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Welcome to our news round-up. See previous issues here.
11 OCTOBER 2024
CHINA’S GREEN CAPITAL TSUNAMI SPEEDS GLOBAL DECARBONISATION
Australia must do more to catch the wave
Our new report released this month, lead authored by CEF director Tim Buckley – Green Capital Tsunami: China’s >$100 billion outbound cleantech investment since 2023 turbocharges global energy transition – tracks China’s pivot from ever larger domestically-focussed investment in and deployment of energy transition technologies to an additional new program of huge, historically-unprecedented outbound capital flows. China’s world-leading corporates operating across every key decarbonisation sector are increasingly “going global”.
Our tabulation of investments proposed and confirmed shows that Chinese firms have committed >US$100bn in outbound foreign direct investment across ~130 major cleantech transactions since 2023, in solar, wind, new energy vehicles, batteries and more, both renewable energy infrastructure projects and manufacturing.
The technology and geographic diversity of this investment program is striking, spanning Europe, greater Asia, Africa and South America. Chinese cleantech investment initiatives into North America are being undermined by increasingly adverse China-specific rules.
China leads the world on R&D, investment, innovation, manufacturing, deployment and exports of cleantech by an astonishing margin, investing more than double the US or the EU into cleantech.
This, coupled with its massive buildout of domestic manufacturing capabilities, has led to ‘overcapacity’ of cleantech production, triggering staggering price deflation: solar module prices are -60% yoy, batteries -50% yoy, and lithium -80% from its recent peak, with significant global impacts:
A reconfiguration of global trade dynamics and rising geopolitical tensions, including US and EU sanctions against China’s cleantech exports – e.g. in the US a 40% tariff on Chinese solar modules and 100% on EVs to protect onshore industry and domestic interests, as the US accuses China of flooding global markets.
An opportunity to convert overcapacity – which CEF argues can be reframed as under-deployment – into increased demand via a faster rollout of decarbonisation technologies across the globe, including in emerging and developing economies (EMDE) in the Global South, both addressing climate change and enabling nations to secure their energy independence.
Enormous potential for bi- and multilateral partnerships and collaborations on building emerging future-facing energy transition industries, as nations leverage Chinese capital, tech leadership and expertise in localised contexts to value-add domestically to mutual benefit.
Increasing momentum in Chinese cleantech investment into economies worldwide, including, in addition to the Global South, greater Asia, Africa and Central and Eastern Europe, as China deploys its clean energy statecraft to navigate a complex and challenging international trade and diplomatic landscape.
We previewed the report in an op ed in the SCMP, noting that rather than being framed as a glut, China’s massive expansion of cleantech production is the world's decarbonisation opportunity. As climate change escalates, the global energy transformation requires a market-driven, pragmatic approach beyond geopolitical rivalries.
Unparalleled opportunities for enhanced Australia-China collaboration in zero-emissions trade & investment – with the right policy settings
Our report found that China’s global technology and manufacturing leadership, its foreign investment firepower, and the scope for Australia to help China decarbonise – e.g. by producing green iron – present immense potential for Australia to collaborate with leading private Chinese corporations, with appropriate safeguards such as foreign ownership limits to manage risks.
However, Australia’s current posture toward Chinese investment and the opacity of Foreign Investment Review Board (FIRB) rules disincentivise investment. Chinese capital into Australia was at a multi-decade low of only $613m in 2023. Work is required to create an investment environment that facilitates partnership, or Chinese capital will increasingly go elsewhere, putting at risk our potential pivot to zero-emissions trade and investment leader.
We recommend that the Federal Government:
As a strategic national-interest priority, clarify the rules of engagement with the Foreign Investment Review Board, so that Chinese firms looking to co-invest are incentivised by transparent, stable, welcoming investment policy frameworks and guidelines;
Improve and streamline engagement by tasking federal and state investment bodies to communicate FIRB rules to prospective Chinese investors, assisting them with market entry strategies;
Establish a strategic critical minerals reserve trading fund to underwrite new investment in mining and extraction and protect Australia’s national interests;
Strongly advocate for an Asian Carbon Border Adjustment Mechanism (CBAM) – a green premium price signal to accelerate investment into renewables-powered processing of Australia’s energy transition materials (e.g. green iron), helping foster partnership with China.
>>Read the full report, including a foreword by David Olsson, president and chair of the Australia China Business Council.
>>Media coverage included interviews with Tim on ABC RN Breakfast and AusBiz, with Sky forthcoming; and op eds in the AFR by David Olsson, and in PV Magazine by Xuyang Dong.
>> Other print coverage spanned international and domestic media including: Wall Street Journal, Bloomberg, The Financial Times UK, Reuters, The Business Times, Canberra Times and 100+ mastheads including The West Australian via AAP, The Guardian, Renew Economy, and industry publications including Engineering + Technology Magazine, Power Technology, Accounting Times, and Oil Price.
On a related note...China Monthly Energy Update
Our new China Monthly Energy Update shows that China continues to make major, globally significant strides in decarbonisation. It added a total of 210GW of new capacity to the grid during the first 8 months of 2024, a 14% yoy increase.
