Europe’s Climate Stride: Unpacking the Carbon Border Adjustment Mechanism

Container Ship on the Ocean

In an ambitious bid to combat climate change, the European Parliament has introduced legislation, including a Carbon Border Adjustment Mechanism (CBAM), aiming to drastically cut greenhouse gas emissions.

With a target of at least a 55% reduction by 2030, this initiative could have far-reaching effects, particularly for large industries whose operations produce considerable carbon emissions.

Central to this package are two key measures. Firstly, it proposes to phase out free allowances under the European Emission Trading Scheme (ETS) by 2026. Secondly, it introduces the Carbon Border Adjustment Mechanism (CBAM), which sets tariffs on goods produced using carbon-intensive processes, particularly those prone to ‘carbon leakage’ — a term for shifting carbon-intensive production stages to countries with more lenient climate policies.

While the CBAM concept is gaining momentum globally, with countries like the UK, Japan, Canada, and the US exploring similar mechanisms, it presents its own challenges. Despite Australia’s ongoing considerations for a CBAM amidst resistance from carbon-intensive sectors, the complexity and cost of compliance, including intricate accounting and potential auditing bottlenecks, could pose significant obstacles to its widespread implementation.

This is a summary article from Edge2020 – read the original article.

The team Edge Utilities are passionate about renewables and sustainability, we are energy brokers with an eye on the planet. We are committed to helping councils and business communities reach their net zero goals through renewable power purchasing agreements (PPAs) and smart portfolio management.
To discuss options and plans for your community contact us at save@edgeutilities.com.au  or call us on 1800 334 336 to discuss. 

Unpacking the Impact of AEMO’s Scheduling Error Post Liddell Shutdown: A Peek into the Energy Market Dynamics

Light Bulb - Electricity

The Australian Energy Market Operator (AEMO) recently confirmed a scheduling error involving the Liddell Power Station, which led to considerable disruptions in the National Electricity Market (NEM) and the futures market on May 1, 2023. The closures of the last three units of the Liddell Power Station towards the end of April should have been integrated into the AEO dispatch system. However, a data mismatch within the system kept these units active, leading to market inconsistencies.

This oversight originated from a disparity within the NEM Dispatch Engine (NEMDE) utilized by AEMO. While a portion of the system correctly acknowledged the shutdown of the Liddell units, another part, responsible for handling constraints, continued to count them at their initial 500MW capacity rather than the actual zero. The resultant 1500MW drop in capacity from the system’s balancing equation led to adjustments in the power distribution across states.

To rectify this situation, AEMO reduced power flow from Victoria to New South Wales and moderated power generation by approximately 173MW. The resulting market response was a surge in electricity prices, pushing the daily average price up by around 30%.

In the aftermath of the Liddell shutdown, the market has been on high alert, responding to the smallest of disturbances. This sensitivity was evident as the futures market reacted positively, experiencing a rise in the Q3 2023 close price across QLD, VIC, and NSW, and a notable increase in SA.

In the following weeks, the power market continued to be volatile due to various outages and unexpected factors such as a tube leak at Bayswater 2, outages at Kogan Creek, Eraring 2, and Tarong, the delay of Callide’s return, and unexpected interest rate hikes. This scenario led traders to act on the price differences between states, resulting in a rise in NEM prices. It is suggested that this sensitivity and rapid reaction of the market is likely to continue for some time. Despite the quick adjustments in the spot market, the futures market appears to be retaining its value.

This is a summary article from Edge2020 – read the original article.

The team Edge Utilities are passionate about renewables and sustainability, we are energy brokers with an eye on the planet. We are committed to helping councils and business communities reach their net zero goals through renewable power purchasing agreements (PPAs) and smart portfolio management.
To discuss options and plans for your community contact us at save@edgeutilities.com.au  or call us on 1800 334 336 to discuss. 

“Rewiring the Nation” project to invest $20 billion

Gala sitting on electrical wire

Australia is undertaking a significant “Rewiring the Nation” project to invest $20 billion to transform its energy sector. Spearheaded by Chris Bowen, the initiative focuses on developing and constructing 10,000 kilometres of transmission lines by 2030. Bowen stresses the importance of obtaining social acceptance for this transition. To that end, New South Wales (NSW) and Victoria (VIC) governments offer landowners affected by the infrastructure projects generous incentives of $200,000 per kilometre. These measures aim to establish strong stakeholder relationships in the regulatory investment test process.

