If you accept the proposition that we are moving to a more renewable energy future, it is instructive to examine how other regions are managing this transition. As it happens, CommBank has been focusing not only in Australia, but also lending to greenfield renewable projects in the UK, where more electricity is generated from offshore wind than any other country. 
Significance of subsidies
In May 2016, we reached financial close on the 588 MW Beatrice Offshore Wind Farm. It will be built 13.5 kilometres off the Caithness Coast in Scotland and is expected to meet the needs of more than 450,000 homes across Scotland and the UK.
The Beatrice project was granted an Investment Contract by the UK Government under the Contracts for Difference (CfD) regime that was implemented as part of the Electricity Market Reform programme. The CfD strike price for Beatrice is £140 per MWh. This compares with forecasts from Poyry, an international consulting and engineering company, for a UK wholesale electricity price of £44 per MWh in 2019  (when Beatrice is expected to become fully operational), representing a subsidy of £96/MWh. The 15 year CfD for Beatrice is therefore worth approximately £2.3 billion.
These are significant numbers. The UK Government is providing this level of support to meet its 2020 target for 15% of final energy consumption and 30% of electricity production to come from renewable sources. Subsidies are expected to decrease, with the UK government indicating that the next batch of offshore wind projects will be awarded with CfDs capped at £105 per MWh.
Cost reduction opportunities
Analysis by The Crown Estate found that the of wind farm projects could be cut by as much as 39% between 2011 and 2020 as a result of technology and supply chain factors. While the majority of cost reductions are driven by technology, significant savings can be realised within individual parts of the supply chain, including design, engineering, procurement, construction, regulatory approval, financing, operation and maintenance. 
We can’t sit back and rely on technological advancements when a substantial part of the cost savings is very much within the control of everyone reading this article. We are all involved in these core elements.
Efficient and effective transition
As people become more comfortable with the risks of greenfield renewable projects and risk allocation becomes more efficient and effective, the cost of capital will come down.
As we know from the PPP sector, early stumbling blocks to widespread participation in critical infrastructure included uncertainty over the regulatory landscape, and the absence of a robust pipeline of projects for investors and contractors.
It is incumbent on us all to establish that pipeline and provide that regulatory certainty.
Compared with Europe and North America with their much larger populations and higher electricity consumption, Australia is geographically challenged when it comes to optimising our renewable energy capacity and mix. That’s why we need certainty around targets, and certainty around the regime so that major players will commit to investing in the region.
We are all consumers of energy, so the cost of the transition to a more renewable energy mix is borne by us. Everyone has a role to play to make the transition as efficient and effective as possible.
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