Welcome to our news round-up. Previous issues including 15 August here.

30 AUGUST 2024

ENERGY MARKET OPERATOR: NO RELIABILITY RISKS IF RENEWABLES DELIVERED ON TIME & IN FULL

AEMO’s new 10 year electricity outlook released this week concludes there is no power supply reliability gap until FY2034 in any state in the National Electricity Market (Figure 1, below) unless there are delays in deployment of replacement capacity, and assuming programs and initiatives already established are delivered in full.

We simply need a lot more zero-emissions energy capacity approved and built, particularly utility-scale renewables.

Now is the time for upscaling of ambition by our state governments to align with the Federal Government’s 82% renewables by 2030 target, particularly given the inevitability of looming end-of-life coal capacity closures. 

AEMO’s modelled shortfalls that result from likely delays in building of replacement capacity are smaller than in AEMO’s forecast earlier in 2024. The latter was inflated to justify $450m of subsidies by the NSW government to Origin Energy to extend the life of massive, polluting coal power clunker Eraring. More coal subsidies are an untenable tax on the public and should be ruled out. 

In an important admission, AEMO now sees distributed consumer energy resources (CER), particularly commercial and industrial rooftop solar, as playing a transformative role in the energy transition as a valuable resource in the future energy system. If well coordinated (‘orchestrated’), they help deliver reliable and secure energy, offset the need for grid-scale clean energy infrastructure investment, and reduce costs for consumers as well as slashing energy sector emissions.

AEMO also underestimates the ambition of the federal government’s 32GW Capacity Investment Scheme (CIS), a key driver of the accelerating buildout of renewables nationally. We need to see confirmation of the first 6GW CIS auction round, or even an upscaled outcome to get things back on track to give consumers the confidence that we can permanently resolve the energy affordability crisis. 

Any delay to the delivery of expected generation, storage or transmission may result in reliability standards not being met, whilst any earlier withdrawal of existing capacity would also deteriorate the reliability outlook of the power system, with NSW highlighted as vulnerable and in need of more timely investment given risks in FY2028 and then FY2034. The CIS can solve this, if NSW moves with urgency.

The solution to our concurrent energy, cost of living and climate crises is an acceleration of the transition of the energy market to low-cost, clean, reliable firmed renewables at speed and scale.

This AEMO update should provide more motivation for state governments to pick up the pace on streamlining clean energy approvals processes to prevent any further dela ys and bottlenecks, and to boost strategic public-interest investment into both utility and distributed firmed renewables to lock in our energy security into the future.

>>>Read Tim Buckley's fuller analysis.

DUTTON WOULD CUT FMIA & SERVICES BY $100bn: 30-STRONG ALLIANCE SAYS NO 

In response to the threat of a $100bn razor gang attack by a Dutton Coalition government on services and industry support under the Future Made in Australia Act (FMIA) to fund their nuclear fantasy, CEF and Climate Capital Forum joined ~30 other organisations in a statement rejecting the proposal. Signatories included the ACTU, the Australian Workers Union (AWU), Electrical Trades Union (ETU), Australian Conservation Foundation (ACF), Smart Energy Council (SEC) and a broad range of renewables, climate and community organisations. The alliance wrote:

“The radical proposal would slash everything from housing and public transport to renewable energy and manufacturing jobs to find the $100 billion for their unpopular nuclear scheme, which would drive up energy bills in the short, medium, and long-term.

By attacking both bedrock social programs and the renewable energy already providing 40% of Australia’s electricity, the Coalition would undercut Australia’s economic prosperity, undermine investor certainty, and make life harder for Australians already doing it tough.

By scrapping Future Made in Australia, Powering the Regions Fund and Rewiring the Nation, Peter Dutton would also abandon the key initiatives designed to reduce carbon pollution and reform the economy to ensure we remain prosperous and internationally competitive in a decarbonising world.

The attacks on a Future Made in Australia are especially telling, a rehash of the tired arguments Donald Trump and the Republicans used in their attempt to kill the U.S. Inflation Reduction Act. 

Yet U.S. inflation has decreased substantially since the U.S. passed its clean industry policy,  attracting private investment equivalent to six times the support it provides, creating 210 new clean projects, 400,000 new jobs and adding $155bn to U.S. GDP annually.

Instead, the Coalition wants Australians to sacrifice their own social services so they can prop up a nuclear industry expected to raise household energy bills an average of $1000 annually.”

>>>Read the full statement and coverage in The Guardian.

WHEN PREDICTIONS COME TRUE: CHINA REACHES 2030 INSTALLED WIND & SOLAR TARGET 6 YEARS EARLY

As CEF had previously projected, our latest China Energy Update finds that China achieved its target of 1,200GW of installed wind and solar capacity by 2030 six years ahead of time – a key indicator of its staggering progress on decarbonisation.

Total installed wind and solar capacity is now at 1,207GW. To meet its carbon targets, CEF estimates that China will need to add approximately 330GW of solar, 80GW of wind, and 4GW of nuclear capacity annually until 2040.

