15 DECEMBER 2023

2023 YEAR IN REVIEW |

Here's our wrap of the highlights and lowlights of 2023, covering key themes on which CEF been active through our intensive program of research, analyses, report writing, collaboration and engagement, and media commentary.

___HIGHLIGHTS |

1. BOWEN TURBOCHARGES RENEWABLES

The Coal-ition’s old travesty of a “capacity investment scheme” – #CoalKeeper – was pronounced dead, buried and cremated, as Federal Energy Minister Chris Bowen turbocharged Australia’s energy transition. We hailed this move in our media commentary on ABC 7.30, ABC TV The Business, Sky News Afternoon Agenda, AusBiz and Renew Economy and in our joint statement with our partners including the Clean Energy Investor Group, the Smart Energy Council, Solar Citizens and Nexa.

Minister Bowen’s November boost to the Capacity investment Scheme (CIS) is a game-changer, expanding federal investment to underwrite a massive target of 32GW of new storage and renewables infrastructure. This is exactly the kind of bold, landmark federal ambition, working in partnership with the states, that we need to rapidly transform Australia’s energy market whilst ensuring grid reliability and restoring energy affordability.

With Australia’s decarbonisation credentials under scrutiny at COP28 this month, our COP pledge to triple RE by 2030, and our bid to host COP31 in 2026, it didn’t come a moment too soon. It will enable the on-time mothballing of Australia’s end of life coal power clunkers, accelerate decarbonisation, power permanent energy bill relief and put the 82% renewables by 2030 target back on track.

When the government launched the first iteration of the CIS last December, it estimated it would crowd-in $10bn in RE investment, We estimate this new initiative will see a fourfold boost of investment into firmed renewables. 

2. LANDMARK NSW NET ZERO ACT AS QLD & VIC ROCKET AHEAD  

November saw an important milestone for NSW, as Energy Minister Penny Sharpe and the Minns Government legislated bipartisan action on climate change – the first legislation passed in Australia to expressly refer to the UN-recognised right to a clean, healthy and sustainable environment.

The Climate Change Act establishes guiding principles for action to address climate change. It sets out minimum greenhouse gas emissions reduction targets of 50% by 2030, 70% by 2035, net zero by 2050, ensuring ambition can only ratchet up, which we had advocated for in our submission on the bill.

The excellent new independent Net Zero Commission will provide recommendations on improvements to existing targets and advice to government departments and the Independent Planning Commission, hopefully driving long overdue intergenerational equity into our planning approvals.

We note the continued roadblocks by the NSW Planning Department to new renewable energy developments, entirely out of line with government policies.

By comparison, Queensland – awash with cash from its brilliantly progressive coal royalties deal sufficient to offset the energy cost-of-living crisis inflicted by the fossil fuel industry on Queenslanders – is rocketing ahead with its 70% by 2032 and 80% renewables by 2035 targets, unlocking weekly new investment announcements.

And October 2023 saw Victorian Premier Jacinta Allan and Energy Minister Lily D’Ambrosio announce that a truly staggering 24 GW of generation and 30 GW of storage capacity were registered for the latest SEC tender. 

In Western Australia, retiring Energy Minister Bill Johnston finished in fine form with Synergy’s proposed 500MW/2,000MWh Collie battery to complete a year of accelerating climate ambition.

And the ACT Government’s Minister for Water, Energy and Emissions Reduction Shane Rattenbury banned all new gas connections effective December 2023, tag teaming with Victoria’s gas substitution roadmap to push up Australia’s decarbonisation ambition.

3. SAFEGUARD MECHANISM AN HISTORIC STEP UP

March saw the federal government pass the Safeguard Mechanism (SGM), negotiating up with the Greens, the Teals and Senator David Pocock. After a decade of inaction, an historic step forward on the nation's decarbonisation pathway, led by Minister Bowen.

Effective from July, this policy will compel Australia's 219 biggest polluting facilities to systematically reduce their emissions 5% pa. Most significantly, the government has put a hard ceiling on actual gross emissions. The overall result is a formally mandated 205 million tonnes (Mt) cumulative emissions reduction by 2030 – with emissions to not exceed 1,233Mt over the decade – and a 100Mt by 2030 annual target. 