Among this newly added capacity, 86% was zero-emissions, a 21% yoy increase. During the same time period, China invested RMB333bn (US$47bn) in power grid projects, a 19% yoy increase.
At the end of August, 55% of China’s installed capacity is zero-emissions and 39% of power was generated by zero-emissions energy. This is directionally excellent.
However, for China to boost its decarbonisation progress, and meet its obligations as a global renewables superpower, it needs to cease net new coal-fired power plants buildout, and further accelerate new solar, wind, battery storage, PHS and nuclear capacity additions each month, as well as continue to modernise and expand the national transmission system.
Last month, China released a plan to bring the cement, steel, and aluminium industries under its domestic emissions trading scheme. Including these three additional sectors could bring the greenhouse gases covered by the ETS to around 60% of the country's total – again, excellent policy progress from the world’s decarbonisation leader.
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AS THE FEDERAL GOVERNMENT ANNOUNCES AN INQUIRY INTO NUCLEAR, DUTTON’S EPIC POLICY FAIL ROLLS ON
The Federal Government has announced a Parliamentary Select Committee Inquiry into nuclear energy in Australia, due to report ahead of a May 2025 election. It can’t come soon enough.
Peter Dutton’s much-anticipated, high-profile speech to CEDA last month on nuclear policy delivered another serving of literally nothing. No detail, no costings, no credible case that nuclear is viable in Australia in a timeframe or at a capital or generation cost consistent with solving the climate and energy crises.
As we have argued on multiple occasions in the AFR, Renew Economy, on Sky News, ABC TV News and elsewhere, since the LNP fired up its nuclear train-to-nowhere in 2023, the party of free markets is running the scam of the century. The LNP proposes to impose on taxpayers the multi-hundred billion dollar cost of standing up nuclear reactors around Australia to deliver energy at more than twice the price of renewables, sometime in the 2040s. A nationalisation of our energy supply by government-funded nuclear will significantly increase power prices in the near, medium and long term.
The giant con is designed with the sole purpose of disrupting and delaying our accelerating energy transition to abundant, low-cost, reliable firmed renewables and entrenching decades more of climate-destroying, expensive fossil fuels.
This scam is getting old – so old that there was even a tonal shift from the luddite Murdoch press, which reported somewhat disapprovingly on Dutton’s CEDA speech that “he has conceded his nuclear energy plan for seven reactors will have a ‘significant’ upfront cost but failed to release the numbers”. We would add: again.
>> See a new op ed by former Federal Opposition Leader John Hewson and Tim in Renew Economy looking in detail at the inexorable decline and staggering costs of nuclear in the UK, which Dutton and his sidekick Ted O’Brien cite as an example Australia should follow.
>> See Tim’s recent interviews on the epic failure of LNP nuclear ‘policy’ on Sky News, and on ABC TV’s Close of Business with Alicia Barry.
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IEA: GLOBAL RENEWABLES TO GROW 2.7x TO 2030 BUT NEED MORE INVESTMENT, STRONGER EMISSIONS TARGETS TO TREBLE CLEAN ENERGY THIS DECADE
The International Energy Agency's (IEA) new Renewables 2024 report out this week confirms that while the world has seen a strong uplift in investment in renewables deployments since the December 2023 COP28 pledge to treble installed renewables capacity by 2030, we are not yet on track to meet this goal, with the agency forecasting renewables capacity will grow 2.7x this decade – led by China, responsible for a staggering 60% of the upgrade forecast.
This is a 25% lift in collective ambition relative to less than a year ago, reflecting significant deflation in solar and battery firming costs and ongoing rapid tech improvements, strongly supporting the ratcheting up of nations’ emissions reduction targets in the 2025 updates required under the Paris Agreement.
Thanks to China, we now have global cleantech manufacturing capacity to accelerate renewables deployments toward the trebling goal. Cleantech price deflation and the drive for energy security both favour accelerating investment as the world looks to mitigate the climate crisis.
The IEA now models a continued increase in global renewables deployments to 940GW pa by 2030, +70% on the 2023 record – a ‘bending of the curve’ and a rate considered impossible only a few years ago.
Key is increased developed world investment into developing nations’ energy transition – again led by China. Our recent Green Capital Tsunami report identified $100bn in outbound investment from China in solar, wind, EVs, batteries etc, including into emerging and developing economies.
This has strong potential to speed global deployments even faster than the IEA forecasts, avoiding investment in more fossil fuels, as in Pakistan, with its unprecedented potential 15GW of solar deployments in 2024. The recent acceleration in Indian renewables investment is also key.
A forecast doubling of renewables in the EU and US by 2030 is well below the COP28 pledge. Leadership is needed; there is more than enough capital and capacity.
Rebutting fossil fuel lobbyists, the IEA’s central case sees renewables delivering almost half of electricity generation as soon as 2030, with wind and solar at 30%. It models renewables reaching 70% share in Germany, Chile, Netherlands and Portugal, including utility and distributed solar and onshore and offshore wind, coupled with battery storage and DRM enhancing grid reliability. Grid modernisation and expansions are key to faster approvals and deployments, and the IEA reports strong progress.
