Want to invest in Australian renewable energy? Good luck

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The second is long-term policy settings.

Prime Minister Scott Morrison famously brandished a lump of coal in parliament and Energy Minister Angus Taylor last week sought to make it harder for coal-fired power stations to close. Investors know the government has a political incentive to maximise fossil fuel extraction, with oil, gas and coal among our top exports.

But supporting the export industry does not have to mean neglecting the domestic energy transition. Countries such as Denmark have shown it is possible to decarbonise domestically, grow leading renewable energy companies while continuing to export oil. Failing to do this will only discourage investment and hurt private sector growth.

Mirova chief executive Jens Peers says the Australian government is at risk of following Kodak’s corporate collapse, when it comes to energy policy. Kodak dominated photography for the best part of the 20th century but when the digital revolution arrived its leaders feared embracing the new world would cannibalise its analogue business so doubled down on the sunset industry. Its competitors shifted, diversified and thrived while Kodak declared bankruptcy in 2012.

“Right now, Europe is like Nikon and Canon. They have everything to win,” Peers says.

While there is enormous investor interest in renewable energy projects, Pendal’s Andrew Parry says “being green is not a sufficient condition for being a good investment”. Investors need the grid to be upgraded and certainty the government will not start underwriting new coal mines, as it has done in the Hunter Valley with gas. “Policy settings are key,” Parry says.

The third reason is that other countries are easier to invest in. Mirae Asset Global Investments chief investment officer Rahul Chadha invests in renewable energy projects in the Asia Pacific Region and says China and India are far more attractive than Australia because boosting renewable energy has become a top national priority.

China has become the world’s leading manufacturer of solar panels and India wants to compete. Both countries see this as a key pathway to unlocking growth and jobs, and have set aggressive targets to propel domestic industries.

Chadha says investors will only feel comfortable backing renewable energy projects after observing a country’s track record five to seven years after targets are set. “You need serious incentives, you need a big push from the top,” says Chadha. “There has to be a concrete plan.”

A higher interest rate environment has caused a recent correction in renewable energy stocks. But investors are confident this has been necessary to remove the froth and are confident the industry is only going in one direction.

The Russian energy crisis has been a harsh lesson in the dangers of relying on finite resources produced by autocratic-ruled countries for critical energy needs.

Australian renewable energy seems like a no-brainer. It’s unlimited, cheap and ours. All we need now is a government that will listen to Guterres. “Investing in new fossil fuels infrastructure is moral and economic madness… In most cases, renewables are already far cheaper.”

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