22 MARCH 2024

Welcome to our news round-up, a bumper edition! If you wish to navigate to individual news items, this link will take you to a google doc with links to each.

A TRANSFORMATIVE FEDERAL BUDGET?

With the Australian Federal Budget some 7 weeks away, news this week of a huge additional new stimulus by the government of South Korea as it looks to secure cleantech supply chains and position the nation as a leader in the zero-emissions new world order: US$313 billion to finance projects that will help to meet its 2030 emissions reduction goals, including the development of renewables infrastructure.

Yet another major economy grasping the strategic, generational, nation-building opportunity of leveraging state investment to crowd-in private capital and turbocharge economic and energy transition, following the lead of the transformative US$1tn Inflation Reduction Act (IRA). This builds on news that the US Government is now considering the scope for an IRA 2, to further accelerate the game-changing stimulus and double down on areas missed in the first go-around!

CEF’s Tim Buckley joined with the SEC to host an industry delegation that met this week with Federal Treasurer Jim Chalmers and Treasury officials to discuss the need for a uniquely Australian response to the IRA, and a new way of thinking about public private collaboration on energy transformation policy and investment. Timely after the Australian visit by world leading strategic economic thinker, Professor Mariana Mazzucato.

Clearly, the Australian government sees the massive investment, employment and net export opportunities of the global energy transformation – and also the climate imperative to accelerate our orderly path to net zero, and the ongoing cost of living pressures of our fossil fuel addiction. There was acknowledgement of the need for a coordinated, scaled and accelerated response to the massive IRA stimulus, the global leadership of China across future-facing zero-emission industries, the geopolitical dynamics of global supply chain enhancement and diversification and their integration with national security and resilience goals, and the role of the QUAD, as well as the case for local content requirements in cleantech.

This is a global race, and Australia has been hamstrung as it rebuilds trusted in-house capacity in the wake of the gutting of the machinery and expertise of the public service under the LNP. 

There was a clear appreciation of the case for increased investment and an ambitious whole of government approach given the magnitude of our strategic opportunity – with our world-leading renewable energy, critical minerals and strategic metal resources, trusted supplier position and massive financial firepower of $3.6 trillion super pool – and of the risks of missing out. The $43bn invested by the Albanese Government across transition programs, investments in CEFC, ARENA and NRF, and policies such as Energy Minister Chris Bowen’s landmark Capacity investment Scheme are a good start!

See our budget asks with the Climate Capital Forum: we identify opportunities to leverage the financial expertise, good governance and independence of authorities such as ARENA, CEFC, NAIF, EFA, NRF and importantly also the Future Fund to de-risk and crowd-in private capital, including world leading international partnerships, and accelerate capital deployments at scale.

As NRF Chair Martijn Wilder said at the Climate Investor Forum this week, we need the clarity of a strong long-term vision, and the ability to significantly raise the risk appetite of these public financial institutions. We need to accept up front that for all the due diligence undertaken, not all country-transforming bets will come good. Ambition of the scale needed to crowd-in $500bn of new nation building investments requires taking calculated risks, and that means public capital commitments the likes of which we are seeing in South Korea, China, the EU and the US. 

We look forward to more detail in the 2024 Federal Budget on 7 May.

Meanwhile, as the government gets on with it, more nuclear time-wasting from the Opposition…

The nuclear ship of fools sails on, with the LNP paddling as fast as they can to beach Australia on the shores of their nuclear “policy” idiocy and sink the renewables transition. At least they have stopped fighting the huge, unstoppable growth in distributed rooftop solar and batteries – but it looks like this sudden conversion is a trojan horse for their campaign to derail utility-scale wind and solar, storage and transmission by diverting investment and momentum from large decarbonisation infrastructure. We need both, as we wrote last month in the AFR.

At some point they have to accept and act on the climate science, and stop peddling delay and disinformation to prop up their fossil fuel donors’ interests.

>>>See our latest nuclear op ed in Canberra Times, and a brilliant demolition of nuclear in Australia by Simon Holmes a Court, presented at the SEC conference this month.

DOWN DOWN, PRICES ARE DOWN(ISH)

Finally, some stabilisation of fossil fuel hyperinflation and price relief for energy consumers, especially in NSW, under the Default Market Offer draft ruling from the Australian Energy Regulator this week. Ausgrid consumers will see 3% retail price declines from 1 July and SMEs a much more significant decline of 10%.

