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Economics & Markets

Innovation and capital are key for the transformation of energy markets

By Bopha Ly
Managing Director, Energy and Renewables Sydney, Australia

Australia’s energy markets have been hit by a perfect storm in 2022.

The war in Europe has spiked gas and coal prices higher, our ageing fleet of coal-fired generators is becoming less reliable, floods are affecting coal supply and unseasonably cold weather is lifting demand.

The resulting energy price volatility meant that, for the first time in the National Electricity Market’s history, the Australian Energy Market Operator (AEMO) halted trading in wholesale electricity markets to ensure supply.

The challenges proved too much for some of the smallest energy retailers, who lost the ability to compete and closed shop.

And amid it all, the planet’s inevitable transition to net zero carbon emissions continues, amping up the pressure on generation, transmission, distribution and retail players alike.

The question is: where to next? How can the nation navigate its way through these unprecedented challenges? And what does it all mean for investors in the energy system?

Australia appears to be going through a replay of events in Europe from a few years ago, where rising pricing put smaller players out of business and saw their markets taken out by the largest, most well-funded players.

Ironically, in our view, the economics of investing in renewables have never looked so good.

And that’s not just true for the big industry leaders – it’s true for households too: generally, the payback on putting solar panels on a house or buying an electric vehicle is never better than when energy prices are high.

This means we have a rare opening available to work together – governments, industry and investors – and AMP Capital is excited to play a role helping shape the future.

Australia is quite unique in the way responsibility is split between state and federal government with different rules and multiple regulators, each with their own view on what the future looks like.

Among the states, NSW is leading the way with its renewable energy zones, which are triggering $100 billion-plus investments1.

The federal government is developing and outlining policies that will also pave the way to a future energy system.

Households are already encouraged to time their use of dishwashers and clothes dryers – and as battery-powered, home-charged vehicles become more popular, managing this load on the electricity system will be important.

Industry is playing a critical role too, innovating and developing new ways to save power and grow renewables, example through corporate power purchase agreements.

The AEMO recently published its 2022 Integrated System Plan to support the energy transformation, envisaging some $180 billion of investment to 2050.

Some of the key components were 46GW of dispatchable storage like batteries and pumped hydro, 10GW of gas fired generation for peak loads and firming and 10,000 kilometres of new transmission to link up new renewable generation and deliver firmed energy to consumers.

This creates an enormous opportunity for investors in this industry.
Fundamentally, as a nation we are working towards solving what’s being called the energy ‘trilemma’.

We need to decarbonise, keep the lights on and make sure energy is affordable for households and industry.

AMP Capital is proud to play its part driving the nation towards a sustainable future.

AMP Capital manages an investment in Endeavour Energy, servicing over 2.5 million people living and working across Sydney’s Greater West, the Blue Mountains, the Southern Highlands, Illawarra and the South Coast of NSW. Endeavour Energy is supporting energy infrastructure needs for the growth of Western Sydney and is competing for the opportunity to build NSW’s first renewable energy zone.

AMP Capital also manages funds that invest in Powerco, one of New Zealand’s largest electricity and natural gas distributors and a company actively engaged with building a net-zero future.

Additionally, AMP Capital is an active shareholder in Evergen, a company that makes energy management software for homes and businesses that use batteries. Already, Evergen is managing energy usage for customers to save money and reduce emissions.

In July, AMP Capital held a panel session Discussing the Evolving Energy Market featuring three industry experts:

• Leanne Pickering, Chief Customer & Strategy Officer, Endeavour Energy
• James Kilty, Chief Executive, Powerco
• Ben Hutt, CEO & Managing Director, Evergen

The session which can be watched here canvassed a range of views on the Australian energy crisis and the energy transition.

One thing was clear though: this is the most exciting transformation the energy market has ever gone through and with less than 30 years until the world needs to reach net zero carbon emissions, there is a great deal ahead of us.

Important note
While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) (AMP Capital) makes no representation or warranty as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs.

This document is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital. This document is not intended for distribution or use in any jurisdiction where it would be contrary to applicable laws, regulations or directives and does not constitute a recommendation, offer, solicitation or invitation to invest.

This document, unless otherwise specified, is current at the date of publication and will not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring after that date.  

  • Opinion
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While every care has been taken in the preparation of this information, neither National Mutual Funds Management Ltd (ABN 32 006 787 720, AFSL 234652) (NMFM) nor any other member of the AMP Group makes any representation or warranty as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This email has been prepared for the purpose of providing general information, without taking account of any of your objectives, financial situation or needs. You should, before making any investment decisions, consider the appropriateness of the information in this email, and seek professional advice, having regard to your objectives, financial situation and needs.

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