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Big Questions for Renewable Energy in Australia

October 18, 2011

The viability of the fundamentals underpinning future expansion of renewable energy in Australia has been starkly brought to light in the last week.

On the one hand, a report commissioned by the Energy Users Association of Australia has pointed out the vast investment sums ($30 billion) and further installed capacity (10 GW) in renewable energy (mostly wind) required to meet the 2020 renewable energy target.  Bottlenecks aren’t just financial and technical – but also difficulties associated with  planning and community acceptance.  The States are currently trying to figure out how they can engender their share of investment.  Liberal-governed NSW is attempting to create an amenable investment climate for renewable energy.

On the other hand, the Government’s key mechanism to assist projects overcoming financing market failure, the Clean Energy Finance Corporation, has been struck by uncertainty following the Liberal opposition’s pledge to shut the entity down and rescind finanacing agreements where possible (in addition to attempting to rescind the source of these funds – the carbon tax).  While technically this will be very difficult to achieve given the need for the Liberals to achieve a slam-dunk on a double dissolution election, their approach doesn’t exactly send useful signals for long-term infrastructure investment planning.

If you think the US is the only place where no-holds-barred political partisanship destroys investor confidence, then think again.  The Australian political elite is competing hard with the range of existing credit and sovereign risks apparent in other markets to out-scare investors.  No safe haven here.

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