Welcome to our news round-up.

10 MAY 2024

“FUTURE GAS" TRAVESTY A MASSIVE SETBACK ON PATH TO NET ZERO

The long awaited federal Future Gas Strategy dropped this week, and it landed like a lead balloon.

Resources Minister Madeleine King’s shilling for the gas cartel triggered unwelcome flashbacks to ex-PM Scott ‘coal keeper’ Morrison’s infamous “don’t be afraid, don’t be scared, it’s coal” performance – the one in which he brandished a lump of coal in federal parliament – as his government and its predecessors trashed a decade of potential decarbonisation progress on behalf of the fossil fuel industry. We are still paying for this devastating legacy of dangerous inaction today.

It is ridiculous and beyond disappointing that in 2024 an Australian Government is releasing a long-term strategy that centres methane gas in the transition to net zero by 2050.

The strategy is a massive misstep in the context of the strides the Albanese Government has been making to pivot to our economic future as a renewables powered, zero-emissions trade and investment leader.

Placing a long term commitment to this expensive climate-destroying fuel at the core of transition policy does exactly zero to ensure affordable gas for domestic use here in Australia. On the contrary, the gas cartel is the key culprit behind the domestic energy unaffordability that has smashed Australian households and businesses over the last three years, as they export the vast bulk of our gas and sell it back to us at hyperinflated prices.

The only winners from the Future Gas Strategy are the multinationals, who war-profiteer like bandits even as they pay next to no corporate tax here.

The only gas shortage is a shortage of gas cartel ethics, enabled by a government apparently hostage to vested interests and suffering a severe case of industry capture. 

This development is entirely at odds with the commitments made by PM Albanese, who said in launching his ambitious Future Made in Australia Act that it is imperative that Australia embraces new low cost, zero-emissions energy solutions and industries of the future as we move to a fully renewable grid, firmed by interstate grid transmission, massive deployments of ever-lower cost and improved battery energy storage systems (BESS), pumped hydro and demand side technologies.

We have the comparative advantage of huge clean energy potential, meaning we can ‘green’ our world-leading reserves of critical minerals and strategic metals by using our renewables to process and manufacture onshore pre-export. 

We must join the global transition race by accelerating state and private capital investment into future-facing industries, and that means boosting the rollout of utility and distributed firmed renewables – which will deliver permanently reduced power prices – and manufacturing using these energy sources, not gas. 

This strategy sends exactly the wrong signal to cleantech investors and markets at a critical moment in the energy transition. 

And it shows flagrant disregard for the government’s mandate to act responsibly on behalf of future generations by rapidly slashing emissions as the climate crisis escalates.

>>>Our full statement.

>>>Tim on ABC TV The Business breaking down the gas strategy and the implications for Australia’s energy transition pathway; and presenting a robust takedown of this policy debacle on ABC Victoria statewide (at 9:50).

>>>Our statement reproduced in full on ABC online, reported in Renew Economy and the Newcastle Herald; our op ed in PV Magazine, more to come. 

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AS BUDGET 2024-25 LOOMS, WE’VE (STILL) GOT HIGH HOPES

We’ll be on the case in Budget lockup next Tuesday 14 May and releasing our take as Treasurer Jim Chalmers stands up in Parliament to deliver his third Budget speech.

Despite the crushing setback of the entirely wrongheaded “Future Gas Strategy”, reminiscent of the bad old decade of Morrison and his fossil fuel cronies, we remain hopeful that the 2024-25 Budget will be a defining moment in transitioning Australia to a decarbonised future. 

It is upon us next Tuesday and rumours, movement and reporting swirl about what’s in and what’s not. We look forward to a good downpayment, front-end-loading the $10bn pa for the next decade ask: $100bn of new public capital and budget support for economic decarbonisation to crowd-in 2-4 times this in new private investment. 

With a second surplus forecast of $13bn for 2023-24, the economy is performing more strongly than expected, even at last year’s MYEFO, so the government is in a position to use this Budget to continue to invest strategically in our future.

The Future Made in Australia Act announced in April advances our pathway to become a renewable energy superpower by flagging investment in industry and manufacturing central to decarbonisation of the economy. 

The vision is to build on and extend our comparative advantages – a point many old school economists appear to have missed. In the absence of a carbon price in domestic and international trade, we can no longer rely just on traditional free markets in the energy transformation space as governments the world over commit unprecedented state capital into transition and new technologies, securing sovereign energy and manufacturing capabilities and cleantech supply chains. 

