Australia’s renewable energy sector is charging ahead, with $9 billion in new capacity approved for construction last year.
According to CBRE’s latest Renewable Energy Market Viewpoint report, 88 new renewable electricity generation projects are in the development pipeline, buoyed by strong government incentives and robust projected returns.
“The government’s push for net-zero emissions, along with supportive policies and subsidies is giving the sector a big boost,” CBRE’s Capital Markets Manager for Energy and Infrastructure Lee Holdsworth said.
At the same time, the falling cost of renewable technologies such as solar panels and battery storage is making green infrastructure more accessible.
“Add to that a growing desire to move away from fossil fuels, and you’ve got both public and private sectors jumping on board to back green infrastructure,” Mr Holdsworth said.
Strong Returns Drive Investor Interest
According to the report, Australia’s clean energy sector is now delivering some of the highest returns across the infrastructure investment landscape, with internal rates of return (IRRs) ranging from 5% to 18%.
Solar and wind farms remain cornerstones of Australia’s renewable mix, with solar assets offering IRRs between 5% and 15%, and wind farms generating between 8% and 12%.
“There is currently a huge investment in wind power, especially in high wind areas throughout Victoria and South Australia, where returns are strong,” Mr Holdsworth said.
“Rooftop solar is also going strong, and is favourable because it’s low-risk, pays off quickly, and keeps scaling up.”
Battery storage, however, is emerging as the sector’s highest-yielding asset class. The report identifies four-hour battery systems as delivering IRRs between 12% and 18%.
There is also increasing momentum behind co-locating batteries with solar and wind assets to improve efficiency, manage supply volatility and respond more effectively to demand fluctuations.
“Batteries are an essential asset because they help balance the grid and allow us to use renewable energy when it’s needed most, not just when the sun is shining or the wind is blowing,” he said.
Playing the Long Game
Despite the compelling returns, CBRE cautions that renewable energy assets require a longer-term, more complex investment approach compared to traditional real estate.
The report outlines several critical considerations: development timelines of up to nine years, evolving regulatory frameworks, rapid technological change, and the complexities of energy sell-back pricing.
“Keeping in touch with changing energy policies, grid rules, and environmental regulations is crucial,” Mr Holdsworth said.
“Technology is evolving very quickly so investors also need to be across the emerging advances in battery storage, hydrogen, and smart grids.”
Location and connection costs can make or break a project’s feasibility, and proximity to existing grid infrastructure or other renewable projects can reduce risk.
“The final consideration is around diversifying your portfolio across different technologies and regions which will help mitigate the risks of green energy investment,” he said.
For investors willing to do the groundwork, the mix of policy support, maturing infrastructure, and high-yield opportunities is proving hard to ignore.
