Welcome to our news round-up.

15 AUGUST 2024

SUPERPOWERING UP!: PILBARA DECARBONISATION & ELECTRIFICATION KEY TO $250bn GREEN IRON BOOM 

Our new report out this week, SUPERPOWERING UP by Matt Pollard, finds that failure to urgently decarbonise and electrify the Pilbara region in WA risks Australia's $250bn pa future green iron industry. The region is the world’s #1 iron ore exporter and the engine room of our resources industry.

We were delighted to have the endorsement of our partners the Clean Energy Investor Group, representing investors with over $24bn in renewables assets across 70 power stations, and Zero Carbon Hydrogen Australia/the Smart Energy Council. 

The AFR ran strong coverage of the report, including in an op ed by former chief scientist Dr Alan Finkel based on his report foreword, and a feature story centred on the critical imperative to accelerate clean energy infrastructure evaluation and approval processes, including via an Overriding Public Interest test.

Our key Asian trade partners’ progressive focus on decarbonising their steel industries is a clear threat for Australia’s heavy economic reliance on Pilbara iron ore exports. This powerhouse has served us exceptionally well. But it's now urgent that we invest in the grid and renewables infrastructure needed to enable an accelerated plan for the export of green iron and other value-added energy transition materials including critical minerals and strategic metals, of which WA has globally-significant reserves.

As Dr Finkel says in his foreword to the report:

“The consequences of acting too slowly or inefficiently will be severe…Brazil, South Africa et al can dig and ship their iron ore to countries in the Middle East that will use low-cost zero emissions electricity to [produce] green iron. If we follow a business-as-usual trajectory…we will suffer from a decline in our mineral resources exports at the same time that our fossil fuel exports start a slow but terminal decline. This is a major risk to Australia’s economic security.”

WA's opportunities to lead the green steel global supply chain are huge. However, the Pilbara currently sources only 2% of its electricity from renewables, as mining majors guzzle 2.4bn litres pa of high-emissions, heavily subsidised diesel and burn climate-destroying methane gas to power their operations. This is a relic of a last-century, dig-and-ship mentality.

Pilbara common-user grid infrastructure (CUI) is critical to enable renewables investment at speed and scale to value-add our iron ore ‘rivers of gold’ while they're still world-leading. A CUI would unlock >$50-100bn of new private capital in renewables, battery firming and transmission, so the Pilbara’s vast abundance of critical minerals, strategic metals and energy transition materials – including green iron – can be processed and transformed onshore using zero-emissions power. This is how we can lead the world on the export of ‘embodied decarbonisation’.

As the world races toward net zero, Australia’s key opportunity to reposition as a green superpower lies at this nexus.

The report makes 16 key recommendations for urgent action by the WA and Federal Governments, Pilbara industry majors and stakeholders. These include:

• Prioritise development of a comprehensive single Common User Grid Infrastructure Plan to efficiently and cost-effectively electrify and decarbonise, enabling value-added industries of the future

• Centre First Nations equity participation on Pilbara grid and renewables deployments ensuring return of benefits to communities

• Embed Overriding Public Interest principles in environmental approvals processes to overcome roadblocks  and expedite clean energy infrastructure including Pilbara CUI

• The Federal Government should urgently prioritise the Pilbara for national-interest public investment under a Future Made in Australia, to rapidly crowd in private finance at scale

• The WA Government should urgently identify priority Pilbara CUI projects to deploy the $3bn Clean Energy Finance Corporation financing committed to WA under Rewiring the Nation a year ago, unlocking private capital investment.

>>See the full report and recommendations here.

>>See our media on the report including, in addition to the story and op ed in AFR, Tim’s interview with AusBiz, and articles in Renew Economy, PV Magazine, Canberra Times (and syndicated to 100+ mastheads including The West Australian via AAP), PV Tech, AU Manufacturing, the Australian Mining Review, Manufacturers’ Monthly, Australian Manufacturing, Australian Mining, New H2.

>> Listen to Tim on the Climatalist podcast speaking about Australia’s green export potential.

...SEC strategy for Powering WA's Future

The Smart Energy Council’s excellent Powering Western Australia’s Future strategy released this week laid out a decarbonisation pathway for the WA Government that reflected many of our key asks, including recommendations to: 

• Legislate at least 82% renewable energy by 2030 on the South-West Interconnected System and at least a 43% emissions reduction by 2035 in its Climate Change Bill.

• Develop a comprehensive single Common-User Grid Infrastructure Plan in the Pilbara to deliver large-scale renewables, green iron and green minerals projects; and establish Green Iron Precincts in partnership with the Federal Government, ensuring investment in large-scale renewables necessary for the delivery of green iron. 