To meet its ambitious renewable energy targets, Australia requires roughly 29GW of large-scale renewables, equivalent to installing about 3.6GW annually. However, the country only added 2.3GW of large-scale solar and wind capacity in the previous year, and progress in developing essential transmission lines has been slow, posing a significant challenge to achieving these goals. AEMO‘s Chief Executive, Daniel Westerman, highlights that the curtailment of solar and wind generation is due to inadequate transmission capacity. Though renewable energy integration is at record highs, with an average of 37% and a peak of 66% in the grid during Q1, the closure of 14GW of coal-powered generation capacity by 2030 surpasses the 8GW of announced renewable projects.

The government plans to address these concerns by introducing a new Capacity scheme and examining potential extensions to existing infrastructure. In addition, as the VIC-NSW West Interconnector’s final drafts and Humelink’s approval are expected, the transition to new transmission systems is underway. There are still questions, however, over whether the government will be able to reach its renewable energy goals in the allotted time. Further updates will provide information on the advancement and difficulties encountered along the road as Australia works to attain its clean energy ambitions. Australia’s energy environment is continually changing.

This is a summary article from Edge2020 – read the original article.

The team Edge Utilities are passionate about renewables and sustainability, we are energy brokers with an eye on the planet. We are committed to helping councils and business communities reach their net zero goals through renewable power purchasing agreements (PPAs) and smart portfolio management.
To discuss options and plans for your community contact us at save@edgeutilities.com.au  or call us on 1800 334 336 to discuss. 

2023 Federal Budget Update: Plans for hydrogen investment fund

Melbourne, Victoria

New details have emerged from Hon Chris Bowen’s MP office on the federal government’s plans for hydrogen investment fund in Australia. The 2023 federal budget has allocated half of a $4bn green energy package to accelerate its “modernised” energy economy and bring 1GW of hydrogen capacity onto the system by 2030. The allocation will be distributed via “production credits” through a competitive process, although details remain scarce.

The new REGO or Renewable Energy Guarantee of Origin scheme will work towards certifying the energy and emissions from hydrogen projects with a budget allocation of $38m. We anticipate that these will be run state by state and through auctions, with SA and VIC leading the charge this year. Unsurprising given the high renewable penetration on those states’ grids.

Limited information has been provided regarding the “Net Zero Authority” who received $83m in the 2023 Federal Budget last Tuesday. It is anticipated that they will be working with local state and territory governments and stakeholders to create a net zero roadmap. The executive agency will be established in July and tasked with supporting those in heavy industry to transition into a low carbon economy, assist with policies around this and assist with investment in the regions. No small feat to say the transition is already well underway.

This is a summary article from Edge2020 – read the original article.

The team Edge Utilities are passionate about renewables and sustainability, we are energy brokers with an eye on the planet. We are committed to helping councils and business communities reach their net zero goals through renewable power purchasing agreements (PPAs) and smart portfolio management.
To discuss options and plans for your community contact us at save@edgeutilities.com.au  or call us on 1800 334 336 to discuss. 

Good news regarding the 2023 budget, but does everything that glimmers gold?

A man and woman at a computer

In contrast to last year’s budget in October 2022 which forecasted a deficit $36.9bn for this financial year Hon Dr Jim Chalmers MP announced a surplus of $4bn in the 2023 Federal Budget, which is the first in 15 years.

Under a tightly controlled budget, the industry could be forgiven for worrying that there may have been unexpected shocks. Especially with the closure of Liddell, Baywater trip and extended outages. However, it was good news! But is everything that glimmers actually gold?

Little was mentioned in the 2023 budget regarding the huge windfalls the treasury gained from the commodity industry and that fact that 20 per cent of the surplus came from increased commodity prices.

Overall, the budget was scarce on Energy for large business, with it mainly focusing on infrastructure for Electric Cars, cost of living relief for residential and small businesses and the creation of a National Net Zero Authority.

There was a mention of the new Hydrogen head start program, giving $2bn to the scheme and more investment in green industry, which was expected. And interestingly a mention of the Capacity Investment Scheme “unlocking over $10 billion of investment in firmed-up renewable energy projects up and down the east coast” which we hope to hear more about.

The Gas and Coal caps were mentioned but there has been no talk of the Coal Cap either being extended or removed when it expires in December 2024.

Undoubtably in the commodity space the biggest losers yesterday were the Gas companies, due to the extension of the Gas cap at $12/GJ into 2025, increased taxes due to the extraordinary market conditions, and the Petroleum Rent Resource Tax.

