Superannuation funds in Australia represent an investment capital of around $2.6 trillion dollars if added together, and this could increase to $6.5 trillion by 2050. According to the UTS Institute of Sustainable Futures and Future Super, these funds can drive a transition to 100% renewable energy by 2030, and can completely decarbonise transportation and industrial activity by 2050.
Super funds should be allocated among stable investments, since Australians count on them for retirement. Solar power and other renewables are an excellent industry for super funds, for several reasons:
Using the capital from super funds for renewable energy investments would not endanger the financial security of Australians in retirement. In fact, this approach can make super funds even more stable.
On the other hand, fossil fuel generation has characteristics that make it an unattractive investment for super funds. Operating costs are affected by the volatility of international fossil fuel markets, and the aging coal power plants in Australia are becoming less reliable each year.
Since Australian super funds are so massive, allocating 7.7% of their capital to renewable generation would be enough to transition to 100% renewable generation by 2030. A specific fund called Future Super Growth is aiming for 20% capital allocation to renewables.
The super fund analysis by the UTS Institute of Sustainable Futures assumes a 7% yearly return on investment for renewable energy. This value can be considered conservative, since many renewable generation projects are now achieving a ROI in excess of 10%.
A more ambitious goal would be a complete decarbonisation of Australia, not only for the power network but also for transportation and industry. However, even this target is possible with super funds; investing 12.4% of the available capital can decarbonise the country by 2050. It costs around $788 billion to decarbonise Australia, but this figure pales in comparison to the $6.5 trillion of super fund capital expected to be available by 2050.
Allocating capital to renewable generation is financially viable for super funds, while providing an additional benefit: improving their public image. For most Australians, renewable generation and energy storage are viable solutions for the current energy issues in the country, especially the high electricity tariffs charged by power retailers.