Investors ready to spend on Australia energy transition

Australia's energy transition entered a new phase with the election of the Labor federal government in May, which has raised targets to accelerate the deployment of renewable energy to provide the infrastructure for a future green hydrogen export sector. This has provided confidence to investors, which are preparing to fund new power transmission and generation projects.

The first gathering of Australia's renewable energy industry since the 14 May election met this week at the Australian Clean Energy Summit 2020 (Aces2022), with investors, project developers, regulators and government agencies discussing the changed policy settings. This includes deeper greenhouse (GHG) emissions cuts to 43pc by 2030 from 2005 levels, up from 26-28pc previously, and a renewable energy target of 82pc by the end of the decade compared with no target previously.

Delegates at Aces2022 used the release of the blueprint to transition Australia's electricity system to a low emissions network as a reference point for the energy transition pathway. The Australian Energy Market Operator's 2022 Integrated System Plan (ISP) sees Australia's electricity use doubling by 2050 as transport, heating, cooking and industrial processes electrify. The biennial ISP report was largely ignored by the Liberal-National coalition government that ruled for nine years until May.

The ISP and Canberra's policy to reaching net zero emissions by 2050 requires a rapid construction of a electricity grid running almost 100pc on renewable energy, which is largely a mixture of solar, wind, battery storage and pumped hydropower. This requires a trebling of Australia's renewable energy share from its current 33pc in the National Electricity Market that covers east Australia, in a far shorter time than the 22 years it has taken to reach the current market after Australia's first renewable energy target was set in 2000 and to meet an increase in demand that is expected to at least double.

Investors presenting at Aces2022 said they are ready to invest in the energy transition and will be able to tap into the A$3.4 trillion ($2.35bn) of funds under management in Australia's mandated pension system. National Australia Bank head of infrastructure, energy and utilities Ally Bonakdar told delegates at Aces2022 that the change in the energy and climate policy settings had provided more confidence to investors to fund the A$130bn required to build new transmission lines to connect the existing power grid to new renewable energy zones set up in each of Australia's six states.

This level of investment is required to provide the infrastructure for Australia to become a large-scale exporter of hydrogen from renewable sources, which will result in a fourfold increase in power consumption in east Australia from existing levels, according to the latest ISP.

Transition waiting on transmission

But even if investors start pouring money into the sector, any new transmission line will only be ready by the end of the decade and it is likely to be the 2030s before any green hydrogen is produced at scale to make any meaningful difference to Australia's GHG emissions profile, Rewiring America founder and chief scientist Saul Griffith told Aces2022.

The chair of the Australian division of US electric vehicle producer Tesla Robyn Denholm told delegates that she expected the number of Tesla cars in Australia to almost double by the end of the year from around 26,500, along with a similar growth trajectory for home battery storage units from the 33,000 that have so far been installed.

Denholm also echoed comments a meeting last week in Sydney of members of the Quadrilateral Security Dialogue, or the so-called Quad group of the US, Japan, India and Australia, where ministers discussed the creation of their own clean energy supply chain without using China.Australia should be a global leader in the battery supply chain given its role as a significant producer of lithium, Denholm said.

Despite the welcoming of the Labor government and their energy and climate policy agenda, it is already facing opposition for not been ambitious enough. The Greens party and independents, elected in traditional conservative seats at the last election for their greater ambitions on tackling climate change, want deeper GHG emissions cuts and guarantees no new coal or gas projects will be developed in Australia.

By Kevin Morrison