 Great to see the Essential Energy Services draft DMO for Victoria calling for 7% electricity price reductions from 1 July 2024, showing the value of leadership and clarity of vision from Energy Minister Lily D’Ambrosio.

We have been enduring a massive fossil fuel-induced cost of living crisis. Increased deflationary renewables and batteries entering the system are now helping to moderate prices. The solution is to end our fossil fuel addiction and permanently move to a low cost, renewables-powered energy system. Yet with 50% declines in CY2023 wholesale prices, retail price reductions are relatively marginal. 

To permanently drive lower energy costs in NSW, Energy Minister Penny Sharpe should invest in accelerating deployment of distributed energy resources (DER) e.g. rooftop solar and batteries in households and businesses – obviating the consumer cost and time delays of transmission infrastructure  – and concurrently speed the rollout of utility-scale renewables and storage, which have been subject to massive state planning approval inertia, while leveraging existing grid transmission capacity wherever possible.

>>>Read more on the DMO in our op ed in The New Daily. Tim Buckley was also on ABC PM, on SBS and quoted in Renew Economy.

ERARING TO GO?

On a related note, CEF and our partners were active in again calling for the on-time phased closure in 2025 of Origin’s massive coal-fired power clunker, Eraring, with our new analysis confirming that, if delivered, the pipeline of low-cost firmed renewables and growing grid orchestration capacities in NSW are more than sufficient to offset the capacity loss from Eraring’s closure. As Stephanie Bashir wrote in the AFR: 

“The end of coal power is inevitable. To manage the unavoidable, necessary and accelerating transition of its energy system, NSW should now redouble its efforts and focus on delivering its pipeline of replacement supply-side projects, concurrently with a program of cost-effective demand-side participation measures. …NSW residents and industry can look forward to increased supply, improved reliability and lower electricity prices.”

>>> See further commentary by Stephanie and Tim Buckley in Renew Economy.

>>> Watch this space for CEF’s new report out soon, quantifying the massive cost that would be borne by NSW consumers in subsidies to Origin Energy to keep Eraring open – public money that should instead be deployed to underwrite the renewable transition.

AEMO’S LATEST GAS FANTASY A MIRAGE OF HOT AIR

AEMO’s Gas Statement of Opportunity (GSOO) for eastern states, which this week flagged the risk of gas shortages and called for yet more new investment, reads as gas industry propaganda. It is blatantly wrong, as we remarked this time last year when it issued the same dire warning. One only needs to look at the accuracy of that forecast – methane gas demand is rapidly falling, not growing. East Australia produces five times the amount of gas needed to serve the domestic industry (i.e. excluding what the gas industry needs itself). 

There is zero shortage.  The only shortage is a deficit of ethics from the extortionate gas cartel seeking to entrench its interests in prolonging methane gas as it rakes in profits, gouges customers and drives escalating climate change, compounded by the chronic regulatory capture that has prevented our governments putting the interests of Australians ahead of a few private multinational corporations extracting tens of billions of largely tax free gains for the likes of the Chinese and Singapore governments, Shell, Chevron and ExxonMobil.

AEMO’s projection that gas use will be higher in 2040 than today completely fails to grasp the massive structural technology shift underway in battery storage and firming – utility scale, behind the meter and in electric vehicle to vehicle to grid charging (V2G) – as well as grid orchestration. This is permanently diminishing the need for gas peakers, which play an important but small and diminishing role in grid firming, mostly in winter. AEMO’s projections today entirely fail to incorporate the total disruption that a 40% decline in battery prices in the last three months alone entails.

AEMO’s GSOO also inexplicably ignores the obvious number one opportunity – to ‘electrify everything’ and thus reduce demand. The best solution would be to immediately nationally ban new gas connections in homes, and then accelerate the phase out from existing homes, starting with public housing.

Gas bans in new builds are already in place in Victoria and the ACT, with NSW under pressure to follow suit, and with major industrial customers looking to transition their supply to firmed renewables.

>>>Read the Renew Economy story with Tim’s commentary.

A WOODSIDE NOTHINGBURGER WITH THE LOT 

In news that will surprise exactly noone, last week mega-polluting oil and gas dinosaur Woodside cited market uncertainty over the climate science as a reason to delay its green investments, warning that it may fail to meet its own measly low emissions energy project target of US$5 billion capex to 2030, a fraction of its capex on new high emissions projects.

