How cutting-edge energy infrastructure is delivering old fashioned returns
In Short
Ivor Frischknecht
Managing Partner, CIO Asia Pacific at Sosteneo, part of Generali Investments
The scale of change underway in energy infrastructure is enormous. But with a traditional approach and detailed understanding of the changing market, it is possible to deliver the kind of stable and predictable returns that investors have come to expect from an infrastructure allocation, says Ivor Frischknecht, Managing Partner, CIO Asia-Pacific at Sosteneo Infrastructure Partners, part of Generali Investments.
Solar, wind and battery energy storage projects represent excellent traditional infrastructure assets because almost all the risk is in development, with much of the cost fixed at the time of construction.
To date, Sosteneo has focused on investing in new clean energy generation, entering offtake agreements to secure long-term contracted revenues for our clients.
We are also investing in large-scale battery energy storage systems, leveraging more than a decade of experience financing the rapidly growing technology.
Like solar, battery storage is competing with traditional energy infrastructure
There’s little old fashioned about the renewable energy projects transforming the world’s energy infrastructure. However, as cutting-edge technologies reshape the way we generate and consume energy, these projects can perform the role of traditional infrastructure to provide stable, predictable returns in a diversified portfolio.
Eight years ago, while in my role as the inaugural CEO of the Australian Government’s renewable energy agency, ARENA, we saw an opportunity. Australia enjoyed lots of sunshine, a vast landmass, and a successful wind industry. Despite this, large-scale solar was struggling to establish itself in the market due to the high cost in an immature sector.
Through ARENA’s role investing in renewable energy to make it more competitive, we allocated $92 million to 12 solar farms, attracting an additional $1 billion in private backing. These projects helped to halve the cost of large-scale solar and provided a launchpad for the technology to compete with fossil-fuelled incumbent technologies.
The rapidly growing large-scale solar industry, combined with world-leading uptake of residential rooftop solar, created another new opportunity: to store abundant, affordable daytime power in the largest batteries the world has ever seen.
Like solar, the first battery projects needed government investment to get off the ground. However, by late-2017 they showed their potential to store wind and solar power whenever needed and compete with traditional energy infrastructure. There are now 20 large battery energy storage systems operating across Australia, with another 38 under construction.
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