Interview: Ian Kay, ARENA
|In the last few years Australia’s renewable energy sector has gone from niche to mainstream, resulting in cost reduction and a reduced need for government funding to get projects off the ground. Ahead of his presentation at the 2017 Australian Energy Storage Conference, we caught up with Ian Kay, Chief Financial Officer at the Australian Renewable Energy Agency (ARENA), to discuss the financial side of renewable energy projects, and what companies should be aware of when attempting to commercialise renewable energy and storage projects and technologies.|
Financing Australia’s renewable and storage sector
Ian Kay has been working in renewable energy for 15 years and currently leads ARENA’s business development and transactions teams. ARENA supports the development of Australian renewable energy developments and technologies through funding. In his role as ARENA CFO, Mr Kay specialises in the investment of infrastructure development, and delivery of renewable energy projects.
Mr Kay says Australia is seeing a massive transformation in the renewable energy sector and there has been great strides in cost reduction in solar PV and wind projects.
“The sector has reached the stage where it has gone from being relatively niche and needing significant support, to being mainstream, where if you are looking to add additional generation in the system, the generation that’s provided by the renewable sector is actually cheaper than building new fossil fuel generation,” Mr Kay says.
“Because of the relative pricing of wind and solar PV versus other forms of generation, we expect to see those to continue, and probably be the dominant sources of generation.
“The really big change is going to be the role of storage in its many forms, where storage is going to be required in an increasing capability to help balance the ability of generation.”
Renewable projects of the future
Mr Kay says storage in the form of residential batteries, utility scale batteries, and pumped hydroelectric storage will be prominent in the future.
“We are also seeing, what some people could see as storage, which is demand response, where energy users get economic benefit for how they use the grid. There will also likely be some form of storage in hydrogen, where excess electricity is stored as hydrogen,” Mr Kay says.
When thinking about what companies in the sector need to be aware of when commercialising renewable and storage projects, Mr Kay says to think about the long term.
“Look through the noise that exists in the market, particularly at a political level, and think logically through how the economy is going to transition to a low-carbon model. That’s the first thing that people need to think about.
“They also need to think about contracting for services, be it energy or storage, that contract will lead to a lower cost finance, and that lower cost finance then leads to a lower cost of providing the service.”
Renewable challenges and opportunities
The energy industry is in a period of disruption, but adopters of renewable energy projects and technologies, including energy storage, are in a strong position. Mr Kay says one of the challenges is to encourage more projects to implement new technologies.
“There’s a couple of challenges, one is to get early adopters to have a look at and try out new technologies in pilot projects or in smaller scale projects, so the market gets used to working with the new technologies.
“The second challenge is in the energy sector, most energy devices or projects use big pieces of equipment, they’re capital intensive so the cost of capital is a very important driver in a project.
“In terms of the opportunities, we’ve got some great innovators in Australia, both at the research level and companies that are prepared to try new things, and these companies are doing really interesting things.
“One of the big opportunities is in ARENA funding, allowing people developing those opportunities to experiment with new technologies and transition their business, which then in turn can lead to future opportunities.”
Ian Kay discussed these issues in further detail at his presentation at the Australian Energy Storage Conference and Exhibition 2017.