Brookfield, the Canadian asset management giant with more than $A1.5 trillion under assets, says corporate demand for low cost and zero emissions power has never been stronger, and the prospects for low cost wind and solar have never been better.
“Off-takers and users of electricity are always going to take as much renewables as they can because it is the cheapest,” says Connor Teskey, the CEO of Brookfield Renewables.
“The off-takers simply need the power. And therefore, they’re not going to let short-term uncertainty stop them from signing contracts, and they will ensure — and they will do what is necessary to protect the developers in order to pull those projects out of the ground.”
The comments from Teskey are significant for a number of reasons. Firstly, Brookfield Renewables has more than 47 gigawatts of capacity and a pipeline of 200 GW more, mostly in wind, solar and storage and is one of the biggest players in the world.
Like the US utility giant NextEra, is is unfazed by the incoming Trump administration, and its threats to trash support for wind and solar technologies, because both companies say the demand for new, low cost and low emissions power is overwhelming, and other technologies can’t compete on cost, or on time scales.
It is significant for Australia because Brookfield Renewables has recently taken control of French-based renewables and storage developer Neoen, arguably the most successful development company in Australia, a country facing a similar political polemic as the US, with conservative parties threatening to stop the transition to renewables.
The conservative plans in the US and Australia make no economic sense, unless you are part of the fossil fuel cabal, and no environmental or engineering sense either. It is instructive that so many big players in the energy space are now making this clear, even as those is other industries cower amid the threats of retaliation.
“We are experiencing a dramatic shift in demand driven by the AI revolution, one of, if not the most significant advancement in technology in our lifetime,” Teskey said in an analysts call late Friday (US time) after the release of its latest quarterly earnings.
“This is driving a significant step change in demand for our, supporting our continued and accelerating growth. And while the renewable sector has traded down in the public markets on weaker sentiment stemming from the new US administration’s announced executive orders and potential policy changes for renewables.
“The simple fact is that the fundamentals for energy have never been better. The low-cost renewable technologies that we have built our business on are the cheapest form of electricity production and are seeing greater demand than ever before.
“As a result, we believe that low-cost renewables which are readily available to deploy, will play a leading role in the requirements for any and all increases in generation capacity that we are already seeing unfold.
“Our focus on the lowest cost, most mature renewables technologies that have the greatest demand from corporate customers and are not reliant on government subsidy has (served) us well to benefit in the current environment.”
Indeed, while much has been made of the moves by the likes of Microsoft in nuclear – and the tech giant is negotiating a price for the potential start of the Three Miles Island nuclear facility – the reality is that such opportunities remain limited, and years away.
Brookfield has sealed a massive deal with Microsoft to deliver more than 10 GW of new wind and solar before the end of the decade, mostly before the 0.8 GW Three Mile Island facility can be restarted.
As both Brookfield and NextEra argue, wind and solar provide the only low cost and zero emission option that can be delivered at scale within the next decade or two.
Teskey also says the company is protected from any removal of government incentives by the new Trump administration.
“This is obviously very topical right now in the United States (but) … in many of the PPAs we are locking in right now, if there is a retroactive change or a near-term change to things like the tax credits, there are — we are increasingly putting adjusters in those PPAs to essentially keep our development margins fall,” Teskey said.
“So that is increasingly becoming, I would say, market standard. And I think it’s reflective of a broader dynamic that it’s very simple.
“The off-takers simply need the power. And therefore, they’re not going to let short-term uncertainty, stop them from signing contracts, and they will ensure — and they will do what is necessary to protect the developers in order to pull those projects out of the ground.”
CFO Wyatt Hartley agreed, saying, the prospects for low-cost, mature renewable technologies such as renewables and storage are better than at any point in history.
“Simply put, offtakers and power will naturally take as much of the lowest cost solutions renewable before turning to other forms of generations to meet their needs.” He also says large-scale battery systems and distributed generation are increasingly important parts of the solution.
“As batteries become more cost effective with costs declining over 90% in the past decade, we expect that they will become a significant component of stabilizing the world’s transmission grids and supported the accelerated build-out of low-cost mature renewable technologies,” he said, noting the leading position of Neoen.
“With this investment, we are one of the largest battery developers globally with 3,300 megawatts of operating and under construction capacity and additional 35,000 megawatts in our pipeline.”
