Welcome to our news round-up. See previous issues here.

19 DECEMBER 2024

MESSAGE FROM CEF DIRECTOR TIM BUCKLEY

Climate Energy Finance wishes all a Merry Xmas and great NY break after what has been a massive year of progress on the global energy system transformation, but we also note there is still insufficient momentum relative to the stark reality of the growing climate crisis.

In 2025, CEF expects a year of accelerating momentum, led again by China, but also by the economics, technology enhancements and sheer build up of global manufacturing capacities. The solutions exist at the scale needed, as does the finance capacity, we just need to get the right policy settings, including a high regulated price on carbon in international trade. More on this in CEF’s forthcoming report by Matt Pollard on the need for an Asian CBAM. 

To end the year on a positive note, CEF would flag two massive growing themes for 2025: 

Theme 1. Battery energy storage system (BESS) + solar momentum: Our top theme for 2025 is the convergence of the global BESS + solar disruption, as the massive momentum in battery technologies, huge manufacturing capacities growth and resulting rampant price deflation sees massive scaling of deployment capacities and financial understanding. Like solar, BESS can be deployed in just 12-18 months. This technology convergence is going to massively accelerate the global energy system transformation. Renew Economy wrote about this scaling up and massive deflation today. This building BESS + wind/solar is a key aspect of our new CEF report  highlighting that Minister Bowen’s 82% renewables by 2030 target is definitely achievable (discussed below).

Theme 2. China’s accelerating outbound direct foreign investment (ODFI) in cleantech globally: We documented this in our recent CEF report “Green capital tsunami: China’s >$100 billion outbound cleantech investment since 2023 turbocharges global energy transition”, and note that two months later our tracked figure is over US$120bn, rising every second day with another transaction e.g. CALT investing in a new €4bn 50GWh battery manufacturing plant in Spain in JV with Stellantis, and China's Elite Solar building a 2GW solar cell and module factory in Egypt.

We thank all our valued allies and partners for their ongoing collaboration as we collectively navigate the highs and lows of building our zero-emissions, clean energy, climate-safe future, and look forward to working with you in 2025.

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MEANWHILE IN AUSTRALIA, LNP’S SHAMELESS GRIFTERS RELEASE NUCLEAR ‘COSTINGS’ HOAX 

Frontier Economics modelling was finally released this month to prop up Peter Dutton and Ted O'Brien politically-motivated nuclear con, but the fatally flawed report fails the daylight test:

• Frontier’s assumption that nuclear costs A$10bn/GW directly contradicts the evidence. The UK's Hinkley Point C costs triple that at A$30bn/GW. Southern Power's Georgia nuclear plant at Vogtle in the US costs A$25bn/GW.

• The report allows the LNP to erroneously compare AEMO's Integrated System Plan (ISP) scenario with the Frontier scenario of a shrinking Australian economy with 40% lower electricity demand. 🍎 vs 🍑 Farcical!

• They prioritise the un-discounted numbers, ignoring the time value of money – aka inflation. Economics 101 dictates a Net Present Value (NPV) approach. But Ted's con disregards this fundamental adjustment to normalise 🍒 vs 🫐.

• They cut off their cashflow impacts modelling at 2051, conveniently amortising nuclear’s massive capital cost over only half a reactor’s life, thereby massively slashing their stated cost during the forecast period.

The LNP nuclear fantasy sees electricity sector emissions ⏫ ⏫ 400% over the 2030-2040 decade relative to AEMO's ISP. 

It would drive dramatically more fossil fuel use in the short, medium and long term – exactly as intended – as it derails our firmed renewables rollout, exacerbating the fossil energy-driven cost of living crisis, a catastrophic outcome and an egregious betrayal of the Australian people. 

The LNP falsely conflates renewables with energy price hikes driven by fossil fuel price inflation after Putin's invasion of Ukraine, with the resulting surge in oil, gas and coal prices from ongoing sanctions. Actual authorities with credible data confirm renewables are the solution. The Australian Energy Market Commission (AEMC) models a 13% real energy price reduction over the coming decade, thanks to surging deployments of new private sector funded renewable energy and BESS. 

This $331bn price tag for nationalising onto taxpayers the cost of reactors makes the massive Snowy Hydro 2.0 cost blowout, 7.5x the original guess, look like a rounding error. This is more than our imaginary US submarines, now in a race with Dutton's nuclear plants to see which materialise first. 

