Australia is perfectly placed to become the next global superpower of renewable energy, the “Saudi Arabia of solar” for the coming century.
While Saudi Arabia has barrels of oil, we have an abundance of sunlight to fuel solar power and wind to power turbines, plus enough geographical space, modern infrastructure and a stable political system to house such an industry on a massive scale.
But if Australia is to realise its remarkable renewable energy wealth, (see chart below, published by the Melbourne Energy Institute, revealing its world-beating solar exposure as indicated by the lighter colours on the map), banks and investors will need to active players.
Despite what the government has been saying, the role of the CEFC has never been to back emerging or even “mature” renewable energy technologies. That role belongs to the Australian Renewable Energy Agency – which the government would also like to abolish if it could get the numbers in the Senate.
Why there is a need for a green investment bank is that our banking industry is not particularly innovative when it comes to backing new technology – whether renewable energy or other sectors.
Accounting rules typically demand investments pay off within very short periods, adding to the reluctance by many companies to invest in energy savings as well as renewable energy ventures.
In finance-speak, the CEFC exists to “de-risk” the sector so that banks and companies venture where they would not otherwise do so, much like we help agriculture or even exports.
Major banks such as Commonwealth and NAB are among those partnering with the fund on a range of projects. As one insider put it, the ultimate aim of the CEFC is to create “a distinct green asset class” that will attract more investment and more attention to the sector.
Most banks, for instance, don’t have the in-house ability to conduct due diligence on many of the projects without outside help, which is what the CEFC brings to the deal.
As banks gain expertise and confidence, more interest and funding will flow and the fund won’t be needed. But that’s not the case now in Australia or in the many countries which operate similar “green banks” such as the UK and the US.
In unhelpful timing for the Abbott government, the CEFC is also expected to release its latest annual results this week showing that it is delivering a positive return on its investments to date.
Harder to fathom
The government’s efforts to change the mandate of the CEFC to exclude investment in large-scale wind farms or solar panel programs adds to a confusing approach to the sector.
Prime Minister Tony Abbott may have declared coal to be “good for humanity” but his government will later this month present long-term targets for cutting Australia’s greenhouse gas emissions that recognises the damage carbon pollution is doing by stoking climate change.
Coal use will have to be curbed if Australia is going to meet anything like the 24-28 per cent reduction on 2005 levels by 2030 that is reported by Fairfax Media to be the Abbott government’s likely pledge ahead of the global climate summit scheduled for late this year in Paris. (The release of the targets has now been put back to August, well after most other nations have disclosed their goals.)
Renewable energy must fill much of that void, and Australia has excellent wind and other renewable sources that could replace much of the coal-fired sector.
It is also remarkably popular with the electorate, making any roll-back moves likely to trigger some response in the electorate.
Press link for more: Peter Hannam | smh.com.au