• Work with the Australian Government to deliver at least $15bn investment in WA through the Future Made in Australia program and key authorities including the NRF, Rewiring the Nation, the CEFC and ARENA. 

>>See the full strategy here.

WE SEE PEAK EMISSIONS IN CHINA

Our Jan-June 2024 China Energy Update by Xuyang Dong found China is rapidly approaching a pivotal moment in climate history, with the power sector very close to what CEF expects could well be a permanent peak in carbon emissions in 2024.

This is more than six years ahead of the country’s Nationally Determined Commitment for 2030 under its contribution to the global goals of the Paris Agreement, as part of its dual carbon targets – to peak emissions by 2030 and achieve carbon neutrality by 2060.

As CREA's Lauri Myllyvirta noted 2QCY2024 emissions were -1% y-o-y, with thermal power generation in June 2024 -6.9% y-o-y.

This is off the back of the sustained slowdown in property sector new construction and the staggering, ongoing and escalating pivot in China’s economy towards zero-emissions industries of the future (e.g. solar, batteries and EVs) in parallel with the transformation of its electricity market.

Our half-year analysis found:

• During the first 6 months of CY2024, China installed 152.8GW of new capacity additions, up 14% y-o-y. 134.5GW or 88% was zero-emissions capacity, +25% y-o-y, with solar leading the way (102.5GW newly added, 67% of new installs, +31% y-o-y), followed by wind, hydropower and nuclear. Only 1.2GW of nuclear capacity was added from January to June, 1% of the total new capacity added, flat on 2023.

• However, China did add another 18.3GW of thermal power capacity in January to June, 12% of the total new capacity additions. Pleasingly this is down 30% y-o-y.  Building on this significant decline, China needs to cease new thermal expansion as early as possible, even noting its orientation to new low utilisation, flexible coal plants.

• By June 2024, China had a total installed capacity of 3,071GW, +13.4% y-o-y. Notably, more than half (54%) is zero-emissions (1,665GW), +23.3 % y-o-y. 

• China’s target of 1,200GW wind and solar installed capacity by 2030 will be met ahead of time.  By the end of June 2024, it already had a total installed solar and wind capacity of 1,181GW. The remaining 19GW of new wind and solar power capacity additions will be highly feasible to achieve in July 2024, meaning China will beat this target.

• China’s electricity demand continued to grow during 1HCY2024, +6.4% y-o-y, well above its 5% GDP growth target for 2024. 

• In 1HCY2024, China generated 4,695TWh of electricity. 64% of power generation came from thermal power, reaching 3,005TWh. However, June saw a  6.9% y-o-y decrease In thermal power generation to 446TWh. 

• 36% of generation was from zero-emissions sources (led by hydropower, followed by wind, solar and nuclear). In June alone, 73TWh of solar was generated, a material +33.9% y-o-y. After a long period of lower solar utilisation due to a lack of grid connectivity and battery deployment, China has been actively addressing these issues in the grid, now reflected in rising solar generation.

The decarbonisation trend in China’s electricity mix is directionally right and accelerating. If China’s emissions peak, then potentially the world’s emissions peak, particularly as China builds its outbound investment and trade with developing countries worldwide to increase their capacity to embrace the cleantech disruption and align with climate science, even as these countries grow their energy independence and domestic energy security.

Watch this space for our new report on China’s outbound cleantech investment, forthcoming in September.

>>See our recent China media, including our op ed in the Financial Times UK on lessons for the world in China’s decarbonisation progress.

Collaborative Australia-China opportunities on electrifying tomorrow – UTS Forum

Tim and Xuyang attended the inaugural Australia-China Energy Transition Forum at UTS this month focussing on electrifying tomorrow and EVs, with Tim delivering a presentation on China’s outbound foreign direct investment in the battery and EV sector, highlighting trends in 2023 and 2024.

Topics ranged from the adoption of EVs to Australia’s cleantech supply chain value-adding opportunities, partnership and collaboration, investment regulation and political climate, and building regional ecosystems.

The forum covered Australia’s value-added opportunities in the global EV supply chain, and opportunities for Australia-China dialogue and collaboration in critical raw materials, EV technologies, and global market development. A key topic was the need for clear enabling policies for Chinese investment in Australia while balancing sovereign risks, as well as leveraging Australia’s strengths in ‘soft connection’ to help Chinese investors navigate Southeast Asian markets, fostering multilateral bilateral cooperation and capitalising on opportunities in the ASEAN region.

