– By AMP Capital
Rooftop solar and battery solutions are empowering people to make the shift from energy consumers to energy generators. And the benefits are compelling.
According to the Climate Reality Project, few countries see almost every side of the climate crisis as early – and have as much to lose – as Australia.*
Their forecasts warn that if we do nothing, babies born now will suffer a 5°C hotter Australia by their 70th birthday.** Sea level rises may cause residents to reside away from coastal cities like Sydney. And the consequences go on.
Desperate efforts are being made to achieve carbon neutrality by the end of the century. The landmark 2018 report by the UN Intergovernmental Panel on Climate Change (IPCC) says we have 11 years to make life-or-death changes that would curb average global warming to a ‘moderate’ 1.5°C, with warning that even half a degree more would be devastating.
No more ‘inconvenient truth’, this looming threat has been the catalyst for much debate about how Australia produces its electricity.
In the investment world at least, the debate about renewable vs traditional coal-fired generation is over because renewable energy is now the cheapest. Part-way through a decades-long energy transition, our National Electricity Market (NEM) or ‘grid’ is evolving to new ways of sourcing and distributing energy. The changes call for investment to develop and build more sustainable, reliable and affordable generation, including intermittent (wind and solar), dispatchable (gas peaking plants) and storage (pumped hydro and grid-scale batteries).
Distributed energy resources (DER) are another solution in the mix. These are smaller generators that sit behind the meter and power homes directly, as opposed to buying from an energy retailer and getting the electricity that comes down the power line. DER also empower consumers to sell their excess energy back up the line into the grid, or even give it to a neighbour.
Power to the people
Going ‘off grid’ sings to the Aussie spirit in its ingenuity and egalitarianism – and the benefits are, in our view, compelling. They include cheaper power bills, the option to derive an income stream from trading excess energy and a sustainable power source for electric vehicles.
Some power companies will offer to remotely manage the system as part of a virtual power plant (VPP), which is like teaming up with your neighbourhood to automatically offload your excess and help meet everyone’s energy needs. A modern version of the neighbourly cup of sugar.
A growing number of Australians are opting to take power into their own hands and on their own terms, with our climate and geography bestowing an advantage to do this with solar power. Additionally, energy providers are now going beyond jut solar and battery solutions, with technology available to maximise savings and minimise footprint. Renewable power installations per capita topped the EU, Japan, China and the US last year and continuing this trajectory could achieve 50 per cent renewable energy generation by 2024 and 10 per cent by 2032, research by the Australian National University has shown. And, energy providers going beyond just solar and battery solutions, with technology available to maximise savings and minimise carbon footprint.
CSIRO and Energy Networks Australia further estimate between 30-45 per cent of Australia’s future energy generation will be customer – owned – in homes, businesses and communities. This is, in our opinion, likely to present attractive opportunities for investors wanting to capitalise on Australia’s advantage in solar.
It means solar panels on every sunny roof and batteries in households and commercial buildings; ‘microgrids’ in apartment blocks powered by solar and batteries; renters joining community solar projects. When you go to the shopping centre and plug in your electric car, it will be shaded by solar panels.
Looking globally, Bloomberg forecasts deployment of behind-the-meter and grid-scale batteries over the next two decades will grow the energy storage market to 857 GWh – one-fifth of Australia’s massive Snowy Hydro scheme; the ‘fourth pillar’ in the NEM – and attract $620b in investment.
This growing and deserved sense of urgency in addressing the global climate crisis is leading to greater investment and innovation in the green economy, with, in our opinion, compelling opportunities for consumers and investors alike.
While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) makes no representation or warranty as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.
* Fragile Planet, HSBC Centre of Sustainable Finance, 2018
** Al Gore’s The Climate Reality Project, research published online, January 2019