New Energy Solar was created in 2015, raising $300 million almost exclusively from private Australian investors, but has focused all its efforts on the more mature and better regulated US market to date.
So far, it has four major projects in California and North Carolina, some of them supported by major corporate buyers such as Duke Energy and Stanford University, and has recently contracted to buy a portfolio of 124MW.
Now, as the company seeks up to another $300 million and a public listing on the Australian stock exchange, CEO John Martin says New Energy Solar is looking for projects in its home base.
It is a sign of the huge interest in the Australian solar market, which is at an extraordinary transition point.
To date, only about 400MW of large scale solar projects have been completed, but there are another two dozen projects totalling 3000MW under construction.
Investors are moving in – from the UK, Europe and locally – and there is a growing interest in the emerging corporate market, which is just starting to take off.
Zinc refiner Sun Metals is building its own 116MW plant in north Queensland, Telstra has contracted a 68MW solar plant now under construction, while the new owners of the Whyalla steel plant are looking at up to 700MW of solar to power its own facilities and those of other big energy users in South Australia.
Martin says most new solar projects will not be so grand, but the commercial and industrial sector is ripe for investments in solar plants of the 5MW to 20MW size – and taken as a portfolio, that’s of interest to New Energy Solar.
“I think the behind the meter commercial and industrial sector is going to be large,” Martin tells RenewEconomy. “They have to look after themselves (in terms of managing their electricity bills).”
He said a single 5MW project would be too small for the fund to invest in, “but a portfolio for five of them starts to get interesting.”
The focus on the corporate market is occurring because of soaring energy bills on one side, and the market for bigger projects from big energy retailers is drying up, and the various auction processes are cutting margins too fine.
“When there are 90 bidders for a project, it is difficult to gain any certainty for investors,” he notes.
Martin says many of the investors in the fund have had previous experience backing new technologies – solar and battery storage manufacturers and developers – and the experience has not always been good.
“What these people want is solar and renewables, but investments that are sustainable,” he says. “They want a stable low risk investment … and they want to be able to look at their investments, and show their grandkids that they are investing for a sustainable future.”
But there are some that don’t accept the science of climate change, “but still think renewable energy provides a good return.”
(As current news reports indicate, Conservative Senator Cory Bernardi is a perfect example, albeit at a household level.).
The solar funds offer a solid rate of return – 7 per cent to 10 per cent a year – that is underpinned by contracts for the output of the solar farms.
Private investors and self-managed super funds are the most interested, because it is too small for the big infrastructure investors.
New Energy Solar is seeking a minimum of $100 million and says it has already exceeded $150 million of applications. The public raising closes on Friday.