Speakers included Dr Xiansheng Sun of the International Society for Energy Transition Studies; Xiaoshi Liu of China EV100; Maria Silos from BYD Australia; and Chanjie Qin of China Construction Bank.

PRODUCTIVITY COMMISSION’S NEOLIBERAL FREE TRADE FANTASY THREATENS A FUTURE MADE IN AUSTRALIA

As we wrote in Renew Economy, Australia’s path to enduring prosperity is through accelerated economy-wide electrification and decarbonisation. 

Economic umpire the Productivity Commission’s flagship annual publication, its Trade and Assistance Review 2022-23 released at the end of July, risks undermining this at a critical juncture. It decries strategic national interest public investment in Australia’s once-in-a-hundred-year opportunity to reposition itself as a renewables-powered, value-adding zero-emissions trade and investment leader.

The Commission notes that 1,800 trade-distorting industry policy measures were implemented globally in 2023 by our competitors and allies. Then – at a time when global trade is fracturing, led by the $US1 trillion US Inflation Reduction Act, “protectionism” is rife as state interventions in industry policy escalate across other major economies, and the US raises tariffs against imports from China – they recommend we ignore this profound shift, warn against Australia implementing an industry policy of our own, and pretend free markets remain in operation in global trade.

As David Scaysbrook, MD of leading clean energy infrastructure investment manager Quinbrook Infrastructure Partners said in Capital Brief: “Free trade is dead, just look at what's actually happening in Europe, the US, Canada. That's the reality. No one's supporting free marketeering anymore. Everyone is protecting their borders and domestic interests. We’re all in on the Future Made in Australia [strategy]. We're in a global competition where these big green industrials are choosing where they're going to place their bets [for] multibillion dollar factories. They look at raw materials, input cost and the level of government concession or supportive financing. Also the road logistics, rail logistics, permitting, timelines, labour costs, labour availability, all of those things. And Australia has a really good story on all fronts.”

The race is on. Australia can play a significant role in the accelerating the global energy and economic transformation that defines our era. Domestically, we have the opportunity to derive enduring benefits from an investment, employment and trade boom in industries of the future as we decarbonise, electrify, re-industrialise and pivot from our increasingly risky exposure as a fossil fuel-dependent zero-value-adding, dig-and-ship petrostate.

We cannot afford the Productivity Commission's flat-footed, tone-deaf and misdirected policy approach that fails to grasp the core role of industry policy and national interest investment as a key enabler of this new vision.

>>Read our full review of the Commission’s report in Renew Economy.

STOP PRESS: FOSSIL GIANT CHEVRON PAYS SOME TAX, UP FROM PREVIOUS ZIP

Chevron Australia paid $3.5bn in company tax in 2023, following the $4.2bn it paid in 2022. In one of the most egregious dodges in corporate tax history, it had paid $0 tax in CY2019 (and in the years preceding this) and just $30 in CY2020 (that’s not a typo, that's $30 tax on $12,484,000,000 revenue). The massive recidivist was fined $340m by the ATO after it lost its tax evasion case in the Federal Court in 2017.

Prior to 2022, most multinational corporations (MNC) operating here, e.g. ExxonMobil, bp, Shell TotalEnergies and INPEX Corporation, paid zero corporate tax in Australia, as long reported by reform champion Michael West. 

CEF has actively campaigned for MNC fossil fuel majors operating here to pay a remotely fair share of corporate tax in Australia. For too long they have been pocketing windfall profits by exploiting our finite resources for their private gain and channelling the proceeds to tax havens and their parent country jurisdiction, conniving with the help of PwC et al to undermine democracy as they leverage tax loopholes against us.

Treasurer Jim Chalmers has booked two surpluses in part as a result of MNC finally inching toward a marginally improved contribution, but rigorous reform is overdue and needed.

• The Federal PRRT royalty (in substance) delivers only a 3-4% share of LNG export revenues, leaving the gas cartel laughing all the way to the bank. The minimalist reform in the 2023-24 Federal Budget went nowhere near far enough as we wrote in Renew Economy. Queensland Treasurer Cameron Dick has delivered a better 5-6% LNG share since 2021. 

• Queensland citizens have also enjoyed the massive benefits of a progressive coal export royalty (see our op ed in The Guardian). From FY2022 to FY2024, this added a staggering $33bn to Queensland’s budget and is forecast to deliver a further $20bn over the budget period, as we wrote in our QLD Budget analysis. Amongst other things, this has funded the state’s ambitious clean energy rollout and the country’s largest energy bill rebates, offsetting cost of living pressures.

