Emission Control: After a record 2020 for renewables, is investor confidence in Australia beginning to wane?
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As the Morrison Government pushes ahead with its gas fired recovery plan, investor confidence in the renewables sector is slipping, according to the Clean Energy Council.
The industry group released its Clean Energy Outlook Confidence Index this week, with grid connection issues and government intervention in the energy market named as renewables and energy storage investors’ main concerns.
In the latest survey investor confidence has slipped to a rating of 6.3 out of 10, the lowest level since December 2019, down from 7.3/10 in June 2020.
“This is the time to be opening the doors to new investment in utility-scale clean energy projects, boosting jobs and regional development and ensuring that sufficient new generation is in place before old fossil-fuel generators retire or are priced out of the market,” CEC chief executive Kane Thornton said.
Thornton cited the Government’s funding of the Kurri Kurri gas plant, proposed changes to the ARENA remit to include carbon capture and storage, and the knockback of the Asian Renewable Energy Hub green hydrogen mega project on environmental grounds among the evidence of unfavourable regulatory conditions.
“It’s a concerning series of events and not a particularly welcoming environment if you’re an investor in clean energy.”
Probably more pressing are the connection issues entering the grid that have been one of the core challenges faced by large scale renewables, which came online at a record level in 2020 but have slowed in 2021.
Thornton also views Australia’s transmission infrastructure as a bottleneck.
“Without transmission investment, congestion will increase, creating greater risks for generators and further stalling investment,” he said.
A new rule declared by the Australian Energy Market Commission yesterday could help improve that, by making it easier for multiple generators to share access to assets such as power lines.
“In a win-win, investors may recoup costs while shared access makes connection costs lower for generators than under the existing rules,” the AEMC said.
“The new approach is also likely to support additional generators joining the network, typically those using renewable energy, who will find the shared costs and greater flexibility appealing.”
It didn’t take long to trim one of the assets heading into the Accel rebrand, announcing it would mothball one of the four units at its gas-fired Torrens B site in South Australia.
The decision has been attributed to falling power prices from the volume of new supply coming into the grid, which in SA means renewables and batteries.
Almost 60 per cent of the grid down there is renewable with the State sticking to its guns on wind even after coming under heavy fire for its level of wind penetration during a major blackout in 2016.
AGL said the decline in forward prices and competition from new generators did not support keeping all four Torren B units open.
COO Markus Brokhof said Torrens remained an important site for the company’s transition into battery storage and developing low carbon industrial hubs.
“We have assessed all publicly available information and are confident there is sufficient capacity available to AEMO to ensure system strength,” Mr Brokhof said.
“Torrens Island continues to be an important site for our future generation plans, including its development as a low-carbon industrial energy hub of the future.
“Construction of our 250MW grid-scale battery is planned to begin later this year, making it the first of AGL’s planned 850 MW of batteries to get underway.
“This new grid scale battery along with the Barker Inlet power station that commenced operations in 2019 demonstrates our commitment to playing a leadership role in the state’s energy transition.”
By knocking the coal off to one side AGL, Australia’s oldest energy business dating back to the 1830s, was no doubt looking to improve the ESG look of its public-facing retail business.
The new AGL Australia will also have many of the company’s renewable energy investments.
That includes its 20% stake in PowAR, which is buying Tilt Renewables (ASX: TLT) Australian assets.
Analysts see a couple of issues there.
UBS for one struggles to see growth opportunities for the split stocks.
“We support the concept to co-ordinate the develop these industrial hubs to create synergies across supply chains,” Allen said.
“However, it is unclear what the returns achieved will be from these hubs. Based on the projects in Accel’s development pipeline (grid scale batteries (at Loy Yang and Liddell), Bells Mountain Pumped Hydro and 1.6GW of wind development projects) we remain sceptical of earnings growth from Accel’s development pipeline,” he said.
Grid scale batteries “are a key growth area planned for Accel Energy however we believe asset IRRs for grid batteries are likely to be <5% in most Australian states, until further coal fired plant exit the market," Allen said. With more than 40% of the stock in the hands of retail shareholders, he also said there is a prospect the demerger scheme is voted down. It will require 75% support to go ahead. AGL will still be buying power from Accel and its non-renewable power sources until at least 2027, and they will remain linked with Accel keeping a passive 15-20% holding in AGL.
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Lion will “jointly explore opportunities” in testing and operating hydrogen dispensers in Australia with Censtar, which operates 19 stations in its homeland.
Lion exec chair Tom Soulsby said the company views future demand for the equipment as “significant”.
“We welcome the opportunity to cooperate with Censtar and we will start by assisting Censtar obtain relevant regulatory approvals for their hydrogen refuelling and related equipment in Australia,” he said.
Province Resources (ASX: PRL) was also up in the order of ~13%.
The company is pursuing a “globally significant” green hydrogen project in WA’s Mid West and secured letters of support from local stakeholders in June.
Province has been on a tear since shifting its direction to focus on green hydrogen, with its shares up 954% over the past six months to a market cap of more than $165 million.