Clean energy could be super for industry funds
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Industry superannuation funds are calling for tax changes so they can invest part of their $1.2 trillion in members’ retirement savings into new electricity transmission lines and batteries, amid warnings Australia may have to spend $100 billion a year until 2050 to strip greenhouse gas emissions out of the economy.
Some of the nation’s biggest funds including AustralianSuper, Cbus, Hostplus and HESTA will on Friday urge state and federal governments to use policies including tax concessions, faster construction approval processes and “fair compensation” to landholders to help ramp up investment in renewables and electrification.
Industry superannuation funds say with the right policies they will be able to invest in electricity transmission lines and batteries.Credit: Nicole Cleary
Governments around the world are dramatically increasing investment in the sector. This year, more than 500 gigawatts of renewable generation capacity is expected to be added to the world’s power systems. The capacity of Australia’s east coast power system is 65 gigawatts.
America’s Inflation Reduction Act, Japan’s Green Transformation Act and Europe’s Green Deal Industrial Plan are sinking trillions of dollars into replacing fossil-fuel generators with renewable energy sources.
The industry super funds said that with the right policies, they could invest in new transmission lines, batteries and sustainable aviation fuel that would help Australia sharply reduce its carbon emissions.
They argue new ways to enable investment would help super funds support the expected 10,000 kilometres of transmission lines that are forecast to be needed by 2050.
This could include concessional finance or direct payments that would ensure super funds delivered sufficiently high investment returns to their members while putting downward pressure on costs to consumers.
A growing complaint in some regional areas has been the differing payments offered to landholders for the construction of transmission lines on their property. The funds said there should be a nationally consistent approach to landholder compensation and earlier consultation with affected communities.
Allowing providers to lease out spare capacity in community batteries to the wider electricity grid would make it more viable for super funds to invest.
They said new policies could deliver $4 billion in battery investment that would provide 3 gigawatts of firming capacity at the local community level.
This week, IFM Investors – which is owned by industry super funds – signed a memorandum of understanding with the British government to invest $20 billion by 2027 in United Kingdom infrastructure projects, predominately those relating to changes to its energy system.
IFM Investors chief executive David Neal said with policy changes, superannuation capital could be deployed across Australia.
“Millions of industry fund members can receive returns on their retirement savings, owning the infrastructure they rely on every day and that will create a prosperous, greener, more productive economy for them and their children and grandchildren,” he said.
CareSuper chief investment officer Suzanne Branton said new policies would help unleash billions of dollars of investment in cleaner energy.
“The national transition to cleaner energy presents a wealth of investment opportunities for super funds and their members, and CareSuper supports this collective initiative,” she said.
The industry funds estimate Australia will need to spend about $12 billion a year until 2050 on the electricity sector alone as the country decarbonises.
Commonwealth Bank senior economist Kristina Clifton said the figure could be much larger, noting the level of spending was likely to add to inflation pressures across the economy.
She said spending on decarbonising the economy, on top of programs to boost housing construction, hydrogen production and critical mineral investment, would all make it more difficult to keep prices under control.
“Australia may need to spend over $100 billion per year until 2050 to decarbonise energy and transport,” she said.
But consumers could be the winners as they used cheaper energy sources than fossil fuels.
Clifton said automotive fuels accounted for 3.6 per cent of household spending. A move to electric vehicles powered by renewables would in effect eliminate the fuel costs facing most families.
“Electricity and other energy prices can be high and volatile during the transition. However, overall household and business energy costs can fall over time as more energy is sourced from cheaper renewables.”
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