumped three places to number 10, up from 13 in September 2015.
But EY’s Renewable Energy Country Attractiveness Indices said few long-term power purchase agreements (PPA) had come to market and a “mountain of cash” was being held back because developers of alternative energy infrastructure wanted 15 year contracts rather than the three-to-five year contracts on offer.
“It is difficult to comprehend the sheer volume of global pension fund money that needs to be invested in energy infrastructure, and particularly non-conventional energy,” EY Oceania Power and Utilities Leader Matt Rennie said.
“The market is extremely competitive because of pressure to deploy capital and limited opportunities globally.”
Origin Energy’s recent 15-year agreement for the 56 megawatt Moree Solar Farm in NSW, signed in March, was a landmark deal which could help spur more long-term contracts, EY said.
Mr Rennie said recent investor appetite for renewable energy projects puts Australian energy retailers in the box seat as renewable energy deals accounted for 50 per cent of global transactions in the power and utilities sector last year.
Global funds were eager to put their money into renewable energy as Australia’s renewable energy sector raced to supply the Renewable Energy Target (RET) of 33,000 gigawatt-hours of output by 2020, EY said.
Mr Rennie added that an Australian market for long-term contracts looked likely to develop in the footsteps of similar markets in the US and Europe.
But he said the sector would be looking for longer term policy certainty to drive growth.
The report notes that some projects such as the 240 megawatt Ararat windfarm in Victoria and Goldwind’s 175 megawatt NSW windfarm project are being brought forward.
EY said the renewables sector was looking out for any changes to the RET policy as campaigning for the July federal election gets underway.