Accelerating investment for cleaner energy, buildings and industry

A discussion with CEFC CEO Oliver Yates

Article for Business View Magazine, June 2015

The Clean Energy Finance Corporation (CEFC) invests in energy efficiency, low emissions and renewable energy technologies to accelerate Australia's transformation towards a more competitive economy in a carbon constrained world.

By 30 June 2015, the CEFC expects to have committed around $1.4 billion of investments supporting projects worth over $3.5 billion in total since its inception.

These projects are right across the Australian economy, including finance for projects as varied as utility-scale solar farms and wave technology, through to helping manufacturers and commercial property owners transform their operations with new plant and equipment which deliver lower energy costs and productivity improvements.

The CEFC is working with the private sector, offering new financing programs which are scaling up these efforts to unlock productivity through lower energy costs, greater energy flexibility and security while lowering carbon emissions. This investment has the added benefits of helping future-proof business, contributing to development of new industries and employment opportunities.

The Clean Energy Council (CEC), the peak industry body representing clean and renewable energy in Australia, estimates that over 13 per cent of Australia's electricity came from renewable sources in 2014 - enough to power 4.5 million average homes for a year. The CEC sees the sector poised for a "strong and vibrant" period to 2020 following increased certainty around the Renewable Energy Target. To meet a 33,000 GWh Renewable Energy Target, according to Bloomberg New Energy Finance (BNEF) up to $15 billion of investment in renewable energy will be needed over the next five years. 

Clean Energy Finance Corporation CEO Oliver Yates

CEFC CEO Oliver Yates says the corporation's access to long-term capital enables it to provide long-term financing that is helping to bring down the cost of clean energy technologies. As such, its investments are in a position to support the Australian Government's current Emissions Reductions Targets, which require a five per cent emissions reduction below the levels recorded in 2000 in 2020. This reduction is currently estimated at 126 MT CO2-e based on current projections for 2020 emissions. To achieve this target, the Federal Department of the Environment estimates cumulative emissions will need to be 236 MT CO2-e lower than currently forecast between 2013 and 2020.

With international investment in the clean energy sector rising 16 per cent according to BNEF, there remains a strong incentive for Australia to be at the forefront of renewable technology innovation and implementation, to reap benefits for the broader economy.

Working with other financiers, the CEFC is developing financing models and support to accelerate both large and small-scale projects in renewable and energy efficient technologies and to support increased technology diversity in the clean energy sector.

The CEFC Chair Jillian Broadbent AO, a former long-serving Reserve Bank Board member describes the CEFC approach as working to "crowd in, not crowd out" co-financiers to leverage the investment necessary for Australia's transition to a lower carbon economy.

FURTHER OPPORTUNITIES

The CEFC financing programs are being scaled up across a variety of large scale renewable projects, waste-to-energy projects, more efficient and innovative transport and infrastructure, working with all levels of government and the tertiary education sector, manufacturing and the commercial property sector.

SOLAR

The CEFC's support of the growing Australian commercial solar market involves financing innovative market models and accelerating and widening take-up.

Australia has more than 4GW of installed rooftop solar PV with residential systems accounting for the bulk of that capacity. As an indicator of the momentum in the solar market, commercial solar is now rapidly ramping up. Just under 25 per cent of new solar PV installed capacity is being made for businesses looking to generate their own onsite solar energy.

"We expect this trend to continue, as more businesses experience the benefits of solar in helping them bring down their energy and operating costs over time," Mr Yates said.

The emergence of battery technology in particular is likely to be a game changer for commercial solar, because of its ability to improve the reliability of supply.

Solar homes typically use solar for about 30 per cent of their electricity needs. With battery storage, this could be boosted to over 70 per cent. While electricity usage patterns differ, battery storage will have a considerable impact for commercial operators.  Solar with storage can also reduce the reliance on diesel-fired generators in remote areas.

Mr Yates said that utility-scale solar is becoming increasingly competitive in overseas markets, with record-breaking bids being achieved for new projects in the US, the UK, Dubai and South Africa. This will have flow-on benefits for the Australian market and the CEFC expects solar to play an increasing part in the diversity of renewables within Australia's energy supply system.

"The predictability of solar generation, relative ease of construction and low development concerns around Australia make it an attractive option," Mr Yates said.

Solar technologies make up just over a quarter of the CEFC's total contracted investments and it is considering more than $500 million in finance for solar projects totalling more than $1 billion in value.

WASTE-TO-ENERGY

The waste-to-energy sector holds tremendous potential for reducing carbon emissions of landfills, intensive agriculture meat and food processing industries to recycle organic waste as energy and as a future source of energy.  The CEFC has financed projects to demonstrate the potential of anaerobic digestion to convert organic waste streams to energy and waste-to-gas projects that have potential for energy productivity gains in the mining sector and potential for landfill waste recovery.

According to the Clean Energy Australia Report 2015, there are 139 bioenergy plants operating nationwide comprising about 7.6 per cent of total clean energy generation. With the right support, the Australian economy can realise bioenergy's great potential as a cost-effective, reliable renewable energy for Australia. The CEFC is currently considering $800 million in investment in the bioenergy sector to accelerate $3 billion in projects. The Corporation takes a commercial approach to these investments, seeking projects that increase energy productivity and assist the technologies used to move down the cost curve. These investments broaden Australia's bioenergy supply chain capacity and cost-effectively reduce emissions.

TRANSFORMATIVE POTENTIAL OF ENERGY EFFICIENCY AND PRODUCTIVITY

While renewable energy projects are a key focus of the Clean Energy Finance Corporation's investments, in parallel, the CEFC has its strong focus on investing in energy efficiency right across the economy. Energy efficiency makes up some 39 per cent of the CEFC's current investments.

New plant and equipment which are energy efficient can lower business energy costs and improve their productivity and competitiveness. Businesses which adopt new technologies can save energy while transforming their operations and opening up new market opportunities through improvements in productivity.

ClimateWorks research has shown how Australia could nearly double its energy productivity by 2030 - generating almost twice as much output from every unit of energy - through modernising its energy system and taking up new technology.

Australia spends more than $120 billion a year on energy. But with the right equipment, businesses can lower energy and operating costs, cut heating, cooling and lighting bills and even create energy from waste.

The CEFC's finance has assisted manufacturers upgrading equipment to lower their energy costs by up to 30 per cent, and building owners retrofitting office buildings to cut base building energy costs by up to 45 per cent and schools and sporting clubs to cut lighting costs by more than 50 per cent through the installation of LED lighting and smart controls. These sorts of boosts to operating efficiency and business bottom lines can open up new opportunities, new markets and widen customer bases.

The CEFC has worked with co-finance partners including leading Australian banks, Commonwealth Bank, NAB and ANZ to create finance programs that work economy-wide for Australian businesses and the public and community sectors.

RECENT INVESTMENTS

Some recent initiatives announced by the CEFC include:

• The High Income Sustainable Office Trust - a $400 million trust which will acquire older commercial office stock to upgrade its energy performance and revitalise and reposition it in the market.
• A $120 million financing program with NAB targeted to help business upgrade industrial and agricultural equipment, increase their uptake of solar and switch to greener vehicles.
• Programs that are bringing new solar delivery models to the market, including programs with global solar solutions provider SunEdison Australia.  (Investment subsequently lapsed)