The CSIRO confirmed yet again in its GenCost 2024-25 Report out this month that the lowest-cost form of new generation is solar and wind with firming and transmission, with nuclear costing twice as much.

The LNP projects that its first nuclear power plant will be operational by 2035/36, giving it just 11 years to change Federal and State laws, approve and then build the biggest infrastructure project in Australian history at twice the speed that the UK, France and US can do it, despite us having zero supply chains or skilled workforce. Sounds legit. The modelling further assumes the first mythical SMR to be operational by 2035 – and that Australia will have the first in the world.

Let’s get real. In November the Clean Energy Regulator said that Australia is on track to approve a record 7.2-7.52GW of new VRE (including rooftop) in 2024 – a strong picture for continued momentum in 2025. The CER forecasts RE to reach 45% in 2025, after a 2024 average ~40%. November saw a NEM RE share over the month of 44.6%, up from 40.2%. 30 October set a new record high NEM VRE penetration of 74.7% share for a 30 minute interval. Federal Energy Minister Chris Bowen's Capacity Investment Scheme this month successfully awarded 6.4GW of VRE capacity and 3.5GWh of firming in the largest energy tender in Australia’s history (see below). 

It would be an epic intergenerational tragedy to see these vandals trash our accelerating energy transition progress.

>>We were active in the media on the release including frontrunning Dutton and co’s presser on Sky News and ABC NewsRadio (reproduced online), on Sky Weekends with Jaynie Seal, and in Michael West Media.

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OUR NEW REPORT: 82% RENEWABLES BY 2030 ON TRACK IF CLEAN ENERGY MOMENTUM SUSTAINED

Our new  report – Australia is seeing an Acceleration in our Electricity Sector Transition, putting our 82% Renewables by 2030 Target in reach – finds Federal Energy Minister Chris Bowen’s ambitious target to achieve an 82% renewables share in electricity in Australia by 2030 is on track, if the level of activity and growth in renewables share over the last 6 months can be sustained.

This is key to achievement of Australia’s broader emissions reduction and economy-wide decarbonisation and reindustrialisation goals.

It is critical that nuclear furphy of the LNP not be allowed to disrupt the significant progress we are now making on accelerating Australia’s transition to renewables, as mapped in our report, by destroying renewable energy investor confidence and reversing momentum.

After a prolonged new energy investment drought instigated by the previous government, 2024 has seen a strong uplift in planning approvals across Australian renewables and BESS and a major expansion of project proposals moving forward to final investment decisions, construction and commissioning, whilst rooftop solar continues to boom. BESS deployments in particular are booming, and therefore electricity prices are likely to finally see sustained downward pressure.

Consumer energy resources – led by rooftop solar, but increasing also including behind-the-meter batteries, EVs, VPP and demand response management (DRM) tools – are coming with the ‘electrification of everything’ to play a key role in the deliverability of 82% by 2030.

As noted above, the Clean Energy Regulator says 2024 will see a record 7.2-7.5GW of renewables (including 3.15GW of rooftop) installed, with strong momentum into the new year, putting Australia’s NEM on track to average 45% renewables share in 2025. The Clean Energy Council is even more optimistic, suggesting Australia is on track to reach a 48% renewable share by the end of 2025.

However, complacency and policy chaos is a material risk. There remains a clear and present threat that Australia loses momentum and acts too slowly, or is divided by the climate and energy wars stoked by the LNP.

A failure to sustain our accelerating transition at the speed and scale needed to slash soaring energy prices, reduce emissions, and meet the renewable energy needs of zero-emissions future industries would do profound damage to our economy, prosperity and climate. The investment, employment and net export opportunities for Australia in embracing the unstoppable global energy system transformation are huge. The Future Made in Australia Act is a critical policy initiative to seize this opportunity.

>>View our media on this report including a story syndicated across 100+ mastheads via AAP, PV Magazine and Renew Economy

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MYEFO NOTHINGBURGER ON GREEN IRON, BUT SOME RENEWABLES WINS

This week’s 2024-25 Mid-Year Economic and Fiscal Outlook (MYEFO) comes after the May 2024-25 budget announced $21bn in new funding initiatives under the landmark Future Made in Australia framework. 

Our key ask for MYEFO was for investment as part of the FMIA strategy into production tax incentives (PTI) for onshore renewables-powered processing of strategic metals – by far Australia’s #1 strategic opportunity to position our economy in rapidly decarbonising global supply chains, and one we will lose if we delay further. However, the budget update came up empty on that front.

