national Policy update
Energy briefing update - March 2022
The last quarter of 2021 saw a plethora of global commitments at the United Nations Climate Change Conference, followed by number of interesting domestic policy updates to start 2022:
Eraring closure speeds NSW transition
The transition away from coal-fired energy generation took centre stage in mid-February with Origin Energy’s announcement that they would close the Eraring Power Station in 2025. The Eraring Power Station, situated south of Newcastle, is the largest of the 16 remaining coal-fired power stations in the east-coast National Electricity Market (NEM), and produces around 20 per cent of NSW’s electricity needs. It follows other announcements by AGL that they will be accelerating the closure of their coal-fired power stations in Victoria and NSW.
Responding to the news, the NSW Government announced the commissioning of the 700MW/1400MWh ‘Waratah Super Battery’. According to the NSW Government, the battery will be the largest network standby battery in the southern hemisphere. They noted that the battery, alongside transmission upgrades, ensures the Energy Security Target will be met at the time of the Eraring closure. The NSW Government also announced a clean energy jobs package that aims to offset the nearly 500 Eraring job losses with around 3700 clean energy jobs.
The Australian Energy Market Operator’s draft 2022 Integrated System Plan anticipates much faster retirement of the existing coal fleet than previously expected, with most gone by 2035 and all by 2042. The Eraring announcement is slightly faster than the ISP, but broadly consistent.
Renewables still cheapest form of electricity generation
The latest annual draft of AEMO CSIRO’s joint GenCost report was released for comment in December and has now closed. The report looks at current and projected electricity generation and storage technology costs to allow for more accurate modelling and future investment decisions to be made.
While a final report will be released in the second quarter of 2022, the headline numbers suggest that on a levelised cost of electricity (LCOE) basis – a generator’s lifetime costs averaged over its lifetime output – wind and solar PV still outstrip any other new build technologies. According to the draft report, a key difference from previous reports is the “greater projected cost reductions in wind power leading to an increased preference to combine wind generation and transmission expenditure, with reduced reliance on solar PV and storage to balance energy demand.”
Note that LCOE is a metric best used to compare resources that do a similar job, such as providing bulk energy.
Government banks on green
Australia’s cleantech start-ups focussing on a net zero future will soon be able to access more investment capital thanks to the Clean Energy Finance Corporation’s (CEFC) new specialist fund manager, Virescent Ventures. The new ‘green bank’ is aiming at a total initial capital raise of $200 million, with the CEFC a major stakeholder alongside institutional and strategic investors.
The new venture is expected to increase the amount of investment money available to the burgeoning low-emissions market, and builds on the almost $150 million of investments made by the CEFC’s Innovation Fund over almost a decade.
“We are seeing enormous market interest in the commercialisation of innovative technologies and business models which can accelerate the transition to net zero emissions,” said CEFC CEO Ian Learmonth, who will also join the Virescent Ventures board. “The success of these companies can benefit our economy and our environment, while enabling Australian innovators to play a leading role in the sustainable economy of the future.”
REZs dazzle in NSW
Two NSW renewable energy zones (REZs), the Hunter and South-West REZs, have received a combined $132 billion of registered investment interest for zero-emissions projects. The interest far outstrips the planned capacity of each zone, a strong marker of capital’s readiness to flow into well-planned energy transition opportunities.
The expressions of interest for the Hunter REZ saw 80 projects registered, translating to $100 billion worth of projects with a total capacity of 40GW, including large-scale solar and onshore and offshore wind farms. The South-West REZ had 49 projects with a total registered investment of $32 billion. The 34GW of generation and storage projects represented 13 times the stated capacity for the South-West REZ.
International climate club gains traction at World Economic Forum
The new German Chancellor, Olaf Scholz, has barely swung his feet under the desk but he’s already marking out territory that has implications for Australia. At the virtual World Economic Forum meeting on 19 January, he set out a plan for an international climate club. Scholz plans to use Germany’s presidency of the G7 to “turn that group into the nucleus of an international climate club. What we want to achieve is a paradigm shift in international climate policy: we will no longer wait for the slowest and least ambitious.”
With carbon border tariffs already being worked up by the EU, Scholz noted that proposed joint minimum standards for climate action will become a competitive advantage rather than a cost factor. Scholz also called for members of the proposed club to commit to a “1.5 degree target and to climate neutrality by 2050, at the latest.”
With Australia’s current target falling short of that, this proposal could impact Australia’s terms of trade and investment desirability.
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