An Australia-first climate bond is set to boost investment in the nation’s rapidly growing solar energy market.
The Clean Energy Finance Corporation (CEFC) has invested $10 million in a $90.9 million green bond issue by FlexiGroup Ltd. Rooftop solar makes up a large proportion of the investment, with a smaller allocation for small-scale energy storage.
Green or climate bonds finance a range of renewable energy projects. This is the first time small-scale batteries are included in the Australian green bond market.
Fast-growing solar storage market perfect for green bonds
Australia’s home solar battery market has lagged behind the growth of solar panels. Yet battery prices are rapidly falling.
Data from Bloomberg New Energy Finance (BNEF) shows nearly three-quarters of Australia’s rooftop solar capacity will include battery storage by mid-century.
By 2050 Australia will have more than 6 million rooftop solar power systems installed. Close to 4.5 million of these will also feature small-scale solar batteries.
BNEF says battery prices will also fall by more than 50 per cent through to 2030. Australia’s solar storage market could then become a $1.7 trillion industry.
How green bonds work
According to Gilbert & Tobin, green bonds create a large pool of capital to fund environmentally responsible projects.
They operate like traditional bonds, but with a focus on eco-friendly outcomes.
The CEFC notes that institutional investors in Australia increasingly want to fund carbon reduction assets like solar farms. The new climate bond will help them develop ‘green’ portfolios to reduce Australia’s carbon footprint.
This is therefore critically important. The Climate Council’s ‘expert statement’ backed by 28 climate and energy experts states Australia’s greenhouse gas emissions are rising.
The emergence of green bonds around the world
Data reported by Gilbert & Tobin shows huge growth in the global green bond market.
It has grown from less than $5 billion in 2010 to more than $150 billion in 2017 and 2018. Climate Bonds Initiatives (CBI) data predicts it will reach $351 billion this year.
National Australia Bank was the first Australian bank to launch both an offshore green bond in March 2017 and a climate bond in 2014.
FlexiGroup Ltd issued Australia’s first asset-backed green bond in 2016.
The Australian Government owns the CEFC, which mobilises capital investment in renewable energy. The CEFC has committed $489 million to 11 bond issuances since it began in 2013.