The $55 billion fossil fuel giant – Australia’s biggest – will simultaneously accelerate deployment of three high-emissions greenfield methane gas and oil developments globally, pointing to mythically high return projections completely unsupported by reality to support the play, as its share price reveals a decade-long 21% slide, a 50% underperformance against the Australian stock market. Shareholders should be baying for a strategic board refresh aligned with the climate science, as called for by the Australian Centre for Corporate Responsibility.

Investors are indeed restless, as HESTA CEO Debbie Blakey ($74bn AUM) warns the board needs to massively step up on decarbonisation or ship out, as it chronically fails to manage its #1 financial risk: climate change. We await the April AGM. Chair Richard Goyder is on notice.

>>>Read our op ed in Renew Economy 

FIRST NATIONAL CLIMATE RISK ASSESSMENT REVEALS 56 KEY RISKS

Australia’s first National Climate Risk Assessment was delivered last week by DCCEEW in partnership with the Australian Climate Service, a BOM-led expert body informing climate and natural disaster decision-making.

The report identifies 56 risks across eight systems of national importance  – defence and national security, economy, trade and finance, health, infrastructure and built environment, natural environment, primary industries and food, and regional communities. The assessment recognises that First Nations values and knowledge are essential for our response to climate change and sustainable management.

Eleven primary risks are earmarked for further analysis by the end of 2024.

>>>A National Adaptation Plan Issues Paper is open for consultation, with submissions closing 11 April.

AN INNOVATIVE TWIST ON CLIMATE DUTY OF CARE

We worked with former chief scientist and leading energy advisor Dr Alan Finkel on an op ed published in The Australian focusing on social licence around the renewables rollout, which must be accelerated if we are to mitigate the challenge and risks of climate change. Dr Finkel proposes an innovative concept of duty of care to tackle the BANANA in the room – the Build Absolutely Nothing Anywhere Near Anything syndrome – and encourage approvals:

“Every gigawatt-hour of electricity generated by a new wind farm or solar farm displaces a gigawatt-hour of fossil-fuel generated electricity. This would mitigate global emissions, reduce habitat loss and extinctions, and contribute to a better environment…

“If an ‘affirmative’ duty of care approach were to be adopted [in project approvals processes], it would take into account the displacement benefit described above as a material consideration in the assessment of renewable energy developments. This would add more certainty to the approval of the wind farms, solar farms and transmission infrastructure that we must build in order to meet our renewable energy targets and mitigate climate change.”

>>>Read the full op ed in The Australian.

COMMUNITY ENGAGEMENT ESSENTIAL FOR OFFSHORE WIND 

Climate Capital Forum continues to advocate for effective community consultation and engagement on offshore wind projects’ evaluation and assessment. Forum member Satya Tanner was interviewed by News of the Area in Port Stephens NSW about opportunities for the local community to get involved: “The wider community has a really important part to play in the decision making”... “When it is time to engage, projects will be looking for community associations to talk to about these issues. For example, to understand the needs of the fishermen, so as to create a design solution that is best for all parties.” 

LOCAL CONTENT RULES CENTRE DOMESTIC BENEFITS IN TRANSITION 

A coalition led by Climate Capital Forum, including the Australian Manufacturing Workers Union, the SEC, First Nations Clean Energy Network, Weld Australia, the Institute for Integrated Economic Research and CEF, has called on the federal government to embed requirements for locally produced and supplied components into all renewable energy supply chain manufacturing and development to ensure the benefits of the energy transition are returned to local communities, businesses, workers and the Australian domestic economy as a whole. 

Including a local content requirement will mature domestic clean energy and technology supply chains, underpinning investor confidence as it builds a critical skills base, facilitates social licence and prepares us for global opportunities as a renewables and cleantech superpower. 

>>>Read the joint call.

CLIMATE CAPITAL NEEDS RIGHT POLICY SETTINGS TO STEM EXODUS

This month's announcement by AusSuper, Australia’s biggest super fund ($300bn+ AUM), that it will upscale its infrastructure investments offshore, including A$15.5bn into energy transition opportunities in the UK, should encourage Australian energy policymakers to greater ambition. It follows the recent decision by Aware Super to invest in a US-based energy transition finance firm, taking advantage of IRA incentives, and a tidal wave of superfund capital looking to deploy overseas. Total global cleantech investment in 2023 was a staggering US$1.8 tillion. Global capital is moving, at scale. We now just need to double the speed of deployments!

