Most renewables companies, though, have to lock in long-term contracts, known as power purchase agreements (PPAs), to get banks comfortable enough to fund the projects.
“It is difficult to finance renewable projects without PPAs, and you may have been locked into contracts a few years ago,” Mr Learmonth said.
“If you’re selling onto the spot market and you want any leverage, then there are not many places to go for finance – the CEFC is one of the few.”
The former Macquarie banker said the CEFC was having to offer favourable terms to such projects “in what is quite a difficult market”.
Although the decade-old CEFC is having to go back to this familiar stomping ground, it is also looking to branch out into new territory. It is exploring other parts of the energy transition where commercial banks need the CEFC to ease the risk by taking the first-loss or long-dated slice of debt.
Mr Learmonth singled out battery storage as one of the most significant new areas for the CEFC.
State governments such as Victoria, NSW and Queensland are developing ambitious plans to deal with the ever-growing input of highly variable renewable energy sources into their grids.
The CEFC had stepped into this market, Mr Learmonth, said, because “battery economics is hard”.
Some players might get a full contract with a state government or energy provider to provide back-up power, and would not need CEFC support.
But others were essentially selling stability to the grid — which might not be called on, and might be structured as “an availability charge”. If the power was not drawn down, the battery operator could look for arbitrage opportunities, such as selling solar energy at night.
Those options “rely on a lot of assumptions which make it difficult for commercial banks to participate today,” Mr Learmonth said.
“The banks need a lot more data and a track record. They’re still getting comfortable with the risk. It’s a perfect asset class for the CEFC to be supporting.”
Farms, cars and hydrogen
Another new area the CEFC is exploring is agriculture and forms of “natural capital” such as soils, forests and water.
“Australia has enormous potential to generate carbon credits and potentially export them, subject to our own needs,” Mr Learmonth said.
The CEFC is looking at potential joint investments into farms that would increase their ability to generate carbon credits, bolstering the returns. It has also backed tech companies that measure soil carbon, or find ways of retaining carbon in the soil.
In transport, the CEFC is getting involved in electric vehicle (EV) charging infrastructure, and in supporting credit providers offering cheap finance for EVs.
In heavy industry, the CEFC is looking at green steel, green aluminium, green ammonia and green hydrogen projects such as small electrolysers.
“There is huge potential in green hydrogen but there is still a significant gap we have to close between it and conventional fuel sources,” Mr Learmonth said.
Many of these capital allocations are relatively small, but the CEFC is also expanding at the big end of the scale.
In the recent federal budget, the government dropped $8.6 billion of new funding onto the CEFC to get behind the rollout of massive new transmission infrastructure.
“They need large slices of concessional debt, long-dated, to get the business case to stand up and to minimise the burden on electricity consumers,” Mr Learmonth said.
“We’re trying to get those projects up as quickly as possible when they’re not bankable today.”
Once built, they become the kind of regulated asset, with a steady and predictable return, beloved of super funds – allowing the CEFC to recoup its investment.
Investments great and small
The CEFC’s balance sheet stands at about $6.5 billion, and is capped at $10 billion not including the new budget allocation.
It makes about $1 billion to $2 billion of new investments a year, and typically gets $800 million to $900 million back in returned capital.
“Our largest transmission project to date is the $295 million subordinated debt given to get Transgrid’s project EnergyConnect off the ground. Whereas a farm project might be $5 million,” he said.
“One minute we’re talking about a $2 million investment in a soil carbon company with incredible potential, and the next it’s a $1 billion infrastructure deal unlocking renewables across the Bass Strait.
“We’re in the game to drive policy. We want to get back capital and we don’t want to lose money for the taxpayer, but we will provide those large concessional loans,” he said.
The CEFC has about 140 staff but is “in the process of adding significant additional resource, particularly in the work we’re doing in rewiring the nation”.
Despite the CEFC’s return to the wind and solar game, its early days of helping small projects get off the ground in the mid-2010s seem long ago. Mr Learmonth is enthused about the widening horizon as the bank moves into its second decade.
“People ask me whether I feel my job is almost done. But it has barely begun, really.”