POLICY AMBITION TRIGGERS CAPITAL’S RACE TO RENEWABLES | GOV MULLS ENERGY PRICE CRISIS PLAN 

What a week! Momentum continues to build in the inevitable transition to a renewable energy economy as capital inflows accelerate, driven by Australia’s increasingly ambitious climate, critical minerals and energy policies.

STATES LEADING ON CLIMATE & RE TARGETS | The Victorian election saw an emphatic endorsement of the Labor government’s commitment to reduce emissions by 75-80% on 2005 levels by 2035 and to produce 95% of the state’s electricity from renewables by the same date. Building on the work done in the ACT, South Australia and Tasmania, Victoria now leads the largest states’ race to the top, with Queensland’s new renewables target of 70% by 2032 and 80% by 2035. 

WORLD'S BIGGEST WIND FARMS IN AUSTRALIA | These policy settings are more than aspirational targets. They are having a material near-term impact in driving billions of dollars in new investment, sending policy signals that crowd in private finance. Two of the world’s largest onshore wind farms were announced. In QLD, the $2bn 1GW Herries Wind Farm is to be developed by Acciona and sited in the Southern QLD REZ, alongside the 1 GW MacIntyre Wind Farm (70% Acciona, 30% Korea Zinc’s Ark Energy), bringing the precinct’s total capacity to 2GW and the total investment to $4bn. The Herries Wind Farm as yet has no offtake deal. 

In Victoria, the 756MW Golden Plains Wind Farm near Geelong (stage I of total 1.3GW proposal by WestWind Energy), which will generate 9% of the state’s capacity, has attracted $1.8 billion of global private investment – equity from TagEnergy (part of France’s Impala SAS) and debt from Westpac, CBA, Bank of China, Mizuho, Germany’s state-owned KfW and the Danish Credit Export Agency EKF – boosted by $175m from the CEFC. This innovative financing arrangement will enable it to proceed to construction phase even before the protracted process of negotiating power purchasing agreements. The project is a case in point of government co-investment helping to crowd-in private capital. And this week FIRB approved Equinor’s entry into the Australian offshore wind sector, in partnership with OceanEx.

MASSIVE GREEN AMMONIA PROJECT IN NZ | Across the ditch in New Zealand, which is targeting up to 100% of power generation from renewables by 2030, there was a major advance for one of the world's largest proposed green ammonia export plants. Meridian chose Woodside Energy as its preferred lead venture partner for the Southern Green Hydrogen project. Woodside beat out FFI in a competitive bidding process, with Japan’s Mitsui also in talks to join the consortium. The plant will produce some 500,000tpa of green ammonia via electrolysis from renewable power.

CRITICAL MINERALS RAMPING UP |  Australia’s leading role in the critical minerals boom continues apace. The highest levels of government have turned their attention to the economic and strategic case to go all-in and secure Australia a leading global position in the sector, as evidenced in addresses by Treasurer Jim Chalmers and Resources Minister Madeline King to last week’s Critical Minerals Summit. 

CEF would stress the importance of building in value-added refining onshore powered by renewable energy, and of First Nation’s involvement as prerequisite conditions for developing the sector. As a world leading mining nation, and to maximise our position in the energy transition value chain, Australian miners are also increasingly expanding their involvement across critical mineral industries offshore with major international investments, as we detail in CEF’s latest paper on Australia's opportunity to become a critical minerals value adding superpower.

ANZ'S NEW $100BN DECARBONISATION COMMITMENT | This week, CEF analyst Nishtha Aggarwal published a special update on ANZ's new Climate Change Investor Roundtable report, after calling last month for ANZ to target a much more ambitious $100bn to $200bn by 2030 decarbonisation finance pledge.

We were pleased to see ANZ commit to a massive uplift along the lines we identified, with a $100bn pledge over 8 years to FY2030, putting it ahead of its competitors on this measure. We track this positive move, and areas where there is still an urgent need for further ambition from ANZ– noting that ANZ's advance comes in the same week the CSIRO announced Australia has reached 1.47°C warming, just 0.03 degrees shy of the Paris threshold.

GOVERNMENT MULLS FOSSIL FUEL PRICE CRISIS SOLUTIONS  |  The fossil fuel energy price hyperinflation crisis smashing 20 million Australians continues, driven largely by war-profiteering tax-avoiding multinationals exploiting our sovereign resources while raking in obscene super profits. The government, meanwhile, is working around the clock to come up with a package of solutions, likely to involve direct market intervention, with press speculation this may include a $7-12/PJ east coast cap on domestic gas prices. A medium term domestic gas price cap is the key to solving the domestic energy crisis inflicted on us by the gas cartel.

We would note that industry’s vocal advocacy for new methane gas project approvals, e.g. Narrabri, needs to be treated with serious caution, given such greenfield developments are both disasters for our climate, environmental and water security, and no solution to the crisis, providing no new domestic gas for probably five years. We would continue to advocate that the NSW Government immediately replicate the success of the Queensland Government’s steeply progressive coal royalty system – which only cuts in when coal prices are at unprecedented record highs, like right now – rather than have the Federal Government come in over-the-top on coal.

The measures are expected to be discussed at the COAG energy ministers’ meeting next week, but with Murdoch and other conservative media whipping themselves into a frenzy, and vociferous protests from self-serving foreign vested fossil fuel interests, it is a tricky balance for the government, handed a steaming pile of energy and climate policy failures by Morrison and co just six months ago.

FIRST FEDERAL DECARBONISATION REPORT CARD IN | The federal government released its first annual climate change statement since the passage of the Climate Change Act. Australia is on track to achieve a 40% emissions reduction by 2030, with the Climate Change Authority noting the decarbonisation rate needs to be 17 million tonnes pa, 40% faster than has occurred since 2009 to achieve the government's 43% commitment. The science dictates much deeper cuts, with Climate Change Minister Chris Bowen again acknowledging that the target is a floor, not a ceiling.

ELECTORATE IN THE MOOD FOR FASTER TRANSITION | Intervention in the gas market, and, notably, a rapid transformation of the energy economy to renewables has widespread public support, with almost two thirds (63%) of respondents in the Mood of the Nation poll reported in The Australian last week saying the energy transition should be accelerated. 

Capital agrees, as this week’s developments again show – and when the money moves, get out of the way!

We'd love to hear from you – please get in touch: annemarie@climateenergyfinance.org

Disclosure: Tim Buckley is an external financial advisor to Meridian and Contact Energy’s Southern Green Hydrogen proposal.

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