The Climate Capital Forum/Climate Energy Finance 2024-25 Pre-Budget submission called for a range of initiatives including direct budget program support – A$50bn over a decade, half in the forward estimates – for decarbonisation, such as electrification of everything, onshore battery and renewables supply chain manufacturing and refining of commodities pre-export.

We recommend a time-limited advanced manufacturing tax credit (A$15bn over 10 years) to incentivise local content and local manufacturing, subsidising the portion of manufacturing that is done locally, so as to limit any adverse inflationary impact on the whole market.

A production tax credit for making components of renewable energy systems – solar modules, photovoltaic cells, photovoltaic wafers, solar grade polysilicon, battery inverters, battery cells, battery modules and critical minerals and strategic metal refining onshore – would capture supply chain onshore, building capacity, capability and confidence. And making them with renewable energy means they can be fed into the global economy’s demand for green manufactured products. This approach was nicely outlined in the government’s $1billion Sunshot Solar program.

Other CCF/CEF Budget recommendations include:

• A new $20bn strategic national interest mandated allocation to the Future Fund to take strategic equity stakes in emerging Australian mining, infrastructure and cleantech developments investing in value-adding onshore, to avoid premature takeover by strategic foreign investors.

• Tax incentives and/or massively expanded ARENA grants and/or National Reconstruction Fund capital to incentivise onshore commercial scale first-of-a-kind facilities to produce green iron, and working in collaboration with our trade partners on a green premium or carbon pricing model to add value to Australia’s exports into Asia.

• Continue electrification programs across the community. The Household Energy Upgrades Fund needs to be tripled over the forward estimates including expanding the A$300m for co-funding of upgrades to 60,000 social housing properties developing a pipeline of investment over the coming 5-10 years.

• Local content conditionality for tenders for the Capacity Investment Scheme, to enable Australian manufacturers, local businesses, communities and workers as well as First Nations people, to directly benefit from the fast moving energy transition and rebuild domestic capacities, such as new apprenticeships.

• Long-term, federal capital for cleantech startups, with a return to taxpayers when they become successful. We could follow California’s CalSEED and CalTESTBED model, investing $100m over 10 years in AusSEED and AusTESTBED.

• A cap on the diesel fuel subsidy at A$50m pa per consolidated group to raise A$14bn by 2030, entirely for reinvestment into electrification of mining vehicles via the NRF.

• Build momentum to extend the European Union Carbon Border Adjustment Mechanism (CBAM) into the Asian markets in alignment with our key trade partners to accelerate international decarbonisation investment signals should drive the government to further Australia’s efforts to develop an international green premium price signal for exports produced using renewable energy.

>>> Our full pre-budget submission is available here

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MEANWHILE, IN CHINA: STAGGERING RENEWABLES SURGE POSITIONS CHINA TO END NEW COAL BEFORE 2030

Our major report released last week, POWER SHIFT, unveils insights into the rapid expansion of renewable energy in China. Our comprehensive modelling demonstrates that China has the capacity to curtail its construction of new coal power plants and halt the development of new coal power before 2030. This has far-reaching global implications. Currently, China is responsible for 96% of the world's new coal power plants.

We find that:

• China is on track to surpass its 2030 target of 1,200GW of installed solar and wind capacity six years ahead of schedule. Combined wind and solar capacity is projected to reach 1,294GW by the end of 2024, fourfold that of the United States.

• Despite continued economic growth, widespread electrification, and the use of new coal plants to add grid flexibility, China's reliance on coal power generation is anticipated to decline significantly. Coal's share of electricity generation is forecast to drop from 70% in 2023 to <50% by 2030 as renewables take a larger share, and possibly as low as 30% by 2040.

• Accelerating the pace of zero-emission installations would enable China to achieve its 'dual carbon' targets – to peak emissions by 2030 and carbon neutrality by 2060 - ahead of schedule. China should now aim for net-zero emissions by 2050, aligning with developed nations globally.

• This transition carries profound implications, particularly for Australia, including an inevitable reduction in demand for coal exports. Australia must heed this wake-up call by accelerating its economic diversification away from coal export dependence. Embracing our abundant reserves of critical minerals like lithium and strategic metals such as iron ore, and processing and manufacturing them domestically using clean energy sources, should be a national strategic priority.