PTIs for renewable hydrogen and critical minerals were introduced to address market failures and develop industrial capacities critical to national economic resilience and security in a decarbonising world. Government intervention was deemed necessary to scale investments above the prevailing natural rate. The same applies for green iron. CEF sees the failure to extend these measures to facilitate the creation of a green iron industry in Australia as the single biggest risk to Australia in the global transition to a net zero economy. 

Realising the green iron opportunity presents a far greater upside than critical minerals given the scale of Australia’s iron industry, so the absence of any budget update support is doubly disappointing. We urge the Government to extend PTIs into refining and value-adding of iron in next year’s Federal Budget and/or as a part of its policy platform to take to the next election.

On the upside, new budgetary measures in MYEFO to support the energy transition include:

• An additional $1.2bn to modernise and deliver new and upgraded transmission infrastructure, building on the $20bn Rewiring the Nation Fund. 

• $500m for the Social Housing Energy Performance Initiative to improve energy efficiency and access to solar and batteries in 100,000 social housing properties. 

• $68m in 2025-26 to DCCEEW to resource timely delivery of environmental approvals in priority areas such as renewables, transmission, critical minerals.

• $37m over 6 years for technologies to deliver more energy through existing infrastructure, including integrating batteries into local grids. 

• $10m over 3 years from 2024-25 to implement key improvements to fugitive methane emissions reporting under the NGER scheme. 

• $2m over 4 years for the Australian Energy Infrastructure Commissioner for community engagement and support for those affected by the energy transition. 

>>See our fuller analysis of MYEFO.

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CAPACITY INVESTMENT SCHEME DOING EXACTLY WHAT IT SAYS ON THE BOX

This month, Federal Energy Minister Chris Bowen awarded 6.4GW of new zero-emissions generation supported by 3.5GWh of BESS, completing the first Capacity Investment Scheme (CIS) Generation Tender.

The tender round was more than 6 times oversubscribed, attracting over 40GW of investor interest across 84 proposals – a key indicator of massive investor appetite for firmed renewables – setting the stage for more successful competitive tenders ahead, sufficient for Australia to have a strong chance of delivering on Minister Bowen's 82% by 2030 target.

To further build this momentum, in October 2024, Minister Bowen proposed that the next 6GW solar and wind CIS Generation Tender be increased to 10GW: 6GW of generation and 4GW dispatchable capacity. 

Eleven of the 19 announced projects are solar, although wind projects are bigger and account for more than half of all capacity awarded. 8 out of the 19 projects specify BESS, although many of the others also have storage, as reported in Renew Economy. NSW – as designed – will host the lion’s share to help its massive and urgent task of replacing the country’s biggest fleet of ageing, taxpayer-subsidised unreliable coal clunkers. 

Minister Bowen said “Bids were highly competitive and costs came in significantly lower than expected”.

Most of the projects are expected to be operational by 2028. We now need to sustain this momentum with a big lift in the speed and scale of evaluation and approvals of new projects, given the scale of the decarbonisation task and the lost decade under the Federal LNP. Thankfully, we end 2024 with exactly the directional acceleration we need to see.

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LANDMARK FMIA ACT PASSED, RULES OUT SUPPORT FOR FOSSIL FUELS

On November 28, the last sitting day of 2024, the Albanese Labor Government’s Future Made in Australia Act and 5 of the 6 FMIA Bills passed through Federal Parliament. This sets up the FMIA framework –  a landmark moment in Australia’s transformation to zero-emissions trade and investment leader – and delivers on a key goal of our and our partners’ advocacy.

In a major win, the government worked with the Greens to amend the Bill to prevent any commonwealth support for coal, oil or gas mining or fossil fuel infrastructure. 

Amongst other things, these bills establish the voluntary Guarantee of Origin (GO) scheme, an Australian Government-backed certification scheme to authenticate low-emissions products and support renewable electricity. This will allow Australian producers to remain competitive in new and emerging domestic and global markets as they decarbonise, by accounting for and accurately presenting the low-emissions reality of their products. 

The Bill relating to production tax credits for onshore processing of critical minerals and renewable hydrogen was referred to the Senate Economics Committee and we were invited to make a submission. We will continue our advocacy into the new year ahead of the Federal election.

>>See our joint statement applauding the passage of the FMIA with the Climate Capital Forum.

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AUSTRALIAN GREEN IRON AND STEEL: PROGRESS BUT MUCH MORE TO DO

NeoSmelt consortium announces Kwinana for pilot DRI-ESF facility.

