Macquarie Group, Australia’s biggest investment bank, has entered the solar financing market in Australia, in what is likely to be a significant lift for the rooftop and commercial solar industry.
The interest in solar finance was revealed by Macquarie CEO Nicholas Moore in the group’s operational update. Few details were released, apart from the fact that it is a “recent” initiative, but it follows on from a series of large solar financing investments in the UK, Japan and the US, and is expected to be a fore-runner of interest from other major banks in Australia.
It is generally acknowledged in the Australian solar industry that the next major breakthrough in the market will be in finance. The cost of solar modules are unlikely to fall significantly, and it is quite possible that remaining incentives, such as the small scale renewable energy scheme, may be removed or diluted.
Financing is critical component of the cost of solar. If major banks such as Macquarie enter the market and are followed by the “Big Four” – as many say they are poised to do – then the cost of capital is likely to reduce significantly. So far, only smaller and niche financing houses – as well as private investors – have provided finance to rooftops solar.
The entry into the market of major banks is also likely to spark innovation in financing, such as solar leases and other products that will unlock market blockages in low-income housing, rental accommodation, apartments, and community projects, as well as the burgeoning commercial market.
Macquarie Group has already committed up to $197 million to UK public-housing contractor, Herbert Forrest, to fund zero upfront cost solar-power installations across Britain. The program is targeted at low income private homeowners and social housing tenants.
Macquarie is also involved with another group, Freetricity, and is credited with helping fuel a revival in the solar market in the UK.
And it has formed a joint venture with UK renewable energy investment company Low Carbon to create a solar farm portfolio of up to 300MW.
The first phase of the collaboration will total 25.7MW with an investment of up to £29m to fund the construction of three ground mounted solar projects, two based in Cornwall and one in Wales.
In Japan, Macquarie Capital recently formed a joint venture with Maeda Corporation to invest in infrastructure and renewable energy with an initial focus on large-scale solar projects, capitalising on incentives recently introduced by the Japanese government to encourage the development of renewable energy and reduce dependence on nuclear in the wake of the 2011 Fukushima disaster.
The Macquarie-Maeda alliance is expected to be up and running by the end of 2013 and have 300MW of generation capacity in the works by the end of 2016, with combined projects worth ¥100 billion (US$1.02 billion).
Macquarie Capital also struck an alliance with GE, to cater to the growing global demand for infrastructure funding and development; also with a focus on renewable energy and power delivery.
Solar has been on Macquarie Group’s radar for a while, with its European analysts earlier this year describing the rapid deployment of low-cost PV as an unstoppable force, with or without subsidies.
The Australian Renewable Energy Agency recently said it was looking at mechanisms to attract just the sort of capital that Macquarie is now applying in the UK.