The IEA urges major economies to commit to bold cuts in the next round of national emissions targets under the Paris Agreement – this should include Australia – and prioritise global cooperation on reducing renewables financing costs in Global South regions critical to energy transition, e.g. Africa and Southeast Asia.
>>Read our full analysis and the reporting in Renew Economy
>>Tim Buckley will be giving the ANU’s annual Solar Oration on 4 November, exploring the global solar energy shift, China’s dominance, and changing energy, investment and geopolitical dynamics around cleantech production and deployment, including Australia's innovative solar and wind generation. Discover how technology and international cooperation are reshaping the future of energy. Register here.
Meanwhile in Queensland...
Ironically, it was reported this week that Queensland LNP leader and potential next premier, David Crisafulli, has committed to keeping coal-fired power operating in the state "indefinitely", having previously backed the state's 75% by 2035 emissions reduction target.
If the LNP was serious about addressing the energy price and climate crisis, it would continue to build on the state's brilliant record of leadership in energy transition, as outlined in our February report, Queensland’s Energy Transformation: From Coal Colossus to Renewable Energy Superpower, delivering permanently lower prices, investment, jobs and a thriving future economy. A continued commitment to coal locks in higher prices, disincentivises investment and drives climate catastrophe – exactly the opposite of what a responsible prospective government should be doing.
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COMING SOON ... GREEN IRON REPORT
CEF will soon publish a major report on Australia’s green iron opportunity, identifying Australian investment proposals that leverage our comparative advantages to capture value here in the global iron and steelmaking supply chain in collaboration with our key trading partners and world-leading steelmakers.
The decarbonisation of the steel industry will catalyse a global restructuring of supply chains, and require re-industrialisation of dig-and-ship jurisdictions like Australia on a massive scale as the historical integrated steel mill model shifts to a disaggregated, globally interconnected value chain. The decoupling of ironmaking and steelmaking will require the coordination of some of the world’s largest investors and companies, accelerated deployment of low-emission technologies, patient public capital support, and strategic government subsidies and budgetary measures.
Decarbonising ironmaking is the principal opportunity to reduce emissions from the steel value chain, with traditional blast furnaces accounting for up to 87% of mine to crude steel emissions. Transitioning to electrified or green-hydrogen based ironmaking technologies presents the single greatest potential for the world to abate the largest global source of industrial emissions – steelmaking – which accounts for 7% of all emissions globally.
With the world’s largest iron ore reserves, world-class renewable energy resources, and established and proximal trade partnerships with North Asia, Australia is well-positioned to become a global value-added hub for green iron production.
However, as CEF’s report highlights, the opportunity also presents Australia with an energy and investment challenge on an unprecedented scale. Australia requires strategic, intergenerational policy and ambition to unlock the investment into renewable energy that can enable decarbonisation of our strategic metals supply chain, so we process onshore using renewables and export “embodied decarbonisation. A good start would be to cap the diesel fuel rebate at $50m pa per group and reinvest the proceeds in a Transition Tax Credit to turn a mining sector headwind to decarbonisation into a tailwind.
We are undertaking extensive review by key stakeholders in Australia’s green metals industry, including iron ore miners and steelmakers, international technology manufacturers, NGOs and state and federal governments to ensure we accurately represent Australia’s #1 resources and energy transformation opportunity this century.
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CLIMATE CAPITAL FORUM NEWS
Climate Capital Forum member Mads Prange Kristensen, CEO of KRISCON, explains in an op ed in The Australian the challenges facing offshore wind developers when assessing investments in developing markets. The Developer’s Dilemma involves “deciding how far along the development process they are willing to keep spending money versus the certainty of getting a return on the investment.” A fascinating view from an experienced industry insider with vast knowledge of the emergence of the Danish wind industry, and the policy levers needed to establish a sustainable industry here.
CCF members Satya Tanner of Lautec and Steve Blume, past president of the Smart Energy Council, alongside Heidi Lee from Beyond Zero Emissions, have produced a vision of what life could look like in 2050 and the smart, hard decisions that we need to take now to make that happen, published by Engineers Australia: A 2050 retrospective: How Australia thrived in the global shift to clean, resilient energy systems. Well worth a read – inspiring to imagine our clean, green, thriving and equitable future, if we get the transformation right!
On another note, we’re sad to farewell Amanda Caldwell, CCF strategic lead whose year working with CCF founder Blair Palese and members to establish the Forum has drawn to a close.
We thank Amanda for her brilliant work alongside Blair and the team to establish CCF as a key and growing stakeholder in the accelerating movement to transform Australia into a zero-emissions energy, trade and investment leader. You can see some of the Forum’s work over the last year on its website. We wish Amanda all the very best in the next phase of her endeavours, which we understand involves some well-earned travel.
The Forum looks forward to continuing its work, particularly if and when the Future Made in Australia legislation is successful, with a focus on what the country needs to address next, continuing to call for policy that supports First Nations involvement in renewable energy projects on country both through ownership and jobs, incentivising value-adding for rare earth minerals mining, and circular economy battery production and national electrification.
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OUR MEDIA |
View our recent media here, including Tim’s regular fortnightly commentary on the Spark Club podcast.
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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