This week, NeoSmelt, a new consortium of BlueScope, Rio Tinto, BHP and Woodside, announced plans for an iron value-adding facility in the Kwinana Strategic Industrial Area, WA. The plant will reduce and refine lower-grade iron ores, like those extracted in the Pilbara, without the need for processing with coal in blast furnaces. This is a critically important first step to realising a green iron industry in Australia. We applaud the WA Government’s $75 public investment to support the first of a kind (FOAK) pilot, a key enabler of learning-by-doing.

Commencement is targeted in 2028, with the aim to produce 30-40,000 tpa of molten iron. However, the inclusion of Woodside as the energy provider means the pilot plant will use methane gas to reduce the iron ore, not green hydrogen produced with renewables. There is ambiguity in the consortium’s position on a transition to ‘lower-carbon emissions hydrogen’ in the future, suggesting it will rely on unproven CCS technologies to reduce the emissions intensity of the grey hydrogen used (produced with gas) in the production process. 

As we argued in our November Green Metal Statecraft report, methane gas pathways are not a viable long-term solution for Australia’s value-added iron industry, and nor, as IEEFA has said on multiple occasions, is CCS a long-term solution for iron and steel decarbonisation. 

The scope of Australia’s green iron opportunity is immense, both for export revenues, investment and employment domestically and also for accelerating global decarbonisation (with steel 6.7% of global emissions). 

For example, Mandala Partners’ December report released with the Chamber of Minerals and Energy WA, Realising WA’s Green Iron Potential, said large-scale green iron production in WA could reduce global emissions by 1.2% by 2050, generate $74bn pa and support 19,600 direct jobs. The recommendations reflect our report’s, and include funding measures targeting commercialisation of green iron; prioritising renewables project approvals that support green metals processing; and international R&D partnerships to leverage the expertise of Australia’s trading partners in the iron and steel value chain. 

Likewise, Springmount’s December report, ‘Forging our Future: 10 Requirements to Build an Export-Scale Green Iron Industry in WA’, brought together a broad coalition of partners including the AMWU, Australian Steel Institute, Labor groups and Greenpeace to highlight the policy measures needed to build the industry at scale quickly and responsibly, while ensuring secure jobs and embedding First Nations and community benefit principles.

As these efforts show, momentum is building across sectors to make Australia a green iron leader – now we need to see a priority government policy and investment framework to support it and get moving before it’s too late.

>>See CEF’s Green Metal Statecraft: Forging Australia’s Green Iron Industry

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CHINA’S PROGRESSIVE DECARBONISATION & ELECTRIFICATION OF EVERYTHING CONTINUES

Total demand in China's electricity sector is +6.7% year-on-year (yoy) year-to-date (YTD) to November 2024 (+3.7% yoy for the month of November). With 5% GDP growth in 2024, growth in electricity demand outpacing GDP reflects the ongoing progressive electrification of everything, a trend in which China leads the world. Energy security and energy independence play a key motivating role here.

Thermal power use in China's electricity sector is +2.3% yoy YTD to November 2024, showing that the ongoing electrification of everything is maintaining China’s reliance on coal fired power generation, even as it permanently improves China’s energy independence and undermines reliance on imported oil.

Zero-emissions electricity generation contributed 39% share of total generation. Solar power is +39% yoy year-to-date in 2024, contributing 8% of total electricity. Wind +12.7% yoy YTD, contributing a 10% share.

We are yet to see the capacity install figures for November  2024, but expect another strong month, building on the 27.1GW of renewable energy installed in the month of October 2024 alone (236GW YTD 2024, +15% yoy).

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TEAM UPDATE

CEF is pleased to announce that Caroline Wang will be commencing 6 January 2025 as a Senior Analyst, Australia-China energy diplomacy.

Harry Martin has also taken on a consulting role with CEF looking at the global solar sector disruption, and some of the implications of the ongoing massive ramp-up in global manufacturing capacity, led by China.

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OUR MEDIA |

See some of our media including Tim’s commentary in the Washington Post on China’s energy transition, two stories in the SCMP on the impacts of Trump’s election and tariffs on Indian decarbonisation, and Tim on ABC TV The Business on the outcomes of COP29.

OUR WORK |

See more of our latest work, including presentations on global decarbonisation and capital shifts.

PREVIOUS NEWS UPDATES |

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

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Happy holidays everyone, see you next year!
AJ for the CEF team.

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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.