Welcome to our news round-up.

25 JULY 2024

For a wrap of the last six months, see CEF’s January - June 1HCY24 update covering key news in climate and energy, and CEF’s reports, analyses, media and other work, as we continue to work every day to accelerate the shift of global capital to decarbonisation in line with the climate science.

PRICE SPIKES IN AEMO’S QUARTERLY ENERGY REPORT RAM HOME NEED TO ACCELERATE FIRMED RENEWABLES

AEMOs June 2024 Quarterly Energy Dynamics report tracks major power price spikes in the National Energy Market (NEM) over 2Q2024, particularly in NSW. Tim Buckley discussed the drivers on ABC NewRadio, and will be on SkyNews today.

Despite the reporting around this, AEMO shows electricity demand in Australia flatlining for the last eight years. This is not a demand driven event. This was a low demand period. AEMO quotes 5 factors:

Lower wind production (not the biggest issue)
Lower rainfall saw hydro production down 18% yoy – a serious problem
Major planned transmission outages, the core reason why we had a scenario that ended up causing massive, sustained power prices in the NEM, particularly NSW
Unplanned coal power plant breakdowns at totally unreliable >40 year old, end of life plants, and
Gaming by gentailers exacerbating this scenario.

AEMO names and shames AGL and EnergyAustralia for deliberately repricing their capacity from low to high prices for their Bayswater and Mount Piper coal clunkers, despite their knowledge of a grid transmission outage warned about for months. And then Eraring, Australia’s largest coal clunker, had outages, adding to pressures.

Coal power was unreliable and offline when it was needed and this was opportunistically gamed by AGL and Energy Australia. So when their executives bank their 2024 bonuses, consumers crushed by fossil energy price inflation can thank them for gouging us.

Batteries’ role in supporting evening demand peaks is prominent, with large increases in price-setting frequency of all generation types, 23% in some evening dispatch periods 2Q2024 (7% for 2Q2023).

As for methane gas, despite production being 5x domestic demand, AEMO issued a notice on potential shortfalls due to depletion of southern storage inventories. The gas cartel continues to restrict domestic supply to maximise profits. Note to Resources Minister Madeleine King: the US domestic gas price is 80% lower than in East Australia.

We need renewables replacement capacity now. We have a climate crisis, an energy crisis and a cost of living crisis. We can solve all three by building firmed renewables. Consumers pay the price because investors won't build new thermal power, but they can't build new renewables if they can't get them through our chronically dysfunctional, backlogged planning approval system. In NSW it takes 10 years to approve a windfarm.

Europe just introduced Overriding Public Interest principles for low cost, reliable renewable energy to expedite approvals within a 2 year timeframe.

The other key is grid modernisation to manage demand response, as Tim detailed in his interview on NewsRadio.

>>> The ABC interview can be heard here, and watch our media page for Tim's forthcoming interview where he will breakdown the AEMO report on SkyNews with Kieran Gilbert today.

CHINA KEEPS UP THE BIGGEST CLEAN ENERGY SHOW ON EARTH

Big news in our latest Monthly China Energy Update for May covering January to May: we project with a high degree of confidence that China will achieve its 2030 target for 1,200GW of installed wind and solar capacity this month – 6 years earlier than scheduled.

We note that 103.5GW of zero-emissions capacity was added during the first 5 months of CY2024 alone, while coal power additions declined by 45% y-o-y as at the end of May. This was notwithstanding a still exceptionally strong +6.9% y-o-y YTD2024 increase in electricity demand.

Tim, Xuyang and Matt delivered a presentation to Trade and Investment Queensland – The global energy transformation and implications for Australia – highlighting the unstoppable momentum of the global energy transition, as the world now invests almost twice as much in clean energy and cleantech as it does in fossil fuels. China is the overwhelming leader, investing a staggering US$676bn into cleantech in CY2023.

CEF’s China energy year-end update for CY2023 showed China installed a total 302GW of zero-emissions capacity in 2023, 84% of the total new capacity additions for the year. Each week in 2023, China installed as much wind and solar infrastructure as Australia does in its best year. While CY2024 so far has seen a slight slowdown in momentum of new renewables capacity additions, we are still seeing a massive 25% y-o-y increase.

