4 AUGUST 2023

__PRODUCTIVITY OMISSION: PC’S EPIC FAIL ON CLEANTECH |

Our op ed this week in the Australian Financial Review took aim at the Productivity Commission's myopic Trade and Assistance 2022 Review, which decries state capital support for cleantech, and pretends the energy transition can be left to non-existent global free markets.

This approach is oblivious to both the global geopolitical context and our massive domestic opportunity. The landmark ~US$800bn Inflation Reduction Act (IRA) and Department of Energy (DoE) Loans Program Office (LPO) stimulus have triggered an accelerating global decarbonisation investment and technology ‘race to the top’. "Bidenomics" – programs like the IRA, the DoE LPO and Infrastructure and Jobs Act – have attracted >US$500bn of private capital in under a year, and the IRA alone created 100,000 jobs in its first 6 months. According to Morgan Stanley, these programs have driven a US economic surge, and underpin a sizable upward revision to GDP forecasts. 

They also signal a new era of protectionism, the effective end of the relevance of the WTO, and a revitalisation of trading blocs, such as the QUAD. The EU’s Net Zero Industry Act, India’s Production Linked Incentives, Japan’s GX Roadmap and Canada’s clean energy tax credits are all direct responses to the IRA, and to China's dominance in global cleantech supply chains.

We have some of the world’s largest reserves of critical minerals, metals and energy transition materials for global decarbonisation. Australia supplies 50% of the world’s lithium, but in 2022 captured a fraction of 1% of the total EV value chain. And we have unparalleled RE potential.

We should be urgently deploying our world scale, zero emissions, low cost RE resources to power value-adding of critical minerals onshore. Working in alignment with our key trade partners should position us as a key player in the EV-battery supply chain boom, as we help our partners transition their economies by exporting “embodied decarbonisation” – materials processed and manufactured using wind and sun. Think green iron, green aluminium and refined lithium hydroxide.

Public investment is critical to derisk Australian value-adding and catalyse private capital investment here as global policy interventionism on clean energy gathers pace.

The Climate Capital Forum (initiated by Blair Palese and comprising the Smart Energy Council, Rewiring Australia, Ethinvest, Lautec, SunDrive, Zero Carbon Hydrogen Australia and others) estimates $100bn of new strategic national interest public capital is needed to crowd-in upwards of $200-300bn of private investment to reindustrialise our economy, refocus our mining sector, and massively build out renewables, transmission and storage. The BCA/ACTU/ACF/WWF endorsed Sunshot Report estimated that RE opportunities can generate >A$100bn in gross value added and support >400,000 jobs by 2040.

It’s time to power up from a petrostate to a leading electrostate, as Dr Alan Finkel says; for an ambitious strategic national-interest capital investment response to our trade partners’ and competitors’ massive public subsidy programs, at a scale commensurate with Australia’s unique opportunity.

We await the arrival of the new Productivity Commission chair Chris Barrett, who we hope will bring a clear strategic vision to the role.

>>>Our AFR op ed also appeared in Australian Manufacturing. A slightly longer version is available here.

__AEMO ENERGY UPDATE: DOWN, DOWN (PRICES ARE DOWN) |

The Australian Energy Market Operator's (AEMO) Quarterly Energy Dynamics (QED) report for Q2CY2023 saw June quarter wholesale electricity prices down 59% year-on-year.

That is a major relief after 18 months of unprecedented fossil fuel hyperinflation as the gas cartel and coal producers booked obscene superprofits off the back of Russia's war on Ukraine.

The increased supply of renewables (36.7% in FY2023, up from 33.3% in FY2022)  means that FY2023 carbon emissions from the national electricity market (NEM) were the lowest on record for Australia.

Application approvals of new zero-emissions replacement capacity in FY2023 trebled to 7GW vs the previous two years, but we are still not seeing grid transmission and planning access bottlenecks resolved anywhere near fast enough.

There is a record 30GW of new renewable energy capacity now in the connection pipeline, but just 3GW was completed in FY2023. We need to see the rate of completions double to replace end-of-life coal power station capacity inevitably and predictably coming offline.

The solution is not to extend the life of polluting, unreliable coal clunkers. The answer to high power prices is hastening the transition to low-cost zero-emissions generation, including distributed energy resources (DER), e.g. rooftop solar and batteries-on-wheels (EVs).

Grid connection and approvals processes must be expedited to incentivise both early final investment decisions (FIDs) by investors and timely construction. Only an accelerated transition will put permanent downward pressure on prices, relieving cost of living pressures smashing Australians, and address the dramatically escalating climate crisis.

>>>Read our full analysis and see our media, including a 10 minute explainer on ABC NewsRadio, Energy Monitor and Stockhead.