• The May Federal Budget presents a prime opportunity for the Australian government to channel public investment into forward-looking decarbonising industries, leveraging the newly established Future Made in Australia Act.

• Within the framework of this Act, we should be exploring collaboration opportunities with China in value-added renewable energy-powered mineral processing and cleantech manufacturing.

• As highlighted by David Olsson of the Australia China Business Council, “China’s energy transformation offers new economic opportunities that can also unlock Australia’s potential as a green economy leader in our region.”

>>>See the full POWERSHIFT report here, and the media release including quotes from David Olsson and from Taylah Bland of the Asia Society Policy Institute here. 

>>> See our op ed in PV Magazine by Xuyang Dong and AM Jonson here, and the op ed in RenewEconomy by Tim Buckley here, which explains why nuclear works as part of the zero-emissions energy mix in China but has no place here.

>>> Listen to Xuyang’s extended interviews with ABC Radio on the report here and here. See our coverage on Ecogeneration here, with coverage forthcoming in Carbon Brief and on SBS.

>>> On a related note, Tim Buckley headlined the second day of the Solar and Storage conference in Brisbane last week with a discussion on China’s growing dominance in solar and storage manufacturing, technology developments and deployment, and how China’s leadership enables the world to decarbonise with ever low-cost renewables. 

…LATEST UPDATE: China’s lead maintained in 1QCY24

During the first quarter of 2024 (1QCY2024), China added a massive 69.4GW of new electricity capacity to the grid, with 91% of it renewable energy. As noted above, China is projected to exceed its 2030 target for installed solar and wind capacity six years early.

The electricity generation mix shows a rising contribution from zero-emissions sources, with wind power surpassing hydropower for the first time.

In the EV market, China remains the world's largest by far, with nearly 1.9 million electric cars sold in 1QCY2024.

While China's solar manufacturing industry faces challenges due to overcapacity, major players like Jinko Solar remain financially strong even as gross margins contract with solar module prices now down 50% y-o-y, leveraging the near 50% decline y-oy in battery export prices.

>>> Read our full quarterly update by Xuyang Dong.

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FUTURE TO PENNY SHARPE: “NO MORE COAL CASH FOR ERARING”

Speculation is mounting that NSW Energy and Climate Minister Penny Sharpe is getting close to offering yet another 2 year, $150m annual coal subsidy to Origin Energy to extend the end-of-life coal clunker Eraring, Australia’s largest coal-fired power station. 

This would cost each NSW residence some $150 pa to fund both the $150m subsidy and then to wear the cost of higher wholesale power prices as new firmed renewable electricity capacity is crowded out and undermined by policy back-flips. 

Then there is the massive opportunity cost.

That’s $300m over 2 years that could be going into the pockets of people struggling to pay energy bills, like in QLD where every household will receive a $1,000 Cost of Living Rebate on power bills.

Or that’s hundreds of millions that could be used to incentivise new solar on more roofs across the state, and to subsidise batteries or heat pumps for homes and businesses, permanently reducing their energy bills.

Paying $150 million per year to keep Eraring belching climate pollution is 7 times the total funding per year NSW has committed to energy upgrades on social housing, such as solar, heat pumps and insulation ($87.5m over 4 years/~$22m per year). 

$150 million is the entire cost of the government’s flood Restoration Fund for communities affected by flooding disasters.

At a time of energy poverty and cost of living crisis, with climate change escalating, this is exactly the wrong decision for NSW, particularly following the multiparty support for the NSW Climate Act in December 2023.

The Guardian covered the new speculation in detail, as former NSW Energy and Climate Minister Matt Kean MP noted the misalignment of this potential clanger of a decision by the Minns Government with the state’s climate goals and the pressing need to reduce cost of living.

Our March CEF report Heads, Origin wins; Tails, taxpayers lose evaluates the likely coal subsidy. It calls on the NSW government to commit to on-schedule closure of Eraring phased over 2025 and rule out any extension, investing public monies responsibly instead in rapid deployment of distributed firmed renewables to permanently reduce energy prices for the people of NSW and mitigate climate change.

