The big push for capital comes at a time when there have been high-profile setbacks for large-scale renewable projects and the abrupt exit of the world’s biggest asset manager, BlackRock, after a solar power investment soured.
Fast-track consenting processes are now in place but so is a growing queue to have projects considered under new rules.
But energy experts at one law firm describe the renewable investment opportunity as “immense” and in a prospectus released by the Government at the summit, the case for it was set out. “With an abundant supply of renewable energy, robust renewable foundations and growing energy demands, New Zealand is the smart choice for your investment.”
As New Zealand progresses towards its net-zero aims by decarbonising every sector of the economy, this country’s reliance on electricity is projected to soar, with demand growing by 60% over the next 25 years. To meet this, industries will increasingly rely on our abundant supply of renewable energy.
“This presents an enticing proposition, not only to invest in New Zealand’s growing renewable energy and green fuel sectors, but to use our natural resources to your business’s advantage,” the prospectus from Invest NZ says.
“Proximity to export markets in Asia and Australia and the country’s strong sustainability goals positioned the renewable energy sector to grow exponentially – benefiting the planet and investors alike.”
While in 2023, around 88% of New Zealand’s electricity was generated from renewable sources, there was “huge growth potential” to power industrial processes and transport with clean energy as electrification drives demand.
A MinterEllisonRuddWatts report into investing in the renewable energy sector, published last December, says the Government’s domestic target of doubling renewable generation by 2050 will help drive an increase in its electricity supply by close to 70% by 2050 to meet domestic needs, as the New Zealand economy electrifies. In real terms this equates to approximately 400-500 megawatts (MW) of new generation capacity needed every year through to 2050 – a rate of development never seen in this country before.
The firm also notes that to support all this new generation, it is estimated at least $22 billion of investment in the distribution network is needed this decade.
“Accordingly, the opportunity for investing in renewable energy projects and the associated infrastructure needed is immense, with long-term returns.”
NZ’s renewable energy: The power to succeed
Another MinterEllisonRuddWatts report, on mergers and acquisitions (M&A) in the renewables sector, was published just before the summit and shows high levels of activity.
It says as of September last year, there had been more than 160 projects, predominantly wind and solar.
Because not all projects in the pipeline will be completed (or complete under current ownership), there remains scope for new entrants, strategic investment and, more relevantly, consolidation or sell-down by existing investors and developers.
Independent developers may continue to struggle to secure bankable, offtake arrangements, such as a PPA (power purchase agreement) for a project. It says the New Zealand PPA market is immature and a lack of offtake impacts funding decisions, so some projects may need to be sold.
Last year was a busy one for M&A in the renewables sector.
MinterEllisonRuddWatts noted that:
● Singapore-based fund management company SC Oscar acquired 100% of utility-scale solar developer Rānui Generation.
● Lodestone announced the acquisition of two grid-level solar sites in Manawatū from Kiwi Solar.
● Genesis Energy secured an advanced stage, 127-megawatt peak (MWp) consented site near Edgecumbe in Bay of Plenty from Helios Energy.
● In September, Contact Energy Ltd entered into a Scheme Implementation Agreement to acquire up to 100% of the shares in generator and wholesaler Manawa Energy Ltd through a scheme of arrangement. The deal values Manawa at $1.86b.
● Genesis took a $64 million, 65% stake in EV charging company ChargeNet NZ Ltd, reflecting Genesis’ ambition to be one of the major players in EV charging networks. ChargeNet has more than 400 fast-charging points nationwide and Genesis’ investment is expected to boost the pace of network development.
The Government’s Invest in New Zealand prospectus points to global demand for renewables skyrocketing – and New Zealand is perfectly positioned to meet it, thanks to an abundance of accessible resources generated by hydro, wind, solar and geothermal. Developments in hydrogen and other biofuels also offer significant investment opportunities and excellent export potential.
Although big energy users and consumer groups have different views, the Government’s pitch says the country’s energy and electricity markets are mature and open-access.
The Electricity Authority monitors the market to ensure fair competition and consumer protection. The Government says it is committed to ensuring businesses have access to secure electricity at internationally competitive prices.
At this year’s New Zealand Energy Conference, the Major Energy Users Group warned of the risk of de-industrialisation, with energy-intensive industrial sectors gradually moving their production elsewhere or reducing levels of production here.
It said increases in transmission and distribution charges were impacting all consumers and with fewer parties supplying gas, businesses were “having trouble getting long-term gas contracts alongside electricity at reasonable prices”.
