What a difference a week makes.
Last Monday, Malcolm Turnbull was unseating Tony Abbott as Australia’s prime minister in a late-night ballot of the Liberal Party. He won a poll of his parliamentary colleagues by 54 votes to 44, and became prime minister on Tuesday.
The initial reaction from wind investors was near-euphoric.
Abbott is a high-profile critic of wind, even though he has only seen one turbine up close. He led a series of destructive cuts, including scaling back Australia’s renewables targets and appointing a committee in the Senate to carry out a hatchet job on the wind sector. In two years he has turned Australia from a global green leader into a laughing stock.
This is driving away green investors. This month, New Zealand’s Meridian Energy said it would avoid investing in Australia while Abbott was in charge. Meridian has a strong track record in Australia and co-developed the huge 420MW Macarthur wind farm.
Initially, we thought Turnbull may reverse some of Abbott’s policies. After all, he used to be the nation’s environment minister, and in 2009 he blasted Abbott’s anti-renewables policies as “bullshit”. But now a continuation of Abbott’s policies looks depressingly likely.
For example, Turnbull last week said he backed Abbott’s Direct Action policy despite being a critic previously. Under Direct Action, the government gave $660m in April to businesses for 107 projects that aim to cut greenhouse gas emissions. However, it turns out that three-quarters of the emissions saved came from projects that would have happened anyway.
There is a simple reason why he is now backing policies that he once scorned: politics.
Turnbull has to unite Liberals ahead of next year’s federal election and it makes no sense to get into battles over existing policies. Also, Abbott did not act alone in his eco-vandalism. He had the support of those in the party that Turnbull now has to work with.
Likewise, he is ambitious. It takes a lot to unseat an incumbent leader and, if he is to retain the role of prime minister, selling out on a few of his principles looks like the price he has to pay. It is very early to judge him on his record but, so far, things do not look good.
This means the prognosis for wind investors is also negative.
It will be tough for investors to gain support for projects and deals
will continue to be wracked by uncertainty.
The bright point is that we are seeing states fight back against central government anti-renewables policies, and it might be that Turnbull takes an open-minded approach to renewables in those battles. But it is remarkable how quickly the hope from last Monday has now given way to pessimism.
Developers and investors should not expect any quick turnaround in government policy, as these laws are notoriously hard to unpick. It now looks as though the best hope for change is if the Liberals are ousted as senior coalition partner in next year’s elections.
For those making business decisions now, that is a long way away.
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