The budget is expected to be picked apart, but overall, there are no major changes to the status quo, and the government is cautious about throwing around too much cash in the face of slowing economic growth.

This is a summary article from Edge2020 – read the original article.

The team Edge Utilities are passionate about renewables and sustainability, we are energy brokers with an eye on the planet. We are committed to helping councils and business communities reach their net zero goals through renewable power purchasing agreements (PPAs) and smart portfolio management.
To discuss options and plans for your community contact us at save@edgeutilities.com.au  or call us on 1800 334 336 to discuss. 

South West Renewable Energy Zone: A Step Towards a Greener Future in New South Wales

Street lights on road at night

The NSW government recently released their draft declaration for the South West Renewable Energy Zone (SW REZ) access scheme to the public as part of the NSW government’s Electricity Infrastructure Roadmap.

The government is paying particular attention to the number of projects that will be granted transmission in the zone looking to generate investment.

REZs are designed to coordinate the connection of new renewable energy projects to the electricity grid within a specific area. The NSW government hopes these zones will attract investment for renewable energy projects, thereby reducing greenhouse gas emissions and providing clean, sustainable energy.

The South West REZ is anticipated to have a transfer capacity of 2.5 gigawatts (GW) and will connect to the existing electricity network via the Dinawan Substation. Due to its location, this zone will primarily focus on solar and wind energy projects, as offshore wind and extensive hydrogen investment opportunities are not as viable.

Several upgrades to the electricity network are planned to support these new projects, including the Project Energy Connect (PEC) interconnector, the HumeLink, and the proposed Victoria-NSW interconnector (VNI West). These enhancements aim to entice investors to fund renewable energy projects in the South West REZ.

To participate in this REZ, companies must meet specific requirements and adhere to the government’s guidelines. They need to demonstrate project feasibility, compliance with certain standards, and the ability to manage potential disruptions to the electricity system. Upon meeting these criteria, they will be granted access to the REZ and the benefits it offers, such as a stable and well-funded electricity network.

Public consultation for the South West Renewable Energy Zone (SW REZ) access scheme will conclude on May 15th, marking another step towards a greener future in New South Wales.

This is a summary article from Edge2020 – read the original article.

The team Edge Utilities are passionate about renewables and sustainability, we are energy brokers with an eye on the planet. We are committed to helping councils and business communities reach their net zero goals through renewable power purchasing agreements (PPAs) and smart portfolio management.
To discuss options and plans for your community contact us at save@edgeutilities.com.au  or call us on 1800 334 336 to discuss. 

Gas Cap Extension: What Small and Medium Business Owners Need to Know

Gas fireplace

The Climate Change and Energy Minister Chris Bowen is considering a gas cap extension to the $12/GJ cap on wholesale gas prices. This cap, set to expire at the end of the year, affects both energy producers and users. If extended, it could provide more certainty for businesses that rely on gas for their operations.

Energy producers are worried about how the cap extension might affect long-term pricing, as it may include a “reasonable pricing” clause. This means gas companies can only charge a price based on production costs plus a reasonable margin, without considering their capital investments during exploration and development. Gas buyers can challenge contract prices through a formal dispute process.

Gas producers are waiting for the government’s decision on the cap extension before finalizing new gas supply contracts for 2024. The federal government is also expected to introduce a Petroleum Rent Tax, potentially increasing tax revenues by $100 billion. This tax may cause concerns among gas producers, leading to fluctuations in energy prices for businesses.

The new regulations may allow for exemptions, especially for new projects that increase domestic gas supply. The Australian Petroleum Production & Exploration Association (APPEA) emphasizes the importance of gas in achieving a cleaner energy future, urging the government to create settings that encourage investment in new supply and put downward pressure on prices.

Australia must keep exploiting its gas resources to meet its net zero emission goals. In the long run, this should benefit the gas and electricity industry’s producers and end customers while assuring their security.

This is a summary article from Edge2020 – read the original article.

The team Edge Utilities are passionate about renewables and sustainability, we are energy brokers with an eye on the planet. We are committed to helping councils and business communities reach their net zero goals through renewable power purchasing agreements (PPAs) and smart portfolio management.
To discuss options and plans for your community contact us at save@edgeutilities.com.au  or call us on 1800 334 336 to discuss. 

