Infratil, which is headed by Jason Boyes (above), has a renewable energy presence in 17 countries.
New Zealand should follow the American tax credits scheme to develop renewable energy projects and expand the transmission grid, says Infratil chief executive Jason Boyes.
“We could accelerate the energy transition so much more if we look at what the US has done, and change our mind around incentives in a richer way to get more innovative and independent thought,” says Boyes.
“New Zealand has an unsubsidised mindset which puts it at a disadvantage in attracting investment capital compared with the rest of the world. Fortunately, we have plentiful [hydro] renewable power. If you are known to have abundant renewable energy, then this will attract all kinds of investment. Globally, we are seeing plenty of money going into building renewable generation but not for transmission,” Boyes says.
Last year the United States Government passed the Inflation Reduction Act designed to mobilise private capital for developing and deploying clean energy technologies and meeting the country’s climate goals.
It was the largest climate investment in US history, and the act provides tax credits of up to 30 per cent for qualifying investments in wind, solar, energy storage and other renewable energy projects.
There are other bonuses for companies to locate in under-served communities where job creation and investments can produce higher economic returns. US Secretary of the Treasury Janet Yellen described the initiative as “modern supply-side economics” with government action promoting long-term growth while addressing climate change or inequality.
Boyes says there is a real case for more energy transition support and building out the transmission grid in New Zealand with an open-access incentive scheme that looks like the Inflation Reduction Act.
Europe has a grants-based scheme administered by government entities, and this creates an administrative overhead. The process is slower, Boyes says. Often it comes down to who is best at lobbying, and doesn’t go to the highest economic outcome.”
The US approach is more successful. It is an open-access tax system, anyone can get a credit, and it doesn’t matter where they are.
“The incentive scheme has the effect of pulling in capital for lower-cost projects at the highest profit.”
Boyes says there have been some targeted grants in New Zealand (to Fonterra and NZ Steel) but the present system provides a constraint in adding alternate power fast enough to the transmission grid. “If we don’t do anything, people will struggle to achieve outcomes quickly and this tends to push additional investment to existing large-scale players [like Transpower] who will do it at their own pace. There is a real opportunity, in transmission, to put in a scheme that helps smaller distribution companies make investments.”
Boyes says putting in a system to invest at the right time and at the right pace is complex but not impossible. “You have some fantastic people in the lines companies here who are thinking about these things.
“New Zealand does need alternate power. Methanol will be used in the ships coming to New Zealand, sustainable aviation fuel is important for a remote country, and hydrogen has a role in replacing gas.”
He says transmission is heading towards a fully digital-enabled network with more sources of generation orchestrated through technology. There could be small community-based batteries that can be switched on and off to control the power load.
Utilities investment company Infratil is making use of the Inflation Reduction Act. Longroad Energy — in which Infratil and New Zealand Super Fund each have a 37.1 per cent shareholding — has started building Sun Streams 4, a 1200 MWh storage project in Maricopa County, Arizona.
It is Longroad’s third solar storage project in the Sun Stream complex and has the potential to power 120,000 homes. Sun Streams 4′s output will be bought in a long-term agreement by Arizona Public Service and will help support the reliability of the distribution system, particularly during the peak of the summer months.
Paul Gaynor, Longroad’s chief executive, said Sun Streams 4 is the company’s largest project to date in both megawatts and investment capital. “It is one of our first projects to incorporate provisions from the historic Inflation Reduction Act.”
Longroad is focused on renewable energy projects. It has developed or bought 4.9GW of renewable energy projects across the US (including five projects totalling 1.6GW which are currently under construction) and has raised over $12.8 billion of equity, debt, and tax equity to support the completion of its portfolio.
It owns 3.1GW of wind, solar, and storage projects and operates and manages a total of 5GW on behalf of third parties. It has taken a 50 per cent stake in Valta Energy, a California-based developer and operator of distributed generation projects. Valta, founded in 2009, has more than 200MW of contracted solar assets in development or operation, and Longroad has the option to invest more equity capital within the next three years.
Longroad’s rationale for the investment is to grow its exposure to the rapidly growing US distributed generation sector, through an established development, ownership and operation platform.
Valta is presently building a hydrogen fuel cell station in California to power electric vehicles and buses. The green hydrogen is produced on-site through the use of electrolysers and solar power-charged batteries.
“It’s an attractive tax credit scheme,” says Boyes. “The Inflation Reduction Act has provided incentives for alternate renewable energy production and created investment opportunities.”
Infratil is reviewing opportunities in hydrogen, sustainable aviation fuel, e-methanol and carbon capture. “We are at least 12 months away from making an investment,” says Boyes.
He said there are venture capital companies in the US that have developed a technology and run a successful pilot scheme, but don’t have enough money to scale up into a commercial business.
They have reached the end of their venture capital phase and need to sell to a private equity firm or list on the share market. “Going to an initial public offer is not an option in the present market, and this provides an interesting set of opportunities — to provide funding of say US$100 million for the next phase of their business.
“We see the potential in leading a funding round and getting a foothold in alternate energy technology that will be important for decades to come,” says Boyes.
Renewables make up 26 per cent of Infratil’s portfolio worth more than $9b. Digital with CDC Data Centres and One NZ (formerly Vodafone) is the biggest investment sector with 53 per cent; healthcare with Qscan and Retire Australia makes up 14 per cent; and airports 7 per cent through Infratil’s 66 per cent stake in Wellington Airport.
Infratil has the globe covered in terms of renewable energy. It has a 51 per cent holding in New Zealand electricity generator Manawa Energy; 95 per cent in Singapore-based Gurin Energy which is developing and operating wind, solar and storage projects through Asia; 73 per cent in Australian developer Mint Renewables; 40 per cent in Zurich-based Galileo Green Energy with large-scale projects in Britain, Italy, Spain, Germany, Poland and Sweden; and the 37.1 per cent in the Boston-based Longroad Energy.
Infratil, with more than 6000 staff in its portfolio, has a renewable energy presence in 17 countries and has achieved 5750GWh generation, enough to power 800,000 average homes. It has a renewable generation pipeline of 30GW across four continents.
Established in 1994, Infratil recently released its inaugural Sustainability Report, focusing on four pillars — environmental, social and governance (ESG), leadership, climate and nature, and people.
All portfolio companies have a Code of Ethics or Code of Conduct and a diversity policy. The companies participate in the Global Real Estate Sustainability Benchmark assessments. Infratil is one of the first financial institutions in New Zealand to commit to setting science-based targets (SBTi) for corporate climate action.
· Infratil is an advertising sponsor of the Herald’s Sustainable Business and Finance report.
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