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Some big international financiers are avoiding Australian renewables because of uncertainty caused by the demise of the government’s National Energy Guarantee policy.

But small cap executives swear it’s not a problem for them yet.

The NEG — which would have obliged energy retailers to supply sufficient quantities of “reliable” power and to reduce emissions — was killed off by Malcolm Turnbull’s prime ministerial successor, Scott Morrison.

Small cap renewable energy executives with businesses in the utility scale energy space have reiterated to Stockhead on a number of occasions that the lack of federal policy was not affecting their businesses right now, largely thanks to state initiatives and the fact that they’re in fairly novel areas.

Windlab (ASX:WND) CFO Rob Fisher told Stockhead they aren’t seeing a lack of investor interest at all.

For example, Tilt Renewables (ASX:TLT) is benefitting from the Victoria Renewable Energy target (VRET) which is backing its 336 megawatt (MW) Dundonnell wind farm.

Genex Power (ASX:GNX) has a deal with the Queensland government to top up revenue for the phase stage of its Kidston solar, wind and hydro project if it falls below a certain level.

Others like Kalina Energy (ASX:KPO), which is generating power from industrial heat, or New Energy Solar (ASX:NEW) which is setting up in the US rather than dipping a toe in Australia are more insulated from the changes.

Wind power operator Infigen Energy (ASX:IFN) is more exposed.

Scaring investors

The lack of policy around emissions targets and how the government wants to plan the national energy sector is turning investors off, which in turn squeezes the amount of money available to build new projects.

Although renewable energy projects could now “stand on their own two feet economically”, the sector still needs investors to get projects off the ground, said First Solar’s Asia Pacific vice president, Kent Draper at the All Energy conference in Melbourne this week. First Solar operates some of the largest solar farms around the world and six in Australia that are in operation or under development.

The fact that renewable projects are cheaper to build than coal plants – solar projects are coming in as low as $50/MWh as of July — isn’t enough to persuade new investors to enter without a government framework to guide it.

Policy vacuum is dampening deals

Where the policy vacuum is causing problems is around the edges.

Adani Renewables CEO Jennifer Purdie says the industry was assuming the mooted 28 per cent emissions reduction target would be met, so no one was expecting it to support the construction of new projects.

But it’s made corporate power purchase agreements more difficult as potential electricity buyers wait to see what the coming 12 months brings.

Corporate power purchase agreements (PPAs) saw huge growth in the years up to the end of 2017 as companies started to buy their own power to try to get their costs down.

Further, the Clean Energy Finance Council’s Ludovic Theau says the level of investment activity in the renewable sector has slowed dramatically since Christmas last year.

He says that is a reflection of three boom years, based on the “fantastically successful” Renewable Energy Target – the last energy policy – and also of the need for a new national framework.