Investing in Uncertain Times

Global unrest. Interest rates. Policy uncertainty. Compound these with planning delays and capex blowouts. None of these make it easy to invest in the energy transition.  

But the pace of investment remains strong, as industry players and private capital investors look to capitalise on the opportunities that are present in the energy sector.

The government is also considering changing the superannuation annual performance test administered by the Australian Prudential Regulation Authority, so super funds are not effectively penalised from investing in long-term, higher risk renewable and infrastructure projects that may impact short-term returns but support the energy transition. The proposed changes from the Treasury consultation paper released on 8 May will introduce new benchmarking for emerging and alternative asset classes which, if implemented, will unlock one of the largest pools of capital in the economy and enable more super capital flow into the energy transition.

In addition, the Federal Budget demonstrates the government’s shift to energy security and domestic supply while adopting a pragmatic approach to balancing decarbonisation, affordability and sovereign capability.

Looking into our crystal ball, we see three key areas of growth for the year ahead.

Generation & storage

We expect investment across generation and storage to remain strong. While the focus in recent years has been on standalone Battery Energy Storage Systems (BESS), we anticipate a shift in focus toward solar hybrid projects and wind generation, with the scales ultimately being tipped by pricing relativity between the two asset classes. Investor preference is expected to concentrate on operational or near-term, ready-to-build assets, where construction and development risks are materially lower.

Valuations are expected to be supported by rising underlying energy demand driven by data centres, along with accelerated adoption of electric vehicles (EVs) in response to the recent spike in petrol prices.

Oil & gas

We expect a resurgence in investment in oil and gas. While coal may be a bridge too far for most investors, some are seeking to capitalise on the potential for gas as a transition fuel across the value chain, including upstream production, midstream, and gas-fired generation sectors.

Transition adjacencies 

Transition adjacent opportunities will continue to be sought after, particularly among private capital investors, including:

• grid and network infrastructure—arguably the most critical bottleneck in the energy transition
• metering platforms
• Renewable Energy Zone (REZ) developments, and
• energy software solutions, including AI-driven tools for grid balancing and forecasting.

While investors may adopt more conservative assumptions around the pace and trajectory of the energy transition, demand for assets and platforms that alleviate system constraints, enable renewable integration, and reduce cost or execution risk is expected to remain strong.

Investments may take longer to execute as investors look to understand and manage the national and international uncertainty, but they will continue to look to the energy transition sector as a fertile source of opportunities.