China also dominates global battery-EV supply chain, including mining, materials processing, and manufacturing of cell components, battery cells and EVs. This has led to rising new energy vehicle (NEV) penetration in China. It has also led to dramatic, game-changing price deflation of battery energy storage systems (BESS) and solar components globally, a key enabler of global decarbonisation and electrification.

China’s clean energy dominance gives it a leading edge in an increasingly dynamic and complex geopolitical landscape where energy transition is critical to security, prosperity and growth. Now we are seeing that, in addition to Chinese energy State Owned Enterprises’ (SOE) overseas investment, private-listed Chinese cleantech companies are also expanding their businesses overseas to non-US allied countries.

China’s massive energy transformation is an urgent signal for Australia to diversify from its legacy economy as global top 3 petrostate exporter of coal and gas – we have zero time to waste. We must accelerate the momentum of our energy and industrial transition towards value-added zero-emissions industries of the future.

>>>Our work on China’s remarkable decarbonisation progress as it speeds past its targets was covered widely in domestic and international media, including in a feature in the SMH and across Nine papers, in the FT, in the South China Morning Post, in an extended interview by Tim on ABC TV News Channel and a feature on ABC online, QUORA, and in the Straits Times & The Express Tribune.

IEA ELECTRICITY MID-YEAR REPORT: GOOD NEWS FOR THE PLANET

Hey LNP fossil fuel shills, isn't it amazing to see how the International Energy Agency’s (IEA) Electricity Mid-Year Update: July 2024 projects that renewables generation is forecast to exceed coal generation globally in 2024/25! Peak global coal is here, great news for all our children, including yours.

Meantime it is hard to discern any sign of Ted O’Brien’s global nuclear renaissance. On the contrary, it looks like nuclear continues to flatline.

And, according to the IEA, renewables energy generation is 3 times that of nuclear and accelerating very, very fast. China is building renewables 107x faster than nuclear in 2024 to-date. The US is building renewables 21x faster than nuclear capacity in 2024, and in India, the third largest electricity market, in 2023/24 they build renewables 14x fast than nuclear.

The IEA’s mid-year electricity update projected that global CO2 emissions from electricity generation are set to remain broadly on a plateau through 2025, modelling a slight increase in 2024, followed by a decrease of less than 1% in 2025.

The plateauing of global electricity sector emissions that this report identifies is a globally significant pivot point.

If China can maintain or accelerate its +17% yoy increase in zero-emissions energy generation reported in 1HCY2024, the IEA’s projections may again prove too conservative, as they have consistently been on the speed of energy transition.

The progressive electrification of everything in China is driving strong electricity demand growth globally, with China's electricity sector now more than twice the size of the US (where electrification is lagging) and four times that of the whole of the EU (where electrification everything is also lagging – Rewiring’s Dr Saul Griffith has a bit more work to do yet!

In short, China dwarfs other nations’ electricity sectors; this is why when China thermal power generation plateaus or declines in 2HCY2024 and then again each year thereafter, the global implications are profoundly positive. A lot more to do, but progress is being made.

The IEA also reports there has been a significant increase in 2024 in the frequency of negative wholesale price events in numerous power markets across the globe. For example, in 1HCY2024 the share of negatively priced hours in Southern California was above 20%, more than tripling from a year before. In some domestic markets, such as South Australia, prices have been negative for about 20% of the time since 2023.

Negative prices are a great market signal to incentivise the rapid deployment of BESS and vehicle to grid (V2G) bi-directional charging, which will increasingly feature in our energy transition as EV penetration increases. Grid orchestration is also key to provide for variability of demand on a centrally coordinated basis. Bring on smart electricity retailing technologies, like from Origin Energy's 23% owned Octopus Energy.

FFI’s PIVOT FROM HYDROGEN A NECESSARY REGROUPING

News last week of Twiggy’s pivot from his global green hydrogen export ambitions at Fortescue Future Industries (FFI) had the energy transition spoilers out in force.

