1 SEPTEMBER 2023

NSW MULLS ERARING EXTENSION, WE URGE ON-TIME 2025 CLOSURE

August saw leaked reports that the O’Reilly Electricity Supply and Reliability Review in NSW will recommend taxpayer subsidies to extend the life of Eraring coal power station, Australia's biggest, beyond its closure date phased over 2025. CEF’s joint response with the Clean Energy Investor Group (CEIG), Smart Energy Council (SEC), and Nexa Advisory made the case that this would be a massive retrograde step when the exact opposite is needed – an accelerated transition to firmed renewables. The issue is so contentious the NSW Government has decided to delay its decision, originally slated for August.

Notably, the Australian Energy Market Operator’s (AEMO) new 10 year reliability risk modelling shows that with an effective policy response, there is no reliability threat to NSW in relation to the scheduled 2025 closure of Eraring – see the headline chart above and news item below. In other words, the lights will stay on in NSW.

What is critical is a renewed, ambitious effort by the NSW government to accelerate the state’s energy transformation.

There is zero justification for the NSW government to fund any delay to the planned closure of Eraring at our estimated $200-400m per annum in public subsidies to do so. This money should be invested in energy transition and permanently alleviating the cost of living crisis the coal industry helped create, and is profiteering from. Anyone might think now is a good time to replicate Queensland’s Treasurer Cameron Dick’s progressive coal royalty idea - imagine if NSW Premier Chris Minns had an extra $10-15bn to help build community support for the energy transition, and relieve NSW energy cost of living pressures!

Our joint statement called on NSW Energy Minister Penny Sharpe to flood the market with distributed energy and infill utility-scale RE firmed by accelerated deployment of batteries to drive capacity. This will ensure supply and reduce wholesale electricity prices, putting permanent downward pressure on energy bills and better aligning our decarbonisation pathway with the climate science.

As our July Lights will Stay On report demonstrated, Eraring can and should close on schedule assuming expedited approvals processes and construction for the project pipeline of replacement capacity, front-end loading at least 1.2GW annually of utility scale wind and solar to 2030, continuing the current run rate of 1.2GW annually of rooftop solar, and accelerating commercial and industrial solar. 

Time for political courage and resolve from the NSW government! 

CEIG CEO and chair Simon Corbell said: “Delaying the closure of Eraring creates significant downside risk for investors. This could result in less investment in new clean energy projects in NSW and will blow out our emissions target and budget. Australia cannot afford to have that at this time.”

SEC CEO John Grimes said: "The SEC is calling on the NSW Government to reject the recommendation of the Electricity Supply and Reliability Check Up to extend the life of Eraring. Extending Eraring's fossil-fueled life fails the economic test, fails our climate, will increase future energy bills and delays investment in renewable energy storage and generation technology that exists right now."

CEO of Nexa, Stephanie Bashir said: “Our analysis finds consumer bills would be $2,250-3,000 higher over the next ten years if the transition is not effectively managed and closure is delayed. Further consequences of delay include missed renewable energy targets and exceeding the state’s emissions budget."

>>> Read the full statement by CEF, CEIG, SEC and Nexa.

>>> See our media coverage of this issue, including in the AFR, SMH, on Sky News, in Renew Economy, Energy Magazine and more.

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AEMO CONFIRMS RELIABILITY RISKS CAN BE OFFSET BY ACCELERATING RENEWABLES NOW

The AEMO'S August 2023 Electricity Statement of Opportunities (ESOO) – its 10 year reliability outlook for the National Electricity Market (NEM) released this week – demonstrates yet again that state and federal governments must expedite planned transmission projects, utility and distributed renewable energy generation, and storage. 

While AEMO’s projections show that, in the absence of accelerated delivery, some gaps in reliability will arise over the coming decade, this is a result of the retirement of 62% of Australia’s increasingly unreliable end-of-life coal power clunkers by 2033. In 2022, forced outages left the grid short of forecast coal generation capacity for nearly one-quarter of the year. Continuing to rely on coal power is an unacceptable concentration of risk, when investment should be directed to energy transition.

Notably, AEMO confirms that risks to supply can be adequately addressed by state and federal government renewable energy transition initiatives, e.g., distributed energy resources (DER), transmission infrastructure, pumped hydro storage (PHS), and battery energy storage systems (BESS), assuming these are delivered on schedule.  Its risk scenarios do not factor in the reliability gains to be made from Australia’s massive 248 gigawatt (GW) pipeline of project proposals – 4 times the current total installed capacity of 63GW in Australia’s NEM.

AEMO notes that DER such as rooftop solar, behind-the-meter household batteries and community batteries, peaking shaving, demand response management, and EVs will have an increasingly important role as they are “orchestrated” to help meet power system needs, also reducing reliability risks.

The message is clear: accelerating the pace of energy transformation and transitioning our grid is critical to ensure reliable supply – and to solve the energy price and climate crises precipitated by the fossil fuel industry.

>>> See our full analysis of the AEMO ESOO.

