Expanding Investments in Renewable Energy: Australia Increases Capacity Support Scheme by a Quarter
Australia's Capacity Investment Scheme Expansion Boosts Renewable Energy Investment
The Australian government has announced a significant expansion to the Capacity Investment Scheme (CIS), increasing its target from 32GW to 40GW. This expansion is expected to increase financiers' appetite for renewable energy projects, providing greater revenue certainty and supporting a larger pipeline of renewables and storage projects.
The CIS now underwrites 26GW of large-scale solar and wind, and 14GW of dispatchable clean capacity such as battery storage. The scheme offers competitive contracts guaranteeing revenue floors and ceilings, reducing investor risk and excluding fossil fuels.
The expanded CIS supports an additional 3GW of renewable generation (enough for over 1 million households) and 5GW of energy storage (covering peak demand for 4.6 million households), enhancing grid reliability alongside renewable capacity growth.
Investor confidence is bolstered by clear government policy signaling, with HESTA, a $96 billion superannuation fund, emphasizing the CIS expansion as crucial for unlocking the scale of investment needed for the low-carbon transition. HESTA aims to allocate 10% of its portfolio to climate solutions by 2030.
The scheme has been massively oversubscribed, with $17 billion in investment attracted across initial rounds, delivering over 6GW of new clean generation and 2GW of dispatchable capacity. Falling costs of solar panels and batteries further improve project economics, likely boosting investor appetite.
The ongoing investment in renewables and long-duration storage is seen as crucial for Australia's progress towards its ambitious 82% renewable energy generation target by 2030. Large-scale solar energy has grown by 2777% compared to 2016 levels, and wind energy generation has grown at 13% per year since 2015.
The CEFC, a government-backed finance corporation, has had a record-breaking year, with its investment in renewable energy assets being a significant portion of its total commitment. The CEFC's chief executive, Ian Learmonth, has commented that Australia requires ongoing investment in renewables and long-duration storage, clean energy affordability for consumers, and measures to cut emissions in 'hard-to-abate' sectors.
Debby Blakey, HESTA's chief executive, has stated that a strong and ambitious 2035 climate target from the Federal Government would help give investors the certainty they need to supercharge investment in Australia's shift to a low-carbon future. She also noted that the 25% expansion of CIS to 40GW demonstrates a clear commitment to building a strong pipeline of high-quality renewable investment opportunities.
The momentum on the renewables front would be welcome news for Australian asset owners with a burgeoning climate solutions appetite. The CIS lends revenue safety nets to projects in renewable energy generation and energy storage, making renewable energy projects in Australia more attractive to investors.
- The expansion of Australia's Capacity Investment Scheme (CIS) to 40GW is anticipated to boost financiers' interest in renewable energy projects, due to the increased revenue certainty it offers.
- HESTA, a large superannuation fund, considers the CIS expansion crucial for unlocking the scale of investment needed for the low-carbon transition, aiming to allocate 10% of its portfolio to climate solutions by 2030.
- The ongoing investment in renewables and long-duration storage, as seen in the Australian government's Capacity Investment Scheme, is crucial for Australia's progress towards its ambitious renewable energy generation target by 2030.
- In the Australian renewable energy sector, environmental science, finance, and the industry are closely intertwined, with investments in renewable energy projects expected to significantly impact the environment and contribute to mitigating climate-change.
