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Renewables investors run scared

Investment in renewable energy projects collapsed to its lowest in more than three years in the June quarter and almost halved from earlier in the year as grid connection delays, transmission bottlenecks and unpredictable policy took a toll.

Multiple risks combined to deter clean energy investors in the June quarter, when just $600 million was invested in committed projects, less than half the quarterly average in 2019, according to the Clean Energy Council.

The figure was the lowest since the clean energy industry’s peak body started reporting the data at the start of 2017.

“The obstacles around grid connection are creating substantial challenges for renewable energy developers, and in turn spooking clean energy investors,” said Kane Thornton, head of the council.

Mr Thornton pointed to projects that are experiencing significant and unexpected delays in grid connections, which is hitting commercial terms for the wind and solar farms and increasing investment risks.

Energy Security Board chair Kerry Schott told an energy users’ association conference on Tuesday that grid congestion due to rapidly rising renewable energy generation was just one of several reasons driving work to redesign the National Electricity Market.

“Investors have been suffering losses and been constrained off and been curtailed and finding their revenues really being bashed around because of the transmission system not being there, said Dr Schott. A 12-month extension to her term at the ESB, as flagged by The Australian Financial Review, was confirmed on Tuesday by federal Energy Minister Angus Taylor.

Grid congestion and other challenges in the National Electricity Market are also driving unanticipated changes to technical requirements and creating uncertainty for developers, which is weighing on confidence in the sector, Mr Thornton said.

The findings come after New Zealand-owned Tilt Renewables last month warned that output at its new $650 million Dundonnell wind farm will be capped at one-third of capacity for several months after the energy market operator raised last-minute concerns about the venture’s impact on voltage on the system. The ASX-listed company is expected to update shareholders on the problems at its annual meeting on Wednesday.

Several wind and solar farm developers also faced months of losses from output cutbacks and connection delays in the West Murray region straddling Victoria and NSW as the market operator urgently worked on a fix for the overloaded grid.

UK-based infrastructure developer John Laing Group is seeking a buyer for its renewables assets after having to take a large write-down last year due to transmission losses, while ASX-listed New Energy Solar last week flagged write-downs on its assets of 8-10 per cent after cutting assumptions on future electricity prices.

Investment in new renewables projects already dropped by more than 50 per cent last year, according to Clean Energy Council data, countering claims from the Morrison government of record spending in the sector.

In the June quarter, only three renewable energy projects reached financial close, representing 410 megawatts of new capacity. That compares with the record 19 projects reaching financial close in the first quarter of 2017 and in the fourth quarter of 2018. In early 2017, quarterly investment in financially committed wind and solar projects was running at about $4.2 billion, some seven times higher than last quarter.

The three projects to go ahead were Neoen’s huge Western Downs solar farm in Queensland, and Photon Energy’s Leeton and neighbouring Fivebough solar farms in NSW’s Riverina region. A commitment was also made by the Northern Territory government to a $30 million battery storage system for the Katherine-Darwin grid.

Source: Financial Review