As CEF director Tim Buckley said at press conference at NSW Parliament yesterday reported in The Guardian:

“We are putting band aids on end of life coal assets instead of investing in the solutions to permanent low cost zero emission solutions that Australia and NSW desperately needs to see approved. This is a race to the top and yet the NSW government in 2024 is now going in the wrong direction. We call on them to reallocate planning resources to approving the projects we critically need to solve the climate crisis.”

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ACTION ON OFFSHORE WIND AS VICTORIA STREAKS AHEAD

Last week, Federal Energy and Climate Minister Chris Bowen announced the granting of feasibility licences to 6 offshore wind projects off the coast of the Gippsland region in Victoria, with a potential further 6, subject to First Nations consultation. The government says the 12 projects could generate a massive 25GW of electricity, and 15,000 jobs during construction with another 7,500 ongoing. Offshore wind can provide a key diversification value to our energy system in terms of strategic grid firming as we move well beyond 82% renewables post 2030.

CCF member Satya Tanner, CEO for LAUTEC Australia, which supports offshore wind projects nationally, said, “Our sector stands ready to partner with communities who are keen to embrace Australia’s renewable energy future, First Nations and regional communities, to understand the unique coastal environments and offshore wind potential of Gippsland.”

>>>Read the full media release here with quotes from Naomi Campbell, co-founder of Energise Renewables, and Amy Boersma, Country Managing Director at JUM-BO Consulting.

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SHAREHOLDERS READY WITH PITCHFORKS FOR WOODSIDE’S EPIC CLIMATE FAIL 

Woodside’s “Climate Transition Action Plan” – the nothingburger we described in our op ed for Renew Economy – got sent back to the kitchen at the fossil fuel giant’s AGM in late April, as it was comprehensively voted down by over 58% of shareholders.

The shareholder trashing of the company’s excuse for a decarbonisation strategy shows it was not worth the paper it is written on. This was an historic moment and a milestone in shareholder activism. Shareholders sent an unequivocal message – ‘‘not good enough’’. We can only hope the directors and management hear the clarion call that the tide is turning on fossil fuel majors who fail to credibly address the greatest single risk they face: climate change. 

Although the result is nonbinding, the board is now under clear pressure to rethink its approach and come up with a credible strategy to transition the company as the world accelerates its decarbonisation investments.

Woodside needs to overcome its inability to find zero emissions investments that make commercial sense. The world managed to invest US$1.8 trillion in cleantech in 2023 alone. There are abundant investment opportunities out there if one actually looks.

>>>Read the AFR op ed by Tim Buckley and AM Jonson.

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MACQUARIE TAKES A PROFIT HIT BUT PLAYING A LONG GREEN INVESTMENT GAME

Macquarie Group’s 32% fall in net profit reported in its FY2024 results raises some questions about the speed and bankability of the energy transition in the face of sustained interest rate rises, but Macquarie is playing the long game. The fall was most felt in Macquarie Asset Management (MAM), which houses the Group’s proprietary green assets after incorporating their Green Investment Group into the MAM umbrella in April 2022. Its FY2024 green asset exposures are 65% offshore wind, and 35% solar and on-site storage with 57% at development stage, 24% operational, and 19% at construction stage. 

Continually high interest rates are taking their toll. MAM reports that lower asset realisations in green investments as well as increasing net expenditure in the green energy portfolio were key drivers of the profit decrease. 

Recent Wood Mackenzie analysis shows that a 2 percentage point increase in the interest rate pushes up the levelised cost of electricity (LCOE) by as much as 20% for renewables and is most felt in the offshore wind sector. Against this, the 50% decline in solar and battery cell prices over the last 12 months shows the energy transformation is unstoppable and will prove deflationary over the long term, particularly as carbon pricing increasingly kicks in to international trade via the CBAM.

In an FT article last week Orsted CEO Mads Nipper discussed the headwinds to their business. Macquarie is feeling the same given its high exposure in offshore wind. Increased construction and financing costs also push up LCOE of a project, reducing profitability over their lifetime in the absence of higher offtake prices.

The AFR reports Macquarie CEO Shemara Wikramanayake saying that they would only be a seller “when it is the best time to get the best returns”: “We didn’t sell to any third parties and get a critical gain on any of the assets, partly because of the timing and the assets were not right for realisation,” she said. “This timing was driven by us, not because there was not a market [for clean energy projects].” 

With the energy transition presenting complex challenges, Macquarie’s long term approach to value creation is a case in point for how we ought to be thinking and investing in firmed renewable energy.