This early success should inspire other major powers to accelerate their renewable energy efforts, benefiting global climate goals. However, China must continue to focus on areas like energy efficiency and steel sector decarbonisation, as well as address challenges such as grid connectivity and energy storage to sustain its progress. As China's electricity demand grows, particularly with its ongoing electrification strategy, the need for increased power generation and grid modernization becomes more pressing.

From January to July CY2024, China added 160.5GW of zero-emissions new capacity, a massive 23% y-o-y increase. It invested US$41.3bn in power grid projects during the first 7 months, a 19% y-o-y increase. 

As of the end of July, 55% of China’s total installed capacity is zero-emissions, a 23% y-o-y increase. 37% of the power was generated from zero-emissions energy from January to July in CY202, a +19% y-o-y. This is largely due to the one-off recovery in hydropower generation thanks to heavy rains this summer in China. 

Additionally, five new nuclear projects comprising 11 reactors were approved, supporting China’s zero-emissions energy goals. CEF expects an annual addition of 4GW of nuclear capacity from 2030-2040.

The coal picture remains complicated and challenging. A report from the Center for Research on Energy and Clean Air (CREA) shows China reduced coal power permits by 83% year-on-year in the first half of 2024, issuing only 9GW – extremely encouraging. However, China's goal to add 80GW of coal power in 2024, reflecting past permitting, raises concerns with July already showing an increase in thermal power capacity. 

Despite rapid renewable energy expansion, China must strengthen its climate ambitions by ceasing the addition of new coal plants and retiring old ones. 

>>>Read our full January-July China Energy Update and coverage of CEF’s 1HCY2024 China Energy Update in Straits Times

___

AMID IRON ORE WOES, MUST KEEP EYES ON PRIZE

BHP POSTS STRONG FY24 RESULTS BUT EPIC DECARBONISATION FAIL 

This month, the chairman of the world’s biggest steelmaker, China Baowu Group, warned China’s steel sector will enter a ‘harsh winter’ more challenging than major downturns experienced in 2008 and 2015, as China’s construction slump and steel glut bite. 

We look in more detail at the implications for Australia’s iron ore exports in our longer analysis here.

In short, over 80% of Australia’s iron ore exports are to China. The benchmark iron ore price has fallen below US$100/tonne. While Australia’s iron ore majors are well positioned to ride the downturn, and highly capitalised from low operating costs and strong balance sheets from five years of exceptional prices, this slump is a stark reminder of the influence of China’s domestic steel industry and market power in the global iron and steel value chain. 

China continues to grow its steel exports to jurisdictions that are implementing carbon pricing mechanisms, including the EU’s carbon border adjustment mechanism (CBAM), which penalises high carbon products. At the same time there is increasing supply of iron ore from high-grade, low impurities jurisdictions in Africa and South America.  

It is imperative for Australia to recognise that its future prosperity lies in exporting higher iron content products with low embodied carbon.

Our corporate leaders must keep their eyes on the prize and pivot to Australia’s #1 future export opportunity – green iron, produced using renewables. This requires that they step up their investment into decarbonisation, deploying renewable energy and common infrastructure in the Pilbara. Like Fortescue. 

BHP, on the other hand, this week reported very strong FY2024 results, underpinned by an exceptional 61% return on capital employed in its Pilbara iron ore division. In contrast, its Climate Transition (In)Action Plan 2024 shows a total lack of climate and decarbonisation ambition. It forecasts global operating emissions (scope 1 and 2) will rise 3% to FY2030. Up is not down! A total fail.

Strategic national-interest public policy action is needed. As we have previously written, the Australian government should collaborate with our key trade partners to advocate for an Asian CBAM, the necessary price signal in global commodity markets to commercially underpin the >$100bn investment needed to accelerate Australia's green iron capacities. This, together with a $10bn green iron production tax credit (PTC) and a $50 pa per firm cap on the diesel fuel rebate (see below) would incentivise electrification, decarbonisation and technological innovation in our value-added green iron sector, before our global competitors steal the Pilbara’s iron ore “rivers of gold”. 

We urge the government to implement these measures in MYEFO.

>>> Read the fuller analysis.

__

FOSSIL LOBBY PRESSURES FEDERAL GOV'T TO RETAIN MASSIVE DIESEL HANDOUT 

A new alliance led by peak fossil fuel lobbyists the Minerals Council of Australia (MCA) and including Energy Producers Australia (chief mouthpiece of the methane gas cartel) has released an-MCA commissioned report pressuring the Federal Government to retain its massive tax breaks for imported diesel, a high-emissions fossil fuel, as we explore in Michael West Media. Just in time for a forthcoming federal election.

It is important to note who is behind this special pleading. The MCA represents ~125 resources and fossil fuel firms, including the largest beneficiaries of fuel tax credits for diesel. The coalition the MCA has cobbled together includes groups from the agriculture and tourism sectors, especially small family farmers, handy human shields as it promulgates its disinformation campaign.