The SGM has the effect of increasing the financial hurdles for coal and gas expansion in Australia, albeit subsequently massively undermined by the gas lobby. Critically, the SGM legislation also establishes a path to a credible and rising price on carbon, the key policy lever to drive an accelerated investment switch from polluting, extortionate and volatile fossil fuels to renewable energy and cleantech. 

Now, finally, we can move forward with certainty. We have a policy architecture that will work in concert with the government's other climate, energy and industry initiatives such as Rewiring the Nation, the National Reconstruction Fund, the Powering the Regions Fund and the CIS, to catalyse capital flows into renewables, infrastructure, critical minerals and clean manufacturing – and a framework on which to build further ambition.

4. ~130 NATIONS + AUS SIGN-UP AT COP TO 3X RENEWABLES BY 2030

It was excellent this year to see Australia led by Energy Minister Chris Bowen, alongside the US, EU, Canada and Japan, among over 130 countries stepping up to commit to the globally significant pledge of COP28 to treble renewable energy by 2030 and double energy efficiency, a move which we applauded in our extensive media commentary. This is central to accelerating decarbonisation this critical decade.  

Even two years ago this pledge would have been seen as next to impossible, but with China having transformed the world’s capability to deliver on decarbonisation (see below), this goal will collectively bend the climate trajectory towards what the science clearly dictates. China’s huge expansion of cleantech manufacturing capacity is driving costs down dramatically, making the transition to renewables an entirely economically sensible and viable commitment. 

Minister Bowen’s recent huge boost to the renewable energy CIS, noted above, is a quantum leap in the right direction. With a world-leading abundance of sun and wind, Australia is in prime position to take advantage of the massive renewables, investment, employment and export opportunities of the global green transformation.

5. CHINA, CHINA, CHINA ZOOMS AHEAD

China’s doubling of global solar module, battery and EV manufacturing capacity every two years combines with domestic installs of a staggering 20GW per month of new wind and solar, up 109% yoy in 2023. To put this in context, in just three months, China is installing as much new renewables capacity as the entire Australian electricity grid system has built in the last 3-5 decades.

As CEF documented earlier this year, thanks directly to the massive increase in manufacturing capacity in China, prices of solar modules have plummeted 45% in 2023. Likewise, the scaling of production capacity for lithium-ion batteries used in electric vehicles and stationary storage systems has led to a further 14% price decrease in 2023. The weighted-average battery price has fallen by 90% since 2010.

In our recent major report, we scrutinised investment trends in five of China’s largest energy-focussed State-Owned Enterprises (SOEs) to track capex flows.  We find that all 5 SOEs are aligning their massive capex with the central government’s goal requiring a 50% increase in renewable energy generation and that 50% of incremental electricity consumption comes from renewables over 2021-2025. The target prescribing that renewable generation installed capacity reaches > 50% by 2025 has already been met and is likely to be surpassed by a significant margin. China’s 2030 target of 1,200GW of renewables will likely be met six years ahead of schedule.

6. US BACK IN GLOBAL CLEANTECH RACE: THE POWER OF THE IRA 

August marked the one year anniversary of US President Biden’s historic Inflation Reduction Act (IRA) – the "Green New Deal" that has transformed the energy and manufacturing landscape globally. We reviewed its impacts.

The ~US$1 trillion IRA, Department of Energy Loan Program Office and Infrastructure and Jobs Act – key to “Bidenomics”– are an unprecedented open-ended stimulus into decarbonisation of the US economy.

These all-carrot, no-stick subsidy programs are turbocharging reindustrialisation and cleantech there – battery manufacturing, EV, solar, wind, electrification – boosting GDP, and driving massive manufacturing jobs creation. They've also triggered a global decarbonisation ‘race to the top’ amongst Australia's partners and competitors in response to China's dominance with, for example, the EU’s Net Zero Industry Act, Japan’s GX Roadmap and India’s Production Linked Incentives scheme all seeking to position their economies to benefit from accelerating decarbonisation.

China’s response to the US IRA is to go even harder, as we wrote in Climate and Capital Media.

