As the cost of storage continues to fall, each household or commercial premise has the potential to become more independent, or even participate as part of a highly decentralised, but coordinated energy system.
Market reform could help ensure these changes can be managed properly, so investment in a range of technologies that support the energy system are made in a timely, cost-effective manner that fairly compensates investors and participants. Additionally, balancing the trilemma of affordability, reliability and sustainability remains the focus of the various regulatory bodies involved.
The private sector however is working to get around these challenges. CleanPeak Energy Renewable Investment recently closed a landmark financing provided solely by ANZ for the development of a portfolio of behind the meter, integrated roof-top solar and battery projects across a number of Australian states and territories.
Asset manager First Sentier Investors (formerly known as Colonial First State Global Asset Management) together with its solar project developer partner CleanPeak, offer an innovative technological alternative of embedded generation to large scale generation.
Embedded generation is the process of generating energy at a specific location, effectively mitigating the issues related to grid constraints while still providing end users with low-cost and low-carbon emission energy sources.
The portfolio is Australia’s first commercial and industrial solar scheme – targeted at factories, shopping centres and industrial precincts - to attract stand-alone limited recourse project financing and is expected to grow in the near term as more companies and landlords procure this type of renewable energy solution.
“We found that embedded networks and low emission generation are an attractive alternative to traditional utility scale centralised generation,” Gavin Kerr, Head of Transactions, Australia and New Zealand – Unlisted Infrastructure, First Sentier Investors said.
The fragmentation of the sector provides opportunities to a large fund manager such as First Sentier Investors with approximately $A230 billion of assets globally under management.
“We were looking to partner with an entity that could assist us with the development and operational aspects of building a complete service embedded generation business,” Kerr said.
Aggregating projects under a single entity provides scale, and allows First Sentier Investors to mitigate key risks through diversification and improve efficiency as the individual projects are very small when compared to utility scale renewable projects, Kerr said. Importantly, it also facilitated the involvement of ANZ as financier.
“To be successful in this sector we needed to bring together development, operational, funding, electricity market and commercial capability to be able to offer a competitive product to sophisticated buyers of energy,” he said.
David Roberts is Head of Project Advisory, Corporate Finance, Tsen Wong is Head of Energy, Institutional and Katherine O’Connor is Director, Project and Export Finance.