Australia has one of the world’s largest pension pools, some $3.6tn, and CEF’s research quantifying climate financing by the Big 4 banks shows they have pledged a collective ~$400bn this decade – a testament to the capital ready to be activated to accelerate decarbonisation. This is a powerful conservative voice increasingly playing a constructive role in the national conversation.

We should now urgently crowd-in and leverage this capital to support domestic transition. 

>>>Read the analysis by Nishtha Aggarwal and AM Jonson: Climate capital needs right policy settings to stem exodus.

SUPER OPPORTUNITY: REVIEW OF YFYS PERFORMANCE TEST  

Treasurer Jim Chalmers has opened a consultation on a key component of super regulation, the Your Future Your Super Performance Test. The Test, introduced by the Coalition government, has had a range of ‘unintended consequences’, including benchmark hugging, limiting superfunds' investment in clean technology and low-carbon equities, and their ability to align investment strategies with future risks and opportunities such as climate change.

In opening the consultation period, Treasurer Chalmers and Assistant Treasurer Stephen Jones said: “Industry has raised concerns the current test is holding back investment in some sectors that could provide strong returns for members, such as the energy transition ...”.

This is a crucial opportunity to ensure super settings are right and aligned to the best interests of the Australian public, not tied to hugging historic industries. 

>>> Read more here from CEF special advisor on YFYS reforms Paul Oosting. Submissions close April 19.

MULTIBILLION DOLLAR SNOWY DEBACLE TURNS 7 

17 March 2024 was the seventh anniversary of the Turnbull Government announcing the Snowy 2.0 pumped hydro project. The project was expected to cost $1.7bn and be up and running by 2021, in time to replace the Liddell Power Station. No mention was made of transmission.

Since that time the project has been plagued by overruns and delays. The transmission aspect of the project, which does not have a DA as yet, has also faced multiple delays and overruns. 

By last year, the total project cost had reached a reported $12bn, with expected completion in 2028.

Owen Evans chronicles an unmitigated energy infrastructure disaster, compounded by the massive cost over-uns at the Kurri Kurri gas peakers, built without sufficient gas supply – both case studies in what not to do.

>>>Read the full analysis.

SMART ENERGY COUNCIL 2024 CONFERENCE AND EXHIBITION

CEF’s Tim Buckley, Amanda Caldwell and Matt Pollard attended Smart Energy Council’s spectacular annual conference this month, with Tim and Blair Palese, CEF advisory board member and Climate Capital Forum founder, both presenting.

The SEC has built an incredible network of industry, investors, government and stakeholders to showcase Australia’s opportunities and challenges in the global energy transition, and its concurrent 2024 expo housed 90+ industry leaders in solar, EVs, battery systems and more. 

The event featured our partners and leaders in the movement including:

• Allegra Spender MP, who launched her People Power Plan with Zali Steggall MP and Dr Helen Haines MP this week in Parliament to solarise and electrify households, including renters and low income; 

• Deputy High Commissioner of India Suneet Mehta on the strategic alliance for Australia and India in clean energy manufacturing; 

• Dr Nicole Kuepper-Russel and Winnie Lue from 5B on accelerating deployment of renewables in remote regions and micro-grids and scaling Australian manufacturing through partnerships with key trading partners like India and the US; 

• New Energy Nexus’ Danny Kennedy, offering insights on the renewable energy revolution, the role of batteries, the impact of the US IRA and the serious risks to Australia of waiting to invest in the transition;

• Maia Schweizer from SunDrive showcasing the leadership of Australian innovation in solar module design and manufacturing; 

• Andrew Dickson from CWP Global on the importance and immense opportunity for embodied decarbonisation in the Pilbara; 

• Satya Tanner from LAUTEC on Australia’s energy security and the role our renewables play in decarbonising global emissions from our exports; 

• A session on Asian renewable energy developments, chaired by Smart Energy Council’s Richie Merzian - featuring Tetchi Cruz Capellan from Sun Asia Energy in the Philippines, Patrick Mayoh from NSW Branch of Australia China Business Council, Sanaya Khisty from 5B, Rebecca Mikula-Wright CEO of Asia Investor Group on Climate Change. Each presentation gave fascinating and detailed perspectives on challenges, opportunities and risks in specific Asian settings.

See the SEC’s highlights reel here.

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

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