Financing the Energy Transition - Faster, Fairer, Smarter 

Australia Needs A Scheme Finance Vehicle (SFV) 

Australia’s energy transition is well underway. But the pathway is getting messier - and more expensive - than it needs to be. 

Coal plants are ageing and exiting faster than new renewables can be built.  

Gas prices remain high and volatile.  

And the private market, facing deep uncertainty, is struggling to provide the long-term, fixed-price power contracts that big industrial users depend on. 

This isn’t a failure of renewables. It’s a failure of finance. 

The real problem: high cost of capital, not lack of technology

Renewable energy is now among the cheapest forms of new electricity generation - if projects can be financed affordably. But because renewable energy projects are capital-intensive, most of their lifetime cost is tied to financing rather than fuel.

Because wind and solar projects have very high upfront construction costs but almost no fuel costs, financing is one of the largest drivers of their levelised cost of electricity (LCOE).

The International Renewable Energy Agency (IRENA) estimates that increasing the weighted average cost of capital (WACC) from 2% to 10% increases the levelised cost of electricity (LCOE) of a representative solar photovoltaic or onshore wind project by around 80%.

Across this range, this is equivalent to roughly a 10% increase in LCOE for each one percentage point increase in WACC—a useful rule of thumb, although the precise effect depends on the technology, project characteristics and financing structure.

That means financial risk, rather than engineering cost, is now one of the principal drivers of renewable electricity costs.

Private developers face these risks project by project and, without investment-grade counterparties, must charge higher prices to compensate.

This creates a vicious cycle:

Higher perceived risk → higher financing costs → higher LCOE → slower investment.

The SFV: a structural fix for a structural problem

A Scheme Finance Vehicle is a new kind of public-private financing tool designed to break that cycle.

Instead of offering cash subsidies or taking ownership stakes, government lends its balance-sheet credibility to clean energy projects by standing as a high-credit counterparty—buying electricity from renewable developers and on-selling it to large industrial users under long-term, fixed-price contracts.

By de-risking projects at the source, the SFV lowers financing costs across the board.

Based on IRENA's analysis, a one to two percentage point reduction in WACC could therefore reduce the LCOE of renewable power projects by roughly 10–20%. This estimate applies the same rule-of-thumb relationship in reverse; the precise effect depends on the technology, project characteristics and financing structure.

In short: the SFV lowers the cost of clean electricity by lowering the cost of finance.

Why this matters

  • Secure power for industry: Smelters, refineries, data centres and manufacturers can lock in 15–20-year renewable electricity contracts that are bankable, affordable and firmed.

  • Accelerate renewable build-out: Developers gain the confidence to invest sooner and at scale.

  • Protect taxpayers: The SFV is a contractual mechanism—not a grant or bailout—with support structured to be repaid over time.

  • Strengthen the grid: Long-tenor industrial demand anchors new generation and transmission investment.

  • Advance national goals: The SFV directly supports the Future Made in Australia agenda, delivering sovereign capability, green jobs and emissions reductions.

A model ready to deploy

The Tomago SFV proposal in New South Wales has demonstrated the logic and mechanics: use the government's creditworthiness as a long-term offtake counterparty to de-risk renewable projects, reduce WACC, and deliver affordable, firmed, zero-carbon electricity to one of the country's largest industrial users.

Now this approach can be scaled nationally—through structures such as Snowy Hydro Industrial Power Solutions (SHIPS)—to serve green iron producers, data centres and future clean manufacturing hubs.

A smarter way to build the future

The SFV is not a subsidy, a bailout or a new bureaucracy.

It is a disciplined financial innovation—a market solution that aligns public credibility with private investment to deliver clean electricity faster and at lower cost.

By addressing the core problem—the cost of capital—the SFV provides the missing financial architecture for an orderly, affordable energy transition that works for households, industry and the planet.

Source: International Renewable Energy Agency (2023), The Cost of Financing for Renewable Power.

In the Media

Middle Aged Man with Glasses speaking to an interviewer on a TV News Program

Oliver Yates, Chair of the Expert Advisory Board of the GES Project.