Year in review
AUSTRALIA’S CLEAN ENERGY MARKET IN 2014–15
As a sector-specific investor in renewable energy, energy efficient and low emissions technologies, the CEFC’s operating environment is particularly impacted by energy market pricing, government policy initiatives and general investor confidence in these sectors.
According to preliminary estimates from Bloomberg New Energy Finance (BNEF), overall investment in clean energy in Australia over the financial year to June 30 2015 fell 31 per cent on the previous financial year, from $4,596 million to $3,171 million.
Figure 2: Australian clean energy investment by category, 2014–15 ($m)
|Category of investment||2013–14||2014–15||Change on 2013–14|
|Small-scale PV (New Investment)||$2,139||$2,095||-2%|
|Large-scale (New Investment)||$1,135||$750||-34%|
|Energy Smart Technologies (New Investment)||$593||$228||-61%|
|Government & Corporate R&D||$547||$51||-91%|
|Public Markets (New Equity)||$171||$47||-73%|
|Venture Capital / Private Equity||$10||$0||-100%|
Source: BNEF, figures in AUD
Note: Figures to June 30, provided as at September 2015 and may be subject to revision. Energy Smart Technologies includes investment by regulated network businesses in infrastructure such as smart meters.
The Australian Government’s review of the RET, which was initiated in early 2014, resulted in the passage of legislation which revised the Large-scale Renewable Energy Target (LRET) from a target of 41,000GWh in 2020 to 33,000GWh in 2020.
Following this, the CEFC observed some renewed levels of interest among large-scale renewable energy developers. However, issues remain for longer-dated projects that require some certainty of a RET post-2020 and/or some form of emissions penalty price to successfully underwrite their capital raising.
Figure 3: Clean Energy Investment in Australia, 2012-13 to 2014-15 ($m)
Source: Bloomberg New Energy Finance (BNEF), figures in AUD
Impacts on large-scale renewable investment
Investment in large-scale renewables in 2014–15 fell 34 per cent, from $1,135 million to $750 million. BNEF reported that $544 million of this investment, or 73 per cent, occurred in the final quarter of 2014–15. Prior to this quarter, investment was down 82 per cent 1 compared with the same period in the prior year.
According to Bloomberg New Energy Finance, the only renewable energy projects of more than 10MW which were successful in securing finance in the market in 2014–15 were those which were able to secure the support of the CEFC or the Australian Renewable Energy Agency (ARENA), or participate in the ACT renewable energy auction.
The ACT Government’s 200MW wind auction was a bright spot for the sector. In February 2015, three successful proponents were announced under this program. Two of these secured funding in the second calendar quarter of 2015.
Existing projects were also impacted by the uncertainty around the future of the RET. Large-scale investments in the clean energy sector are particularly sensitive to energy market economics, both in respect of the general ‘black’ electricity price and the RET, or the RET-specific ‘green’ energy price. Some loan agreements that had RET covenants were triggered when the LRET was reduced. In some instances, this required borrowers to make loan pre-payments to lenders, including the CEFC. Throughout this period, the CEFC focused on providing an accommodating approach to best support the needs of borrowers.
The CEFC saw a number of its 2013–14 pipeline of potential transactions abandoned by sponsors, as well as the evaporation of a good portion of its planned development pipeline. This in part resulted in the Corporation making no new investments in either Q1 or Q3, and just one investment in Q2, being the NAB Climate Bond.
The reduced level of large-scale renewables activity resulted in an increased focus of CEFC investments outside this segment.
1. A commonly reported figure for the fall in large-scale renewables investment is the 88% fall in calender year investment between 2013 and 2014