__GAS ON THE NOSE AND OUT OF THE HOUSE | 

Victorian Energy Minister Lily D’Ambrosio has announced a bold and much needed policy reform which health experts, peak building industry groups and the climate movement, including the Cooksafe Coalition, have been campaigning for – a ban on gas in new homes from 2024.

The government estimates the change will slash household energy bills by $1000 per year, or $2,200 for those with solar. The move follows the ban in the ACT, to take effect from this November. 

The gas cartel’s rampant profiteering at the expense of ordinary Australians means it’s increasingly on the nose. As Tim Buckley commented last week, the Victorian decision signals a broader shift in attitudes towards gas. “Having sold Australian gas offshore more cheaply than it did domestically, the industry is losing its social license.” Reform is now more politically palatable, especially in the context of crushing energy bills driving a cost of living crisis.

Regulating  gas out of households is also key to achieving the national energy transition. As Rewiring Australia’s Saul Griffiths says: “Australia cannot be decarbonised without its homes being decarbonised, and homes cannot be decarbonised without gas being removed”.

The Climate Capital Forum also highlighted this necessity in its January 2023 Roadmap to Decarbonisation, calling for a national plan to support rapid electrification of communities that includes government as guarantor for low-income households and operators of public and community housing transitioning to solar, electric vehicle charging, batteries and appliances.

This call was reflected in CEF’s July report The Lights will Stay On, which modelled that by escalating electrification of households and businesses, alongside expediting approvals for utility RE and transmission, the NSW government can shut the Eraring and Vales Point coal power stations on time (in 2025 and 2029), and maintain reliable supply. The modelling showed DER can deliver, at speed and scale, half of the new generation capacity needed to offset the closures, with no grid delays. 

>>>See our commentary on the Victorian gas ban in Stockhead and SMH.

>>>Coverage of CEF’s The Lights will Stay On report continues, including an interview with Tim Buckley on Sky News, and an AAP story.

__NSW COAL ROYALTY BOOST ON THE AGENDA – JUST DO IT! |

News broke last week that, at long last, NSW is considering upping its grossly inadequate coal royalty regime so as to recoup for the people of NSW a fair return on the industry's exploitation of public assets, and to partly address the cost of living crisis they have caused.

Climate Energy Finance has been calling for a review of NSW coal royalties for some time (see this Newcastle Herald story and our Windfall Profits report from August 2022).

The progressive coal royalty regime introduced last year by Queensland Treasurer Cameron Dick, which tops out at 40% when coal prices are a massive >$300/t, produced a bonanza for the state, contributing to a $12bn budget surplus that is underpinning accelerated capital investment in the energy transition. Every QLD household is getting a $550 energy rebate and the state is investing a staggering $17bn into renewables.

As Tim Buckley said, if a progressive coal royalty system had been introduced in NSW, “it would have taken projected royalty income from $4.05 billion to $25 billion”. 

"That $25 billion would have not only paid off the entire state deficit, but the government could have put aside $10 to $15 billion for alleviating energy poverty and energy transition in the Hunter.” 

"It is ridiculous that the coal industry in NSW has extracted $14 billion gross profit in the last 12 months using our public assets and only have to pay a flat 7 per cent royalty. It's unbelievable corruption of our democracy that billionaires sitting in Switzerland and Germany can behave like war profiteers and the 8 million people in NSW and the communities that are most affected are getting absolutely screwed in the process."

We applaud NSW Treasurer Daniel Mookey’s decision to consider coal royalties reform and urge him to go hard. The people, and especially communities like the Hunter most impacted by the energy transition, deserve nothing less.

>>>Read our recent op ed in The Guardian and the Newcastle Herald story “Climate Energy Finance says Hunter communities would be the major beneficiaries of progressive coal royalties.”

__IN THE PIPELINE… |

For our forthcoming work on capping the diesel fuel rebate to raise >$25bn by 2030 for reinvestment in building out Australian mining EV heavy haulage manufacturing onshore;  the Australian Sustainable Finance Institute taxonomy; and reform of Your Future Your Super benchmarks, please see our 21 July newsletter.

__PRESENTATIONS |

The CEF team has been active in public engagements, including climate finance analyst Nishtha Aggarwal’s presentation to the Brisbane SEVENTEENx community on UN Sustainable Development Goals: Climate Finance and Australia’s Opportunity and Tim’s presentation to the National Manufacturing Summit on the global energy transition and implications for Australia, with his commentary reported via AAP; and to GMR Energy, a leading developer of energy storage assets and a portfolio company of Gaw Capital Partners, an international private equity and asset manager with >US$36bn AUM. Previous presentations can be viewed here.

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MEDIA |

We were active in commentary on a range of energy topics. See our other media here, including on the need for reconfiguration of the grid to ensure reliability of supply and drive decarbonisation, and the imperative that the regions receive benefits from the buildout of RE infrastructure in their communities.

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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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.