CEF’s Matt Pollard, lead author of our September 2023 report advocating reforms to the Fuel Tax Credit Scheme to cap credits at $50m pa per firm has broken down and debunked the latest diesel subsidy furphy, including the MCA’s false regurgitations that fuel tax exemptions for off-road (ie miners’) use of diesel are justified because the fuel tax is intended to fund road upkeep, and mining vehicles don’t use roads; that the tax credit is not a subsidy (it is); and that any reforms to the tax will wreak havoc on Australia’s economy and farmers (they won’t). 

Our detailed response is available on our website, as well as in the Michael West Media op ed highlighting the influence fossil fuel multinationals and their lobbyists still have on Australia’s energy and industry policy, and the urgent need to decouple from their stranglehold to realise the massive economic opportunity of a Future Made in Australia powered by renewable energy. 

>>>Read the full analysis and our op ed in Michael West Media.

___

NET ZERO ECONOMY AUTHORITY PASSES SENATE

Congratulations to the Albanese Government for getting the NZEA legislation passed – a critical step toward Australia's energy, economic and export transformation at the speed and scale required.

The NZEA will work with communities, state, territory and local governments, regional bodies, unions, industry, investors, First Nations groups and others to ensure we can collectively take advantage of the massive opportunities of the emerging net-zero world, navigating change and creating the jobs and benefits of the economic transformation, whether by retraining and redeploying workers from traditional energy industries or cutting red tape in clean energy investment via rigorous but accelerated evaluation and approval.

The NZEA is a cornerstone of the government's vision for A Future Made in Australia, ensuring our green metals and minerals opportunities are aligned, accelerated and coordinated to leverage our competitive advantages and reindustrialise our economy, working with our key North Asian trade partners, and rebuilding our collaboration with ASEAN and the Pacific.

___

PACIFIC ISLANDS TO ALBO: NO MORE COAL & GAS

As PM Anthony Albanese jetted into the Pacific Island Forum, time’s up. To avoid condemning our neighbours in the Pacific to climate destruction, Australia must finally call time on coal and gas.

We are a global top 3 fossil fuel-exporting petrostate alongside Russia and Saudi Arabia, making a vastly outsize contribution to global greenhouse gas emissions. Our Federal Labor government has made significant strides in accelerating the rollout of renewables, reducing domestic sector emissions, and reorienting our economy towards its potential as a value-adding zero-emissions trade and investment leader via a Future Made in Australia – this pivot is where our generational prosperity, energy independence, economic security and opportunity lies.

With our world-leading abundance of sun, wind, critical minerals and strategic metals we can leverage this globally transformative moment and collaborate with our Pacific neighbours to share in the benefits, while investing in their climate resilience.

There is only so long the Albanese Government can sustain the irreconcilable contradiction at the heart of its policy agenda – its continued support for new coal and LNG export projects as the climate crisis escalates, including its pathetic Future Gas strategy, a product of state capture by the multinational gas cartel. Our fuelling of climate breakdown harms those who have done least to cause it – nations with which we claim to be part of the 'Pacific family'. 

Albanese’s visit to the Pacific comes as the UN Secretary General Antonio Guterres, also at the Forum, referenced a new report, Surging Seas in a Warming World, which notes that “the climate actions and decisions taken by political leaders and policymakers in the coming months and years will determine how devastating these impacts become and how quickly they worsen.” Time to step up. As Climate Analytics reports, at 5% of global emissions, Australia’s export-led role is world leading, and we must stop hiding behind false narratives that our domestic emissions are just 1% of global total.

>>> Watch Tim’s Sky News interview, which also covers BHP’s full year results and the need for the Big Australian and our economy as a whole to pivot to value-added energy transition resources, led by green iron.

___

CLIMATE CAPITAL FORUM NEWS

Advocacy around community support for renewables projects continues to be a focus, with Satya Tanner, MD of LAUTEC Australia publishing an opinion piece in Energy News Bulletin about the European experience of wind farm developers, and commentary in this news piece.  “Developers in Denmark found that when they offered land lease payments to farmers, without compensating the broader community, it created fierce resistance more broadly. However, developers that offered up share options and planning participation to communities were the only ones to successfully construct their projects.”

CCF founder Blair Palese published an opinion piece in Renew Economy outlining the Forum’s support for FMIA, despite its imperfections. “Australia must move at speed and scale to make the most of the opportunities through our vast and affordable renewable energy resources and enviable wealth of rare earth minerals. Moving now, and making improvements as we go, gives us the best chance of achieving our climate and economic goals.”

In her speech to the House of Representatives for the second reading of the FMIA Bill 2024, independent member for North Sydney, Kylea Tink, referenced that the Forum’s submission to the Senate inquiry “raised questions regarding [community] benefits, including how the benefits will be measured and what their success would look like... To address these questions, the government should clarify how the community benefit principles will apply in practice… This may be achieved by including a requirement that… members of the public are afforded a reasonable opportunity to provide comment directly [and] an explanation of how public comments were considered."

>>>You can read more about Climate Capital Forum's work here.

___

OUR MEDIA |

See our media here.

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. 

__

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

If you wish to be removed from this email list, please just let Annemarie know any time or unsubscribe at the link below. 

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.