>>> see our media including an interview on ABC NewsRadio (with further coverage on ABC RN Drive, ABC Melbourne, The World Today, AusBiz, AAP, Energy Magazine and more to come as available).

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EXPLOSIVE NEW FRAUD ALLEGATIONS ROCK ADANI GROUP

The Financial Times and The Guardian have exposed new bombshell evidence that a web of associates of the Adani Group have engaged in deliberate stock price manipulation and insider trading. An internal document trail details extensive use of tax havens instructed by associates of Gautam Adani’s brother, Vinod Adani, who owns or is associated with multiple offshore companies at the centre of some of the Group’s most high-profile deals.  Where Indian regulator the Securities and Exchange Board (SEBI) has ‘hit a wall’, intrepid reporters have succeeded: tracing the flow of allegedly illegally siphoned money through Adani’s opaque “labyrinth of shell companies” in Mauritius to uncover the evidence.

Tim Buckley said: “The Hindenburg Report suggested Vinod Adani is the puppet master of a much wider promoter group acting in concert to perpetrate a multi-decade financial fraud against investors and the people of India, suckering the likes of Total Energies of France in the process.

“In support of Hindenburg, this new information suggests associates of the Adani Group instructed by Vinod Adani have engaged in a pattern of ‘round robining’ of money using offshore tax haven-based shell entities over many years to mask insider trading and stock ramping. These allegations suggest the behaviour is not attributable to one bad apple but is systemic, with the conglomerate’s leadership working in concert.

“Global investors must now act to belatedly enforce their mandates and ensure they are not supporting these widely reported and allegedly illegal activities of a globally significant scale. This should include immediate new debt denial and divestment of the Adani Group’s multitude of listed subsidiaries.” 

>>> Read Tim Buckley’s full analysis, which calls on: 

• The US DOJ and SEC to conduct a full investigation, evaluating the facilitation roles of JPMorgan Chase & Co., Citigroup, and Bank of America et al.

• Prime Minister Modi to ensure SEBI and the Directorate of Revenue Intelligence have authority to compel international entities to disclose critical information and resolve the issues raised.

•  Investors to hold to account asset manager GQG Partners, which is reported to have earlier invested and now exceeded US$3.5bn in various Adani entities, failing basic fiduciary duty tests. 

•  GQG Partners’ Australian superannuation clients to review and act on their obligations to do due diligence around Adani. 

• The Australian Government’s Future Fund, and super fund Australian Retirement Trust to immediately divest any remaining holdings from the various listed Adani Group subsidiaries.

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CBA'S AMBITION RATCHETING UP ACROSS THE BOARD IN FY2023

As our new analysis reveals that, in an Australian first, the Commonwealth Bank (CBA) – Australia’s biggest mortgage lender with over 25% of the market – has established a 60% emissions intensity reduction target on its mortgage book by 2030. This is a good start aided strongly by efforts to decarbonise the power grid, but also through policy advocacy and a future focus on customer engagement which we look forward to more details on. 

Financial products like CBA’s Green Loan and Green Home Loan have also contributed to the $27bn cumulative allocation towards green residential assets since FY2021, working together with the 60% decarbonisation target to mitigate the physical risk of residential assets especially where home insurance affordability is an issue. 

CBA has been getting the energy investment trend right in previous years, nearing a 1:1 ratio of fossil fuels to renewable energy lending. But due to a change in disclosure methodology, CBA did not report its FY2023 renewable energy exposure, making it impossible to compare with previous years. We do know, however, that CBA provided $1.6bn in new and incremental lending to renewable energy in FY2023, up 28% on last year. Further, CBA’s power generation portfolio comprises a positive ratio of 2:1 renewable to other energy, ahead of the Australian market. 

>>> Read the full assessment by CEF's Nishtha Aggarwal against four material climate themes: trends in energy loanbook, portfolio decarbonisation targets by sector, client transition plan engagement, and climate solutions financing.

>>> This continues from our FY2022 series and our recent review of CBA’s landmark oil and gas financing policy which excludes financing of new O&G and sets a benchmark for Asia-Pacific banks.

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INTERGENERATIONAL REPORT: OPPORTUNITY TO MOBILISE SUPER FOR NET-ZERO TRANSFORMATION

The Intergenerational Report (IGR), released by Federal Treasurer Jim Chalmers last week, is a basis to consider major trends impacting the economy: an ageing population, technological and digital disruption, climate change and the net zero transformation, rising demand for care and support services, geopolitical risk and fragmentation.  Whilst identifying the significance of climate change and decarbonisation, and rightly highlighting Australia’s advantages in green energy and critical minerals, the IGR missed the opportunity to fully quantify their economic impacts. 

On the Budget front, the report noted that Australians’ super balances, already worth over $3.4 trillion, will continue to rise and play a significant role in reducing reliance on government services. But the Treasurer has the opportunity to ensure super plays an even greater role in setting Australia’s economy up for the next 40 years. Adjustments to superannuation benchmarks put in place by the previous government in 2021 present an immediate opportunity to align economic and infrastructure needs whilst ensuring Autralians' super is strategically invested. 

