Super Funds Seek to Turn Australia Into ‘Renewable Energy Superpower’

A group of Australian superannuation funds managing A$1.2 trillion ($790 billion) is urging the Australian government to make policy changes to help enable investment toward transitioning to a low-carbon, net-zero economy and to “make Australia a renewable energy superpower.”

The group, which includes AustralianSuper, ART, CareSuper, Cbus, HESTA, Hostplus, Rest Super, UniSuper and investment firm IFM Investors, have released a policy blueprint that identifies investment opportunities among a range of sectors, as well as barriers that lie ahead during the transition.

According to the funds, there should be a sense of urgency for policy changes, as the country’s energy transition will require investment on “a massive scale.” The report projects that it will take an investment of approximately A$12 billion per year on average between now and 2050 in the electricity sector alone, and more than A$40 billion per year to decarbonize other sectors of the economy and grow energy-intensive export industries.

Overall, the need fits well with superannuation funds’ needs as investors, the report argues.

“Much of this investment will be capital-intensive with long time horizons – a good match for Australian superannuation funds which are able to offer long-term financing,” it states.

The policy recommendations include fast-tracking planning, expanding investment opportunities in transmission and creating a financial bridge intended to provide risk-adjusted returns for pension fund participants, while limiting the costs and the impact on local communities.

“If Australia doesn’t get this right, the costs now and into the future will be significant,” the report warned. “For households and businesses, a slower and disorderly energy transition will mean higher costs. This will be felt not only through increased impacts of climate change on people’s lives and livelihoods but also through higher energy bills and a more unreliable energy supply.”

Additional recommendations include rolling out transmission lines to renewable energy zones, accelerating investments in batteries and developing a local sustainable aviation fuel industry.

“Transmission is the foundation for Australia to fulfill its potential as a green energy superpower and a key enabler of other areas of energy transition,” the report stated. It also noted that the country needs 10,000 km (more than 6,200 miles) of transmission lines built by 2050.

According to the report, accelerating investment in battery storage will be key to the transition, but the country will also need to increase current power capacity by more than 30 times by 2050. It said the National Electricity Market covering eastern and southern Australia currently has about 2 gigawatts of storage capacity but will need to boost that to 15 gigawatts by 2030 and 61 gigawatts by 2050.

“Batteries are the key piece of the clean energy puzzle—providing secure, reliable energy for households, industry and the community as we transition to more intermittent renewable sources of energy,” the report stated.

The report also pointed out several barriers currently faced by long-term investors when investing in battery storage. For example, all battery projects involve relatively large upfront capital expenditure that needs to be recouped over the life of the project. Due to current regulations and market dynamics, battery project revenues are dependent on volatile intraday electricity pricing, such as selling energy when demand is high and maximizing profit from price differentials.

The report also noted Australia’s heavy reliance on air travel, which could be aided by an Australian biofuels industry that included sustainable aviation fuel. According to the report, that scenario could inject up to A$10 billion annually to the country’s gross domestic product and create approximately 26,000 jobs by the 2030s.

“Without a domestic production capability, SAF will be produced overseas, using Australian feedstock, and shipped back to Australia,” the report stated. “This could diminish the carbon reduction benefit of using SAF and could mean Australia misses out on the jobs and economic benefit of a new value-add industry.”