The IRA presents both a challenge and opportunity to Australia. It has already demonstrated its potential to pull vast quantities of global capital away from Australia and other nations at a critical juncture in the energy transformation with its critical mass and subsidy support. On the other hand, in the domestic context, May saw a significant shift in geostrategic energy dynamics, with Prime Minister Albanese and President Biden agreeing on a Climate, Critical Minerals and Clean Energy Transformation Compact. As we wrote, the hope was that if approved by Congress, Australia would be deemed a domestic supplier under the IRA, making Australian companies and projects eligible to also benefit from the ~US$1 trillion of public decarbonisation capital. But this has yet to materialise.

What is also yet to materialise is an adequate domestic response to the IRA – i.e. a coordinated, national strategic public interest investment package – ideally formalised in legislation – aligned to the massive scale of Australia’s opportunity to position itself as a zero-emissions global trade and investment leader. As we note in point 7 below, we and our partners estimate a new $100bn investment would crowd-in a transformative ~$300bn in private capital.

7. TREASURER COMMITS TO AUS IRA RESPONSE IN MAY 2024 BUDGET 

In a major address in October, Federal Treasurer Jim Chalmers prioritised a uniquely Australian response that “complements” but does not “copy” the US's landmark IRA. As we and the Climate Capital Forum have argued, we urgently need an Australian response.

Alongside the Climate Capital Forum, Smart Energy Council, ACTU, Saul Griffith’s Rewiring Australia, First Nations Clean Energy Network, ACF, Clean Energy Council et al, we have called on the government to invest an additional $100bn of strategic public interest capital in the short term into an Australian renewables industry package. This would “crowd-in” ~$300bn private capital, commensurate with the scale of our huge domestic and export opportunities. Recently, led by IFM Investors, nine major asset owners used the Treasurer’s December 2023 investors roundtable to advocate for Super-powering the energy transition in Australia: A policy blueprint to facilitate superannuation investment.

We applaud the Treasurer’s focus on 4 key industry development opportunities that reflect the priorities identified by CEF and partners: refining and processing critical minerals; manufacturing of generation and storage tech, e.g. batteries; renewable hydrogen and its derivatives like ammonia; and green metals including green iron. See our recent analysis of the green iron opportunity; our report on Australia's potential as a value-adding critical minerals superpower; and our report on leveraging synergies with South Korea, Indonesia and China to bring technology and manufacturing onshore. 

These are industries where Australia can lead the world and exercise our significant comparative advantages. As the globe races to decarbonise and China dominates global supply chains, there is a geopolitical imperative to secure domestic supply chain capacities in these sectors to diversify risk. This won’t happen here if we leave it to the free market.

We welcome the six new sectoral plans to guide the government’s priorities on these issues and are keen to assist the government on developing these.

The 2023-24 mid-year economic and fiscal outlook (MYEFO) released in mid-December shows that the Australian budget position is one of rude financial health, with a possible second surplus in two years’ time. 

Included is an additional $5m for a Battery Supply Chain and Research Working Group to work with the US Government. Other new funding includes:

• $2.5 billion for supporting the development of the Critical Minerals Strategy.

• $500m for critical minerals projects in Northern Australia through the Northern Australia Infrastructure Facility. 

• $359m over four years to unlock cleaner, cheaper and more reliable energy, as a critical enabler of future clean industries and broader decarbonisation, which includes the previously announced expansion of the CIS.

As we wrote in a joint commentary with our partners, incremental funding such as this does not provide the certainty, coordination, or level of investment ambition Australia needs now. Attracting international investment at scale comes from confidence in a government’s policies, best formalised in a serious strategic public interest investment package and ideally embedded in a legislative instrument like the IRA to signal globally that we are committed, open for business at world scale, and there will be continuity over time. 

The MYEFO surplus has us in the box-seat to invest another $100bn of public capital to crowd-in the private capital needed to prepare Australia for the massive investment, employment and export opportunities ahead.

The existing $4bn critical minerals facility, the $1.9bn Powering the Regions fund, the $15bn NRF and $20bn Rewiring the Nation and now the CIS boost are all really good “first goes”. 

But this is a global race to the top, with countries and blocs like the EU, Japan and Canada having already responded to the IRA with public investment on an epic scale. And we are starting behind after a lost decade under the LNP denialists.

In CEF's view, the end of year report card (see below) says “Must try harder!” We need to go three times as big in May 2024!