This includes adjustments to super benchmarks that would enable greater investment of this massive pool of capital into where the government agrees the economy, equities and infrastructure need to go, such as the net-zero transformation – the defining challenge and opportunity of the coming decades. 

>>>In the context of the IGR, CEF Special Advisor Paul Oosting’s new op ed explores the opportunity to reform Your Future Your Super benchmarks to achieve this aim. 

>>>Tim Buckley commented on the IGR for FS Sustainability, noting that to future-proof our economy we need to think big and build a new paradigm of powering onshore value-adding with our world-leading renewables.

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CHINA ENERGY UPDATE: NEAR-RECORD RE, BUT COAL PUSH JEOPARDISES TRANSITION 

July saw near record RE installs in China, but the simultaneous coal power scale-up jeopardises China's and global carbon targets. 

As CEF's Xuyang Dong writes in the fifth in our series of Monthly China Energy Updates, 22GW of wind and solar was added in China in just the single month of  July 2023. However, another 6.3GW of new coal power was also added, showing China continues to walk both sides of the street, as does Australia.

Despite China’s consistent efforts to rapidly expand its world-leading RE manufacturing and deployments, there is still a substantial gap between its current decarbonisation rate and what is required to reach its dual carbon targets – to peak emissions before 2030, and achieve carbon neutrality by 2060. 

Interesting to see the world’s largest steel firm, China’s Baowu, present its goal of peak carbon emissions intensity in 2023, seven years ahead of 2030 (noting that if China’s steel production peaked in 2022, then we will see a 7 year plateau), and carbon neutrality by 2050 (a decade ahead of China’s overall goal). As CEF has repeatedly said, China is leading the world on energy transition across almost all sectors. Australia, for its part, needs to leverage its $100bn pa value-add opportunity of green iron, rather than leaving it to climate laggards like BHP, who have committed to increasing their global emissions up to 12% from 2023 to 2030 – absolutely pathetic! 

However, on China, CEF does see a concerning trend: the 60-70% decline in international coal prices to-date in 2023, accompanied by its large number of newly permitted coal-power plants, is placing China’s and global efforts on carbon neutrality in jeopardy.

Climate Energy Finance believes that it is crucial that the Chinese government now impose more strict regulations on building new coal-fired power plants, tighten China’s national emissions trading scheme to increase the internalised cost of carbon emissions, and further accelerate China’s energy transition to place it on a trajectory to meet its dual carbon targets while supplying the country's still strongly growing energy demand.

On a related note, having attended and presented at the APAC Offshore Wind & Green Hydrogen Summit 2023 this week, we are also seeing amazingly exciting opportunities for China in offshore wind development. China leads the world in installed offshore wind of 31GW, and is also #1 globally in its total existing, under construction and pipeline development, which ERM estimates is now 140GW – just huge, like all of China’s energy aspirations.

There is an opportunity for China to start exporting its world leading capacity in offshore wind. Vietnam alone has aspirations for 66GW. Given its massive energy security over-reliance on imported, expensive and high emissions fossil fuels, the Philippines has even bigger aspirations for offshore wind (albeit 90% floating rather than fixed turbines). China could help deliver these transformative targets.

>>> Read our full China Monthly Energy July 2023 Update.

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IN THE PIPELINE… |

Forthcoming: Our new report on capping the diesel fuel rebate to raise >$25bn by 2030 for reinvestment in building out Australian mining EV heavy haulage manufacturing onshore is coming soon – watch this space.

MEDIA |

The gas wars have heated up with the toxic, price-gouging gas cartel flailing as it attempts to secure its vested interests against policies such as the Victorian Energy Minister Lily D’Ambrosio’s decision to ban gas in new builds from 2024. Meanwhile, more and more consumers make the switch to electrify everything, saving dollars and the planet. It is critical the whole community is supported to make the change and enjoy the benefits, including the disadvantaged.

>>>Tim Buckley featured in a report on the issue on ABC TV’s 7.30 program.

We were active in commentary on a range of energy topics. See our other media here.

OUR WORK |

See more of our latest work.

PREVIOUS NEWS UPDATES |

Our previous newsletters covering major energy news can be accessed here.

Our highlights tracking decarbonisation progress in 2022, and our 2023 wishlist, are here.

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Annemarie for Tim, Paul, Nishtha, Matt, Xuyang (see more on our team here).

This newsletter is not intended to provide, and should not be relied on for, tax, legal, investment or accounting advice, nor is it an offer or solicitation of an offer to buy or sell, a recommendation, endorsement, or sponsorship of any security, company, or fund. CEF is not responsible for any investment decision made by you. Unless attributed to others, any opinions expressed are our current opinions only. Certain information presented may have been provided by third parties. CEF believes that such third- party information is reliable, and has checked public records to verify it wherever possible, but does not guarantee its accuracy, timeliness or completeness; and it is subject to change without notice.