Renewables mandate at risk if prices rise: Macquarie boss

The investment banking chief warns that more planning is needed to support the transition to clean energy if governments want to keep the public onside.

Macquarie has been an active investor in the green energy transition, and says the government must focus on specific projects. Picture: Jenny Evans/Getty

Macquarie chief executive Shemara Wikramanayake says governments must rein in the cost of electricity for consumers or risk losing support for a transition toward cleaner energy.

Speaking at a conference in Sydney, Ms Wikramanayake on Friday urged profits made in coal and other sectors be used to reinvest in newer industries.

“Until we have solutions of scale we can’t transition to the way we need to,” she said.

“When people don’t have access to energy or the cost of living is becoming untenable, you can sometimes lose the mandate. What we need to do is take profits earned in sectors like coal, and reinvest those in new solutions.

“We really need a massive step up in solutions, which is where (Macquarie) is doing a lot of work, investing $75bn since 2005, and $30bn in the last five years.”

Ms Wikramanayake’s comments came a day after the first climate change legislation in a decade passed federal parliament – setting a national emissions reduction target of 43 per cent by 2050 and net zero by 2050.

Ms Wikramanayake said the passage of the climate legislation was “fantastic”, but said the government should sharpen its focus on “specific projects” to meet its clean energy ambitions.

“Getting projects prioritised and putting structures around them and getting them done will be vital,” she said.

“The states have taken quite a lead on this historically, but now it’s time for all sectors to narrow it down to projects.

“Transport, agriculture, industry – all have to have a forward thinking transition, because we can’t transition until we have solutions of scale.”

The investment bank has been an increasingly active investor in the clean energy transition, largely through Macquarie Asset Management’s Green Investment Group. Earlier this week it launched a new infrastructure business for operators of electric commercial vehicles, while its larger investments include a number of floating offshore wind projects in Korea, Taiwan and in the United Kingdom.

Macquarie also supports early-stage carbon capture and storage projects through its Commodities and Global Markets business and has backed Storegga, which is a partner in The Acorn Project, the UK’s first large-scale CCUS project capturing carbon from industrial hubs near the North Sea and storing it in deep geological reservoirs beneath the ocean.

On Friday, Ms Wikramanayake said she believed a cross-sector clean energy transition was one of four key areas of national priority going forward, with the development of more digital infrastructure, urbanised infrastructure and investment in defence also critical factors to future-proofing the economy.

“Not since the fall of the Berlin Wall in 1989 have (we seen) geopolitical factors driving the world … we’re potentially headed back to that world now,” she said.

Despite a volatile geopolitical landscape and surging inflation, Ms Wikramanayake said she was optimistic about the future, saying Australia was still the “Lucky Country” despite rising cost-of-living pressures.

“We’re coming into this with a pretty good economic backdrop … net debt is in a pretty good place … if (the Reserve Bank) do go hard … we’re one of the best countries to manage a soft landing or even avoid a recession,” she said.

“We’re a country that gets infrastructure can drive better growth for the economy. Our debt to GDP is only 30-40 per cent relative to our global peers, so we’re really well positioned … (but) we’re going to have to think about how we now transition to the industries of the future.”

Separately, analysts at the investment bank become increasingly bullish on groups exposed to the energy transition, hiking the price target for lithium developer Allekem by 55 per cent this week.