A price on carbon would certainly mobilise the capital at the speed and scale required, so it is important to see the ongoing development and expansion of ETS carbon pricing in China as globally important, building on the EU’s leadership.

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CONFERENCE WRAP

Solar & Storage Live Australia 2024

Over 1-2 May, CEF’s Tim Buckley and Matt Pollard attended the Solar & Storage Australia conference in Brisbane, with over 150 speakers across the clean energy value chain, and 100+ exhibitors from industry leaders in energy markets, solar and battery storage, including Canadian Solar, JinKO Solar, Tesla, AGL and Origin. The event was orchestrated by Queensland’s energy transformation industry leaders, directed by Katie-Anne Mulder, CEO of Queensland Renewable Energy Council (QREC). 

Tim Buckley delivered two presentations, with one showcasing how the energy transition is driving a global investment and policy race, and the opportunities it presents for Australia to lead and leverage its position as the solar capital of the world. As noted above, the other focussed on China’s dominance in all things cleantech and the global implications.

Inspiring speakers and panellists included a number of experts and CEF partners:  

• David Shankey, Deputy Director-General Energy, QLD EPW, on the QLD Energy and Jobs Plan accelerating the state’s energy transformation,

• Brian Restall from Quinbrook Infrastructure Partners (QIC) on navigating large-scale solar and storage projects, optimising economics and grid integration,

• Niall Brady from Clean Energy Finance Corporation (CEFC) on supporting renewables and delivering the Federal Government's Rewiring the Nation fund, 

• Marilyne Crestias from Clean Energy Investor Group (CEIG) on the challenges and opportunities in clean energy investing,

• Tracey Stinson from Clean Energy Council on enabling sensible policy outcomes and building strong local networks,

• Tristan Edis from Green Energy Markets on the growth of rooftop solar and battery deployment and orchestration, 

• Monica Richter from WWF on biodiversity conservation with renewables,

• Warwick Johnston from SunWiz on trends and market insights on the battery market,

• A panel on large-scale solar financing, investment and government policies and incentives, moderated by Winnie Lui from 5B Solar, alongside representatives from Stride Renewables, BloombergNEF and Octopus Investments. 

The full list of presentations, exhibitors, sponsors and roundtables can be found on the Solar & Storage Live Australia 2024 event page. 

RIAA conference

The Responsible Investment Association Australasia (RIAA) represents ~75% managed funds in Australia, with a collective US$29tn in assets under management. Its annual conference last week featured compelling discussions on key responsible investment themes such as:

• Corporate lobbying and investor stewardship by Dean Hegarty the co-CEO of RIAA, Naomi Hogan from ACCR, Daniela Jaramillo at Fidelity and Andrew Cox from Australian Professional Government Relations Association

• Building First Nations investment markets by Caleb Adams of CANA, Brian Wyborn of First Australians Capital, Amanda Young of Pollination and Will Leak of Mercer

• Looking past near term challenges with Dugald Higgins from Zenith Investment Partners, Greg Liddell from Betashares and moderated by Rachel Alembakis at UEthical

• Navigating the Australian policy landscape by Gordon Noble of UTS Institute for Sustainable Futures and Nyanisha Samarakoon of RIAA

• Understanding systemic risk by Rachel Halpern and Renee Grogan of JANA, Pablo Berrutti of Stewart Investors, and Prof Shelley Marshall from RMITAn excellent keynote on geopolitical risks by Professor the Hon Gareth Evans

CEF’s Nishtha Aggarwal hosted a panel on the use of carbon offsets in corporate net zero strategies, with CEO of Carbon Market Institute, John Connor; UNSW's Dr Megan Evans; and IGCC’s Director of Investor Practice, Duncan Paterson. The discussion highlighted the limitations of certain types of offsets, while exploring the corporate and investor momentum around leveraging high quality carbon credits to reach net zero goals.

Carbon offsets, like many aspects of the energy transition, rub up against two theories of change – i.e. build the pipeline at speed and scale, or ensure integrity is baked in from the beginning. These are complementary and both are actually occurring at the same time whether we like it or not. The conference provided a space for robust conversation and contestation of ideas on this key topic.

See Nishtha’s LinkedIn post for more context on the speakers and photos. See the conference event page for the full line up.

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Annemarie for Tim, Paul, Nishtha, Matt, Xuyang and Amanda (see more on our team here).

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