2022 Outlook: Your Ticket to Another Year of Record-Breaking Investments in Renewables

This article is part of our New Energy Insights series, focusing on the increasing M&A potential across the energy, infrastructure and carbon market sectors. Stay tuned for regular updates and commentary on topical issues across the sector.

The Australian renewable energy market has experienced substantial growth over the last five years, with renewable energy deals continuing to dominate Australian investments.

In this article we reflect on the major developments in the Australian New Energy market in 2021 and the origin of New Energy M&A activities in the first half of 2022. Our reflections lead to our prediction that the M&A activities in the New Energy space will continue to increase in the second half of 2022.

2021: The year of broken records.

The Clean Energy Council released their 2022 Clean Energy Australia Report highlighting another record-breaking year for Australian New Energy developments. 2021 boasted an impressive increase in New Energy construction and development including:

• Capacity
  • A 50% increase in large-scale generation capacity
  • 2995 GW of renewable generation capacity added to the grid across 27 projects
  • 3.3 GW of new small-scale solar capacity from 389,577 systems
  • 1.7 GW of new wind capacity
• Batteries
  • Construction currently underway for 30 large-scale batteries with a combined capacity and storage duration of 921 MW/1169 MWh
• Hydropower
  • Hydropower generation constituted over 7.0 per cent of Australia’s total electricity generation in 2021.
  • Generation to be increased in 2022 by the completion of the Snowy 2.0 and the Kidston Pumped Storage Hydro Project.
• PPAs
  • 18 corporate renewable power purchase agreements (PPAs) were announced in 2021, directly contracting just over 800 MW.

The almost 3 GW of new large-scale capacity that were added in 2021 included the country’s three largest solar farms and two of its three largest wind farms all beginning to send power to the grid during the year.

2021 was also a great year for the energy storage sector, with the completion of Australia’s largest battery and the commissioning of the Victorian Big Battery. Energy storage is poised to expand exponentially in the coming years with a continuing strong interest in both large-scale and household batteries.

First half of 2022

Half-way through 2022 we have seen an uptake in the M&A appetite in the New Energy space. The uptake was partially sparked by investment opportunities that have not yet been capitalised on and an increase in ESG driven investments.

Uncapitalised investment opportunity

The Australian Government reported that in 2021 there was over $7.5 billion available in potential investment opportunities in renewable energy in Australia. However, only $3.7 billion was spent on financial commitments for new large-scale renewable energy projects in 2021 leaving a significant amount of financing available for investment in renewables. ¹

ESG driven investments

The corporates focus on ESG is increasing, driven by consumers, financiers and funds. Lenders have become more sensitive to the ESG profile of companies, leading to restrictions around access to capital or access to cheaper capital depending on the borrower’s ESG profile. It was also recently reported that social infrastructure, telecommunications and data, renewable energy and water have largely replaced traditional transport assets as favoured investments in Australia with a survey showing investor appetite for renewables generation reaching 72%.²

Second half of 2022

Although ‘investment security’ levels in Australia are only slowly catching up to the levels of other jurisdictions, the developments reported in 2021 demonstrate that Australian New Energy investment can be profitable. Combined with the increased M&A appetite seen in the first half of 2022, these developments predict that the surge for New Energy M&A will be continuing.

We predict that the investment appetite will be for both the sale and purchase of New Energy projects that are in development as well as projects that are fully operative.

In the coming articles we will dive into the M&A specific considerations of buying or selling New Energy assets, for both projects in development and projects that are fully operative.

The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.