Financing the transition: Why certainty matters more than capital?

By Rose Mary Petrass

Australia's energy transition is often framed as a financing challenge. Yet according to investors at Australian Energy Week, the bigger obstacle isn't capital, but creating the certainty needed to deploy it into new energy infrastructure.

That theme emerged repeatedly throughout Australian Energy Week, culminating in a discussion with Macquarie Asset Management Global Head of Green Investments Ed Northam, who argued that the global energy transition is entering a new phase.

"The ESG benefits of the transition haven't changed," Northam said. "But the focus… has definitely evolved."

For much of the past decade, renewable energy investment was driven primarily by decarbonisation goals and sustainability commitments. Today, Northam says affordability, energy security and growing electricity demand are becoming equally powerful drivers.

"What I've never seen in three decades is almost the perfect storm that we have at the moment," he said.

Importantly, this is not just an Australian phenomenon.

"We operate in about 27 markets around the world and we see that dynamic playing out across the board," Northam said.

Capital is flowing – but not always where Australia needs it

Globally, around US$2.3 trillion was invested in transition infrastructure last year, including US$900 billion in transport electrification and US$700 billion in renewables. Northam said solar accounted for roughly 80 per cent of new generation capacity added globally, while battery investment reached approximately US$70 billion.

Australia will require hundreds of billions of dollars of energy infrastructure investment over coming decades. While global capital remains available, investors have choices about where that money is deployed.

Members of the CEO panel argued that Australia must remain an attractive destination for international investment, particularly as countries around the world compete for the capital required to modernise their energy systems.

The panel repeatedly returned to one requirement above all others: policy certainty.

Without stable and predictable policy settings, investors struggle to commit capital to projects with operating lives measured in decades.

The revenue challenge

Northam identified one of Australia's less discussed barriers to investment: the risk-return profile of energy assets.

Despite its world-class renewable resources, Australia remains an expensive market in which to build projects, with imported supply chains, labour shortages and higher delivery costs increasing investment risk. At the same time, investors face challenges securing long-term revenue certainty.

"I'm investing in a 30 to 40-year asset," Northam said. "I need some certainty and predictability on my revenue line."

The same issue surfaced throughout the conference, with both the CEO and renewables investment panels highlighting the need for long-term revenue certainty, supportive underwriting mechanisms and stronger investment signals.

Taken together, the message was clear: investors are prepared to finance the transition, but they need confidence that projects can generate reliable returns over the long term.

Data centres could change the equation

One development attracting growing attention from investors is the rapid expansion of data centres.

AI and digital infrastructure are driving a surge in electricity demand globally, creating a new class of large-scale energy consumers.

Northam cited forecasts showing global data centre electricity demand rising from around 500 terawatt-hours last year to approximately 4,500 terawatt-hours by 2040.

That demand is creating a new class of large energy customers willing to sign long-term power contracts.

"What they want is certainty and what they want is faster access to power," Northam said.

Several conference sessions explored the possibility that data centres could help unlock new renewable developments by providing large, creditworthy customers capable of supporting project economics.

The renewable investment panel also discussed opportunities to co-locate data centres with renewable energy projects, helping bridge the gap between energy supply and demand while accelerating infrastructure investment.

Batteries are only getting started

While questions remain about Australia's future generation mix, Northam was unequivocal on one point: "The battery boom's only just starting in Australia”.

As renewable generation expands, batteries are increasingly valued for firming, capacity support and frequency response, while continuing cost declines are strengthening the investment case.

The remaining question is how quickly storage can scale and how much it can reduce reliance on gas over time.

Northam described gas as a "short to medium-term enabling technology" but suggested its long-term role would depend heavily on advances in storage and other firming technologies.

From capital shortage to certainty shortage

Australian Energy Week delivered a consistent message from investors, developers and energy executives alike: capital is available, but certainty remains in short supply.

Faster planning approvals, improved transmission delivery, stronger system coordination and, above all, stable policy settings will determine how much of that investment ultimately lands in Australia.

Australia has the resources, technology and capital required to deliver the transition. As Northam and other industry leaders argued throughout Australian Energy Week, the challenge is no longer finding the money. It is creating the certainty that allows investment to move at the speed the transition demands.