Tim had a more nuanced view in his commentary for the AFR, noting that “Andrew Forrest was not alone in betting big on green hydrogen as part of the energy transition but costs near term had, in fact, gone up instead of following the expected pattern of better affordability for clean technology such as batteries, solar panels and EVs. Twiggy went way too hard, way too fast, too globally and way too hyped about hydrogen…The first ship capable of transporting chilled hydrogen at scale is at least 10 years away, if ever.

"Green hydrogen’s value is helping Australian resources companies to pivot to value-adding, such as processing critical minerals and producing strategic metals such as green iron.”

Speaking to the ABC, Tim added that the scaling back of FFI’s green hydrogen export ambitions, including for the site of the Liddell coal power in NSW, is a “necessary regrouping”: “The technology is yet to be commercialised… in terms of production but more importantly in terms of international transportation. The cost of the transportation is prohibitive and it's in fact not even commercially viable at this point in time, and won't be for another decade."

A key focus should be the role of clean energy, including potentially green hydrogen, in onshore processing to embody decarbonisation in our resources such as iron ore and critical minerals prior to export. CEF’s new report on the industrial electrification and decarbonisation opportunity in the resources engine room of the Pilbara in WA, out next month, calls for the Federal Government to leverage the Hydrogen Headstart Program to provide capital support for renewable energy-based strategic metals refining in low-emission industrial precincts (see further details in item below).

>>>In addition to his commentary in the AFR and ABC online, listen to Tim’s interview on ABC Country Hour.

UNLOCKING GREEN METALS OPPORTUNITIES: SUBMISSION

With green iron Australia’s #1 future facing industry opportunity, this month, CEF’s Matt Pollard and Tim Buckley made a submission to the Federal Government’s consultation on the barriers and policy incentives that would encourage investment into priority industries under the Federal Government’s Future Made in Australia (FMIA), specifically the production of low-emissions iron, steel, alumina and aluminium.

CEF called on the Government to accelerate the development of a competitive Australian green metals industry by a. Accelerating zero emissions project proposal evaluation and approvals and b. investing an additional $10-30bn capital and direct budget support in the 2024-25 Mid Year Economic and Fiscal Outlook (MYEFO) in December, building on Treasurer Jim Chalmers’ $22bn provided in the May 2024 Budget, and the $40-45bn of capital support allocated in May 2023 (via the NRF, NAIF, EFA, CEFC, ARENA).

We are all in on Albanese’s Future Made in Australia; it's great to see a serious vision for Australian energy and industry policy at last. CEF recommends that the government:

Provide capital support via complementary financing mechanisms including production tax incentives, public procurement for green metal value-adding, contracts-for-difference, and an expanded Future Fund mandate for strategic public interest, patient equity and enabling infrastructure investments
Introduce clear community benefit principles and First Nations capacity building and benefit sharing (e.g. government financial support to allow real equity participation) as conditionality for investment recipients
Give DFAT and Trade Minister Don Farrell a clear mandate to build international collaboration and consensus on an Asian Carbon Border Adjustment Mechanism (CBAM), to extend and reinforce the EU CBAM
Provide no more investment or budget support to fossil-fuel powered projects for value-added refining without a clear path medium-term to utilise low-emission technologies to embed decarbonisation as a condition of public funding support
Support the integration of industrial demand response mechanisms into Australia’s existing and future grid-connected, energy-intensive, value-added refineries.

>>>Read the full ‘Unlocking Green Metals Opportunities for a Future Made in Australia’ consultation submission, including case studies on strategic metals refining in New Zealand with an +85% renewable energy system, here.

PILBARA ELECTRIFICATION AND DECARBONISATION REPORT PREVIEW

Next month, CEF is set to launch a major report modelling the current energy demand in the powerhouse of Australia’s resources export industry, Western Australia’s Pilbara, making the urgent case for common-user electricity infrastructure (CUI) to accelerate the region’s electrification and decarbonisation.

