Public & Private Funds in Energy
There's an art to linking up the right funding mix to the right projects.
Overview
Key issues
Which projects: renewable energy projects with established technologies, such as wind and solar, are operationally and commercially viable and can provide strong returns. Newer technologies, such as offshore wind and green hydrogen, have long lead times before investments start to return capital. There may be opportunities in transmission upgrade projects to connect to renewable energy sources.
Governments' role: they are risk-sharing in investments and implementing a regulatory framework to support new renewable energy markets, such as net zero by 2050, the Offshore Energy Infrastructure Framework, and Long-Term Energy Service Agreements. Increased investment from public funds helps, but projects seeking public funding need strong bipartisan government support, and can have unique contractual and funding models, social licence obligations, and different commercial outcomes.
Investor hesitancy: there's significant private capital available, but not enough renewable energy projects to invest in, and investor concern about delivery pipelines and skilled labour shortages in Australia.
New options: sustainability-linked loans (SLLs), which allow borrowers to access better loan-pricing when they achieve pre-agreed performance targets relating to sustainability outcomes, will become a popular choice for private investors. Unlike green bonds or social loans, SLLs can be used for projects beyond renewable energy which are improving their sustainability profile.