8. ADANI EXPOSED: “HISTORY’S WORST CORPORATE FRAUDSTER”? 

In January, US based research firm and short seller Hindenburg dropped a bombshell on the Adani Group – the largest private developer of new coal mines and coal-fired power plants in the world. Hindenburg’s 100 page report alleged "the largest con in corporate history" involving “brazen accounting fraud, stock manipulation and money laundering,” and pointing to a network of hundreds of tax haven and private family entities. Adani’s 400 page response called the intervention a “calculated securities fraud”, as the Adani family wrapped itself in the Indian flag, decrying "an attack on India, its growth story and ambition” and threatening legal action. 

CEF has keenly followed the conglomerate for a decade, and was a key commentator on this latest twist in the Adani story including in media.

Since the accusations, Adani has suffered a major share price rout of over $100bn at its worst. The accusations are yet to be effectively proven or disproven, but there is ample supporting documentation suggesting that a credible, independent forensic examination is urgently needed by regulators such as the SEC and the Securities and Exchange Board of India (SEBI), including lifting the veil on its network of tax haven entities.

A lowlight out of this saga was the Gujarat Police pursuing criminal defamation charges against Financial Times journalists in what looks decidedly like an attempt to muzzle free speech, and the expulsion of Mahua Moitra from India’s Parliament for asking what we consider to be entirely fair and justified questions.

For balance, we note Adani’s new US$100bn capex on zero-emissions initiatives pledge over the coming decade, and a pledge that a number of Adani subsidiaries will target net zero by 2050, two decades ahead of India’s 2070 target. That activates a race between Indian billionaires – Gautam Adani and Mukesh Ambani of Reliance Industries – to invest in decarbonisation. When Adani adds Adani Enterprises and Adani Power to that 2050 zero emissions pledge we will get excited indeed!

__LOWLIGHTS |

1. THE NUCLEAR DISTRACTION aka CLIMATE CULTURE WARS 2.0

As the federal LNP cranked up the nuclear clown show at COP,  we worked with our partners John Grimes, CEO of the Smart Energy Council, Rewiring Australia co-founder Dr Saul Griffith, Climate Capital Forum founder Blair Palese, former Opposition leader and professor at ANU Crawford School Dr John Hewson AM, and former president of the ACF, Mara Bun, to articulate the barriers that make nuclear unviable as a solution for Australia’s energy transition in a timeframe necessary to respond to the climate, energy and cost of living crises, published as a full page opinion piece in the Canberra Times and across ACM mastheads.

This furphy is climate wars 2.0, yet another tactic by the LNP to distract from and delay the renewables revolution, cynically designed to do maximum damage to the Albanese Government at the expense of all Australians as climate destruction escalates. 

We need solutions now, not post 2040. The small modular reactors (SMRs) favoured by the climate and energy luddites of the LNP are as yet uncommercial vapourware, nuclear energy is too expensive while renewable are cheap and deflationary, and massive and multiple barriers to nuclear rollout mean deployment here will be too late to address the concurrent climate, energy and cost of living crises crushing Australians. 

We have the superabundant wind and sun we need to decarbonise our electricity system, electrify everything, slash energy prices, and lead the world as an RE superpower.

Watch for the nuclear scam to be leveraged as a key battleground by the Opposition and its media backers ahead of the next Federal election.

2. COAL COP-OUT NUMBER 28 

This one is mixed. First for the lowlights. As COP28 wrapped up this week in Dubai, the commitment to a coal phase out or phase down for which many in the climate movement – including CEF – had strongly advocated, failed to eventuate. Language in the decision text was watered down and watered down again.

The text also called for the development of a list of “zero- and low-emission technologies”, which includes nuclear and “abatement and removal technologies" such as CCS. There is no evidence to date across the world of the commercial and consistent operation of CCS at a scale. It is an excuse for fossil fuel polluters to keep polluting. And there was a concerning reference to the role of "transitional" fuels, i.e. gas.

However, in the context of an multi-nation forum constrained by the art of the possible, COP28 did finally name and shame the key climate culprit – fossil fuels in our energy system, an outcome that has eluded climate negotiators for the last 30 years. And for the first time, nations agreed on tripling renewables this decade and transitioning away from fossil fuels to achieve net zero, recognising “the need for deep, rapid and sustained reductions in greenhouse gas emissions in line with 1.5C pathways”. 