CEF’s new modelling in this report reveals that replacing just the current fossil fuel use in the Pilbara – high emissions, subsidised imported diesel in mobile machinery and fossil gas for stationary energy – would require 16.66 terawatt hours (TWh) pa of electricity, equivalent to 7.8% of Australia’s National Electricity Market (NEM). This could and should be supplied by locally-generated, zero-emissions firmed renewable energy. However, the Pilbara currently sources only 2% of its electricity from renewables.

Progress on comprehensive energy supply decarbonisation in the region is undermined by fragmented corporate energy production and grid transmission structures. CUI in the Pilbara would enable multiple stakeholders to efficiently and cost-effectively electrify and decarbonise their operations, transitioning the iron ore and critical mineral industries away from diesel and methane gas.

As a nation, it’s imperative that we pivot from our increasingly risky exposure as a legacy top 3 global coal and gas exporting petrostate to value-added energy transition materials produced onshore pre-export using firmed renewables. This is where our economic opportunity lies, as fossil fuels enter terminal decline globally, and carbon pricing mechanisms such as CBAMs proliferate. And the Pilbara is central to this goal.

The report is currently undergoing an extensive peer review process with industry, finance and policy leaders to ensure our recommendations capture the latest on the ground knowledge and most effective policy frameworks, investments and incentives to do the job.

We will prioritise the feedback already rammed home to us from key peer-reviewers namely: a. Including the EU “Overriding Public Interest” principles here to dramatically accelerate approvals; and b. Building First Nations alignment via equity involvement.

CLIMATE CAPITAL FORUM GOES TO CANBERRA

A Climate Capital Forum Canberra delegation this month met with MPs, advisers, and key departments including Climate Change and Energy; Industry, Science and Resources; and Infrastructure, Transport and Regional Development.

The CCF delegates reiterated their strong backing for government transition initiatives – principally, the Future Made in Australia Act and the shift toward the central role of government in anchoring investment in Australia’s cleantech sector. This is the necessary signal to crowd-in domestic and international investment, and ensure Australia’s regional and global place in the decarbonisation of the world economy.

CCF’s members called for the following post the May 2024-25 Budget:

A coherent narrative on FMIA/decarbonisation so the wider community can understand the scale of the transformation and what the government is trying to achieve
Accelerated public investment to encourage private investment, especially in the face of the nuclear distraction and delay being pedalled by the Coalition
The establishment of the mooted coordinator-general role, either within the Net Zero Economy Agency or an independent overarching body, to assist project proponents, investors and other stakeholders navigate the complexities of the regulatory environment in the renewables sector, and accelerate evaluation and approvals
Models of community ownership for renewables projects – including Regional Consultation Hubs – to ease community disquiet, limit consultation fatigue, and provide trusted information to lead cultural change around energy infrastructure ownership in Australia
A comprehensive and well resourced First Nations Clean Energy Strategy in 2024, a central element of successful energy change in communities.

A subsequent CCF members’ meeting with Dan Repacholi, MP for the Hunter, focussed on the strong opportunities for the region – an historical fossil fuel heartland – in making the transition to clean energy and decarbonising innovation, and building real new investments and employment opportunities to demonstrate real momentum e.g. the Sundrive module manufacturing and Elecsome module recycling proposals being supported by the FMIA and AGL.

>>>Read the Climate Capital Forum’s 2024-25 Budget Response paper in full here.

MINISTER BOWEN’S NATIONAL PRESS CLUB ADDRESS

CCF members attended the recent National Press Club address by Federal Climate Change and Energy Minister Chris Bowen, in which he ranged across pressing issues in the energy reform agenda. Australia cannot afford policy drift on investment in renewables and decarbonisation and it was great to hear Minister Bowen confirm he is in it for the long haul. Policy certainty now, as formalised in the FMIA Act and the government’s suite of complementary decarbonisation initiatives, is critical to delivering continued investment in Australia’s clean energy and zero-emissions industry future.

Minister Bowen used the speech to point out the stark difference between the government’s energy policy focused on the roll out of clean energy technology and the Coalition’s “nuclear energy frolic” which he said would be outrageously costly and a risk to investment in Australia’s transition. He also forecast last week’s release of the Consumer Energy Roadmap, which includes plans to support consumers and households to manage their energy supply through interactive systems communicating with the grid.

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