• In NSW on the other hand, Premier Chris Minns and Treasurer Daniel Mookhey delayed implementation to FY2025 of their modest coal royalty uplift from 7-8% to 10-11% and declined the opportunity to make it progressive. Then Minns gave $450m back to Origin Energy to extend Eraring, without seeking alternatives (see item below).

• The unjustifiable $11bn pa federal diesel fossil fuel rebate should be capped, as we recommended in our report on this topic, and revenue raised from this cap directed into a special purpose fund for electrification and decarbonisation of Australian mining operations, turning a transition headwind into a tailwind.

It’s not that hard. For majors to retain a social licence to operate, the Australian people must begin to collectively enjoy the material economic benefits of our world-leading abundance of resources. This also involves requiring fossil majors to compensate us for the climate and environmental damage they continue to externalise, even as responsible governments implement policies to accelerate our transition – look at the $2 trillion Norwegian Sovereign Wealth Fund! The fact we are largely gifting our ‘common wealth’ to multinationals and ‘our’ mining billionaires is a chronic failure of political will and public administration, and the undermining of our democracy.

>>See Tim’s commentary in Energy News Bulletin.

“REVISING” PROJECTIONS TO JUSTIFY ERARING EXTENSION?: NSW MUST TRY HARDER

Exceptionally disappointing revelations this month: The SMH reports that, having failed to consider any alternative options, NSW Energy Minister Penny Sharpe signed off on a departmental request to AEMO to revise its modelling to more conservative assumptions on electricity supply, to show a projected reliability shortfall in the state – ahead of the NSW Government’s announcement in May that it will extend the operation of massive, end-of-life coal power clunker, Eraring, two years beyond its planned 2025 closure.

This politically expedient reprieve likely leaves electricity consumers in NSW on the hook for a massive $450 million in payments to private operator, Origin Energy. Yet another huge subsidy to just one coal plant for two years. 

At the time of the extension announcement decision we noted that this outcome is the result of the chronic delays and failures in transition planning and renewables and grid project approvals in NSW, while the transfer of $450m in public monies to Eraring is effectively a “coal keeper” tax on households and businesses already crushed by fossil fuel energy price hyperinflation, as we wrote in the AFR and Tim detailed on SkyNews and elsewhere. 

As Tim commented this week in the SMH feature that exposed the "revised” AEMO modelling, this public capital should have been invested to catalyse “a lot of permanent, low cost, zero emissions private projects. Were alternative solutions actually even sought?” 

Stephanie Bashir of Nexa Advisory aptly observed that: “If the NSW government was serious about addressing reliability and the cost of energy bills, they would be doing everything in their power to speed up the rollout of renewable projects. Not spend time reverse engineering decisions to extend ageing power stations”. 

As for the government-commissioned consultants' modelling released this month by Minister Sharpe in the interests of “transparency”, which conveniently shows Eraring’s on-time closure would drive power price spikes – let’s get real. 

The government long knew the mothballing of Eraring was slated and time was running out. As Tim said in Renew Economy: “Does this analysis assume the NSW government stands there like startled rabbits in the headlights and does absolutely nothing for … years in the face of the stark knowledge that Australia’s largest coal-fired power plant is at the end of its useful life and going to close? How many new renewable energy projects has Minister Paul Scully approved this year? We are waiting and continue to pay the price.” 

The only permanent solution to our concurrent climate, energy and cost of living crises is an accelerated deployment of distributed firmed renewables, including rooftop solar and home batteries, as well as utility-scale clean energy infrastructure. More capacity => lower prices!

We reiterate our call on Minister Sharpe and the NSW Government to rule out any further extension to Eraring and get on with their actual job: delivering low cost, clean, plentiful, reliable firmed renewable energy to the people of NSW by accelerating the state’s transition.

CLIMATE CAPITAL FORUM CONTINUES ITS ADVOCACY ON AUSTRALIA'S ECONOMIC & ENERGY TRANSFORMATION

Climate Capital Forum continues to advocate on how Australia can navigate the economic impact of the US Inflation Reduction Act (IRA). Exploring the issue of gaining community licence for renewable energy projects, CCF member Satya Tanner, MD of LAUTEC Australia shared her experiences of community ownership of renewables infrastructure projects in Denmark on Radio National Breakfast with Patricia Karvelas.

CCF also prepared a submission to the Senate Economics Legislation Committee Inquiry into Future Made in Australia Bill 2024, making a range of recommendations on how to leverage the impact of the legislation and boost the Australian economy’s development in response to the US IRA.

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OUR MEDIA |

See all our media here including international stories on the LNP's nuclear furphy with Tim's commentary in FT and France's Les Echos.

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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Annemarie for Tim, 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.