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Australia's 'Depressing' Clean Energy Policies Deter Investors
2010-08-17 14:00:00.0 GMT
By James Paton
Aug. 18 (Bloomberg) -- The Arkx Clean Energy Fund's
managers are Australians who don't have a dollar invested in
Australia, a stance that's unlikely to change after the Aug. 21
election.
"We want to invest in Australia, but you cannot invest in
a country that doesn't have regulatory clarity and, worse, where
the policy direction is changing every six to 12 months," said
Tim Buckley, manager of the fund in Sydney.
Investors are shunning Australian renewable energy stocks,
unsure of government policy and whether it will start emissions
trading. An Australian index of 78 clean energy stocks, from
wind farm developer Infigen Energy Ltd. to geothermal power
company Geodynamics Ltd., dropped 31 percent in the year that
ended July 30 as the benchmark S&P/ASX 200 Index rose 6 percent.
Australia lacks the "vision" needed to stimulate the
renewable energy industry, said John O'Brien, who compiles the
ACT Australian Cleantech Index. The government has said it will
spend A$5.1 billion ($4.6 billion) on clean energy initiatives.
China is set to spend $738 billion in the next decade on
renewable energy sources, a government official said July 20.
"It's all a bit depressing in Australia," O'Brien said.
The ruling Labor party leader Julia Gillard plans to delay
an emissions trading system until after 2012 if re-elected and
to set up a citizens' group of "ordinary Australians" to help
decide on a course of action to reduce greenhouse gases.
'Absolute Crap'
Gillard's opponent, Liberal-National coalition leader Tony
Abbott, in October said the notion that human-induced climate
change was scientifically proven is "absolute crap." He also
opposes carbon trading, saying it would damage the economy.
Abbott has since proposed a A$1 billion fund to give
businesses incentives to lower emissions and a 15,000-strong
"green army" to repair environmental damage.
While Australia debates climate change policies, China is
attracting more investment because of the "huge resources they
are marshalling" to develop cleaner energy sources, said Arkx's
Buckley. The A$6 million Arkx Clean Energy Fund gained 15
percent in the 12-months through July, with almost a quarter of
its assets in China, the fastest-growing major economy.
The SAM Smart Energy Fund, the top-ranked clean-energy fund
in 2009, according to data compiled by Bloomberg New Energy
Finance, rose 11.6 percent in the same period, the fund said.
"China is going to be a world leader in a whole lot of
new-age industries, and Australia is going to be the world
leader in the dinosaur, fossil fuel industry, and that's not
where we want Australia to be," Buckley said.
Kevin Rudd, who became Labor prime minister in 2007,
shelved his emissions trading plan in April amid opposition.
Rudd was replaced by Gillard in June after losing support from
voters and his party.
Following Not Leading
That set back prospects for a market-based trading system
that puts a price on carbon emissions and gives companies an
incentive to reduce emissions, said Michael Walsh, executive
director of Hunter Hall Investment Management.
"Australia has adopted a posture of being a follower
rather than a leader," said Walsh, whose Sydney-based firm
oversees A$1.8 billion, including its Hunter Hall Global Deep
Green Fund, which has climbed 2.2 percent in the past year.
"Both major political parties will wait until we see
further developments in other major economies such as the U.S.
before passing legislation that would signal a carbon price."
Gillard promises to spend A$1 billion over 10 years to
connect renewable power to the electricity grid. She also plans
emissions standards for new coal-fired power stations.
Carbon Price
"Everything helps," Jack Hamilton, managing director of
Geodynamics, said Aug. 3. "But A$1 billion is probably not a
lot in the total scheme of investment that will be required."
It may cost as much as half that just to hook up
Geodynamics' project to harness heat from underground rock, and
potentially two others to the grid, said Hamilton.
The market value of clean energy stocks traded in Sydney
has slumped to A$9.9 billion from a peak of A$16.3 billion three
years ago, Australian Cleantech said in its July report.
The outlook for those companies may depend on how much
influence the Australian Greens Party holds after the election,
Walsh said. Leader Bob Brown has called for a carbon price in
2011, to be followed by emissions trading.
Hurting Investment
"Even if the Greens are successful in putting the issue on
the table, it will be some time before we see legislation,"
said Hunter Hall's Walsh.
Australia has set a target of generating 20 of its power
from alternative sources by 2020. AGL Energy Ltd., the country's
largest electricity retailer, committed Aug. 12 to a A$1 billion
wind farm after the Australian Senate approved revisions to laws
aimed at spurring renewable energy investment.
Even so, a lack of regulatory certainty has hobbled
Australian companies' ability to reach spending decisions,
making investors leery, said Ross Youngman, chief executive
officer of Sydney-based Five Oceans Asset Management.
Youngman said he doubts either Gillard or Abbott would
implement climate change policies at the pace needed to give
companies and investors the clarity they seek.
Gillard's renewable energy proposals are "probably a step
in the right direction," he said. "But it's not enough. We're
looking for leadership on climate change that involves pricing
carbon. The unfortunate thing is in 2007 Labor had a strong
mandate to get this done, and they didn't get it done."
For Related News and Information:
Top stories: TOP AU <GO>
Top energy stories: ETOP <GO>
--Editors: John Viljoen, Peter Langan
To contact the reporter on this story:
James Paton in Sydney +61-2-9777-8698 or
jpaton4@bloomberg.net.
To contact the editor responsible for this story:
Amit Prakash at +65-6212-1167 or aprakash1@bloomberg.net.
