Investing in Australia’s Solar Future and the Potential Returns

The current trends of smart consumption, decarbonization, and sustainable development are encouraging global countries to switch more actively to a greater share of green energy sources. They have some special advantages that will bring noticeable results in the long run. 

Among all the alternative energy sources, solar potential is one of the most prominent. In particular, this type of energy is a “win-win” for countries such as Australia, which are located in the warmest zones of the earth. That is why the solar energy sector has recently been actively attracting investors’ attention. In general, the country’s economic development and prosperity significantly depend on the stable development of Australia’s energy sector. 

In the following material, we will try to take a closer look at Australia’s solar landscape, investment potential, the importance of sustainable investments in this sector, and the financial profitability of the sector.

Australia’s Solar Landscape: Current State and Future Projections

Energy demand is growing along with Australia’s economic development. Australia has a unique amount of solar resources on the continent, which allows for high-quality and intensive development of solar infrastructure throughout the territory, which is usually located in the northwestern and central regions, often in places where there is no access to the electricity grid and far from large population centers.

Today, Australia’s energy sector is undergoing significant changes. Wind and solar energy are becoming more common in the electricity system, and South Australia is leading the way. According to the statistics of The Clean Energy Australia report: “Rooftop solar accounted for 25.8 percent of renewable generation in 2022 and 9.3 percent of energy generation overall, up from 8.1 percent in 2021”. 

Australia has a long list of implemented solar projects, which aim to popularize the idea of using alternative energy sources to support energy demand and develop responsible attitudes and smart consumption by users. The major solar projects include:

  • Limondale (New South Wales);
  • Darlington (New South Wales);
  • Bungala (Port Augusta);
  • Sunraysia (Balranald Shire);
  • Wellington (Dubbo Regional Council).

Looking at Australia’s energy projections, the development of solar projects and the increased use of solar energy will remain a relevant process for at least the following reasons:

  • Rising prices for consumed electricity (the upward trend has been noticeable since mid-2022), will motivate society to produce green energy on its own).
  • Government initiatives. The Queensland Energy and Jobs Plan, launched in September 2022, is motivating. It aims to completely transform the energy system to support the economic cluster. The desired outcome for The Queensland Energy and Jobs Plan is to use 70% renewable energy by 2032.

Given the current trends, it can be predicted that Australia will be able to utilize fully its solar potential to support the energy system.

Investment Opportunities and Barriers

Given how actively, Australia continues to provide support for the development of the renewable energy cluster, including solar energy. That’s why many investors are looking at the powerful solar potential with interest.

Depending on whether they are direct or external investors, portfolio representatives, or international funds and institutions, those interested can join the financial support of Australia’s green energy through the following investment avenues:

  • participation in government solar financing programs;
  • participation in projects of private ventures;
  • financial support for innovative startups;
  • purchase of “green bonds”;
  • using the services of government initiatives to attract foreign investment.

In turn, the latter option is quite convenient. For example, The Australian Trade and Investment Commission (Austrade) is a government agency that promotes international trade and investment. They demonstrate the main investment opportunities and provide recommendations and advice for activities in the region.

And while green energy financing has some advantages, it also offers solar risks, in particular:

  • Country policy. Starting a business in a completely unfamiliar environment with new norms of life can be a very difficult challenge.
  • The amount of potential funding. This will depend on the financial potential of the investor, as innovative solar instruments require significant investments.
  • A large share of fragmentation of various initiatives. An investor may simply get confused by the large number of potentially successful public/local initiatives or private projects.

In addition, the uncertainty of each state government regarding the main sources of renewable energy may partially hinder the development of Australia’s solar potential.

Analyzing Returns: Solar’s Financial and Environmental Dividends

Potential investors need to understand the main types of dividends that can be obtained from supporting Australia’s solar cluster:

  1. Financial dividends. This ensures stable economic returns for investors. After all, for Australia, energy independence means economic profitability and the competent use of natural resources. 
  2. Environmental dividends. Supporting the development of renewable energy sources will have a positive environmental impact: it will bring the country closer to environmental neutrality and reduce its carbon footprint. In addition, it will effectively support Australia’s environmental sustainability and increase the capacity of renewable resources. 
  3. Government dividends. The Australian government offers some benefits to stakeholders. These may include grants, unique offers, and incentives of a different format.
  4. Portfolio diversification. This is the best option to separate funded projects and reduce investment risk, for instance in VDR software.
  5. Taking sustainable energy benefits. Using renewable energy sources is a good solution for developing energy independence. Using efficient and cost-effective solar panels will minimize the region’s vulnerability to system failures or centralized technical malfunctions.

All these factors can positively influence the decision of interested investors regarding the issue of financial support for the solar industry in Australia.