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Summary
- Under the Federal Budget 2020-21, the government had decided to dedicate $1.9 billion towards clean energy.
- The Australian Renewable Energy Agency is extending financial support to the renewable industry.
- Before handpicking potential outperforming companies, an investor should do a comprehensive study, taking market rick into consideration.
Australia’s energy sector traditionally functions on fossil fuels. However, with rising concerns regarding climate change, the energy sector is steadily transitioning into renewable-based energy production.
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The country is aiming for a 50% renewable share by the year 2030 which will put forward tremendous opportunities for players in the renewable market in the coming years.
Read More: How climate change policies are impacting oil giants: opportunity vs risk
Government’s support
The Australian government is also playing its part to create investment magnets in this space to further boost the transition. Under the Federal Budget 2020-21, the government had decided to dedicate $1.9 billion over the next 12 years to promote research, development and investment in clean hydrogen, energy storage and low emissions and carbon capture.
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The government has also extended tax incentives for inventors in mini-scale minerals exploration companies. These companies would be raising capital to fund green-fields exploration programmes.
The Australian Renewable Energy Agency is extending financial support to the renewable industry. The financial plan was made in 2019 and extends till 2022. The main focus of the funds is to increase competitiveness in the renewable energy market and encourage more supply of renewable energy in Australia.
Read More: How will Electric Vehicles help Australia tackle the climate crisis?
Some encouraging reports for the renewable energy space
The REenergise report 2020, says that 28 of Australia’s largest electricity using companies and institutions transitioned into 100% renewable energy. Thus, the goalpost demand surged for renewable energy in the country. These companies supply electricity to 1.3 million households.
In market anticipation, the Australian Energy Market Operator predicts that 63% of coal-fired generation is set to retire by 2040. Wind and solar farms would replace coal-based plants. The new green farms would have a capacity of up to 19 gigawatts of energy.
According to the Clean Energy Council Report, the Australian energy sector crossed the milestone of generating more than a quarter of the country’s total electricity generation through renewable sources. Towards the end of 2020, more than 70 large-scale wind and solar projects were undergoing construction, and their capacity is worth 8 Gigawatts
Read More: How can a shift in clean energy initiatives spark job creation in Australia?
How to pick the outperformers?
Although the renewable energy space is expected to register exponential growth in the coming years, still it is important for investors to separate the wheat from the chaff. A comprehensive study of the companies is needed before investing because many times, these developing companies manufacture renewable technologies with many parts untested.
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To make informed investment decisions, understanding government policies and new amendments is a must. It is also to be noted that Investing in fully installed projects has lesser risk than investing in the projects undergoing the early stages of production.
An intelligent investor should also beware of the market risks. An efficient market study is vital before commencing with the investment. Research helps in understanding market trends and aid in better decision making.
Some of the companies aiming to go green are Mpower Group Limited (ASX:MPR), Helix Resources Limited (ASX:HLX) and New Energy Solar Limited (ASX:NEW).
Australia’s renewable sector is grrowing at a fast pace. The year, 2021 brings new opportunities for both small and big investors as government incentives are increasing for the industry, and major companies are investing in renewable energy generation. Thus, the clean energy movement has opened new doors for investment.