Climate and Energy Minister Bowen said it best: "We must face this fact head on: if we are to keep 1.5°C alive, we must peak emissions by 2025, and fossil fuels have no ongoing role to play in our energy systems”.

Now we need to see Australia – still a global top 3 petrostate alongside Russia and Saudi Arabia – put this talk into action, as we wrote in our COP28 wrap for Renew Economy in collaboration with Richie Merzian in Dubai for the Smart Energy Council. Anything less is hot air.

3.CLEANTECH CAPITAL RUN OUT OF TOWN: AUSSUPER vs BROOKFIELD

This month AustralianSuper, with $300bn in assets under management and over 3.26 million members, scuttled an ACCC-approved $20bn bid by Canadian fund manager Brookfield and partners to acquire one of Australia’s largest gentailers, Origin Energy.

AustralianSuper's spoiler act trashed a key consideration that, along with fund members’ interests, should be paramount: the broader national interest. It cruelled the $20-30bn investment in 14GW of firmed renewable energy to which Brookfield had committed. As we wrote in the AFR during the course of the drama, investors will find better places for their money if Australia positions itself a backwater hostile to innovation capital.

The acquisition would have been one of the keys to on-time phased closure of Origin’s coal clunker Eraring power station over 2025, obviating the $200-400m pa of public subsidies to Origin by the NSW government to keep the carbon belcher chugging on.

It’s still unclear what AustralianSuper is offering as its alternative plan. Higher electricity prices, slower decarbonisation and more climate destruction? We look forward to AustralianSuper’s matching $30bn commitment to help accelerate decarbonisation via Origin. 

Meanwhile, we hope the superfunds’ new policy paper on 'Super-powering the energy transition in Australia' will help catalyse pension capital investment in transmission, storage and value-added export industries of the future.

In our follow up in AFR on the failed acquisition bid, we noted that for a decade, superfund participation in the massive Australian energy transformation was stymied by the previous federal government's energy policy paralysis.

But even with a government that grasps our economic opportunity, YFYS benchmarks have had the effect of keeping the third-largest pension asset pool in the world, at $3.5tn, on the sidelines, hamstrung by the regulatory requirement that dictates fossil-heavy index benchmark hugging. We need to see reforms to YFYS to prevent a replay of the Brookfield/Origin debacle. 

It was great to see Treasurer Chalmers’ December 2023 Investor Roundtable agree to a detailed YFYS review, as we commented in the AFR.

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2023 REPORT CARD: PROGRESS, BUT MUST TRY HARDER

As we review our 2022 wishlist for 2023 we find that while there is some good progress on decarbonisation domestically, including the highlights identified above, it is a case of can and must do better – particularly on a coordinated nation-building investment and policy package that leverages Australia's massive natural and comparative advantages to adequately respond to transformative energy policy shifts such as the USA IRA and China's accelerating transition. 

And then there is the elephant in the room: Australia's continued addiction to coal and gas, utterly at odds with our clean energy superpower ambitions, our emissions reduction commitments and our obligations to our Pacific neighbours – the first to face the existential impacts of runaway climate change despite having done the least to cause it.

See our grading against each of our key criteria. We'll check back again at the end of 2024.

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OUR LATEST WORK ON CLIMATE FINANCE & CHINA

We’ve been busy in climate finance analyses and commentary since our last newsletter of 1 December,  including CEF’s response by Nishtha Aggarwal to Treasury’s Sustainable Finance Strategy consultation, a case study on the effectiveness of the 2019 Woolworths’ Green Bond, and a summary of big banks’ financing of Australia’s $10tn housing stock. We also continue our new monthly China energy updates, by Xuyang Dong.

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OUR MEDIA |

See our latest media.

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. Our highlights tracking decarbonisation progress in 2022, and our 2023 wishlist, are here.

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HAPPY HOLIDAYS |

Huge thanks to our many philanthropic supporters and partners across finance, eNGOs, thinktanks, corporates and in government, without whom none of what we do would be possible – it’s an honour and privilege to work with you towards our collective vision of a thriving post-carbon Australia and world. 

Some of our team are taking a well-deserved break over the holiday period to recharge after a busy year of building positive momentum.

We look forward to working with you in 2024.

In the meantime, from all the team, wishing you happy holidays and even stronger momentum to deliver on the climate science in the new year.

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