AEMO’s MLF assessment reveals solar and wind farms as big losers

Solar Panel

The Australian Energy Market Operator (AEMO) recently released its final Marginal Loss Factors (MLFs) assessment, highlighting solar and wind farms as the big losers. The MLFs determine how much energy is lost between the generator and the region reference node in each state, and the changes in the new MLF forecasts were primarily driven by changes in availability due to the closure of Liddell, revised return to service dates for Callide C, revised demand forecasts, and the increased penetration of solar and wind generation into the grid.

The lower MLFs impact the amount of revenue generators can make, and many of the intermittent generators have been impacted by changes to the grid and the closure of thermal generators. The location of renewable generation is becoming increasingly important for the success of a project, with unfavourable MLFs potentially reducing the revenue for generators and impacting the renewable energy available to the market.

While a 3% drop in solar farm generation may not seem significant, some solar farms in the New England region have experienced drops that are greater than this. These changes can affect the success of a project and reduce the renewable energy available to the market, potentially leaving end-users with less renewable energy than they signed up for. The final MLF assessment from AEMO underscores the importance of carefully considering the location of renewable energy projects for successful implementation and revenue generation.

This is a summary article from Edge2020 – read the original article.

The team Edge Utilities are passionate about renewables and sustainability, we are energy brokers with an eye on the planet. We are committed to helping councils and business communities reach their net zero goals through renewable power purchasing agreements (PPAs) and smart portfolio management.
To discuss options and plans for your community contact us at save@edgeutilities.com.au  or call us on 1800 334 336 to discuss. 

Intergovernmental Panel on Climate Change Warning

plant in landscape suffering drought

The catastrophic impact caused by rising greenhouse gases

The Intergovernmental Panel on Climate Change (IPCC)’s 6th Assessment Report (AR6) has shocked the scientific world and beyond. More than 250 climate scientists worked on this eight-year assessment, which drew an alarming conclusion about the catastrophic impact caused by rising greenhouse gases.

The report highlights that we are already experiencing the effects of 1.1 degrees Celsius warming, including summer arctic ice coverage, ocean acidification, and rising carbon dioxide levels. Moreover, it discusses the irreversible effects that can occur at as low as a 1.5-degree overshoot, including species extinction and loss of life.

The UN’s Secretary-General, Antonio Guterres, has urged nations to abandon the 2050 net-zero target for stronger 2040 packs while calling for developed nations to phase out coal by 2030 and block new oil or gas extraction. This, he believes, could hold us at the 1.5-degree warming cap. The upcoming COP28 in the UAE in November and December will be a true test of the global commitment to tackling climate change. However, with the chair being the CEO of the 12th largest oil business, there are concerns about softening approaches.

The AR6 shows that we are close to the point of no return and that the impacts of climate change require immediate action.

This is a summary article from Edge2020 – read the original article.

The team Edge Utilities are passionate about renewables and sustainability, we are energy brokers with an eye on the planet. We are committed to helping councils and business communities reach their net zero goals through renewable power purchasing agreements (PPAs) and smart portfolio management.
To discuss options and plans for your community contact us at save@edgeutilities.com.au  or call us on 1800 334 336 to discuss. 

 

Sun Cable and the Battle of the Billionaires

Singapore lit up at night

Previously, Edge has discussed the electricity markets’ move away from coal and gas to renewable energy and firming technologies. Last week it was announced that the Australia-Asia PowerLink project (AAPP) better known as SunCable had gone into voluntary administration.

SunCable was planned to be the world’s biggest solar and battery storage project and was backed by some of the largest renewable energy developers in Australia, namely Mike Cannon-Brookes from Grok Ventures and Squadron Energy’s Andrew Forrest.

It appears from the outside the decision to wind up the company was due to a lack of alignment of the companies’ objectives by the shareholders but is there more to the story. SunCable was to provide renewable energy generated in Australia and transport it via a 4,200km underseas cable to Singapore. Powering the project would be a huge solar farm near Elliott in the Northern Territory with the first part of the project planned to start construction next year. The 20GW Elliott solar farm would be firmed with a 42GWh battery.

Following the announcement of SunCable going into administration the federal government remains positive on the future prospect of SunCable. Are two billionaires too much for a business like this? Will one of them retain control of the company?

Feedback from Minister Bowen suggests following discussions with senior individuals at SunCable, there are no plans to stop moving forward with the project.

Minister Bowen said “It’s a change of approach and corporate structure, but of course in that regard that is entirely a matter for them”. Following a restructuring process, it looks like AAPP will still go ahead but most likely led by only one billionaire.

If you would like a strategy to ensure your company procures energy to support sustainability and growth in renewables  please reach out to discuss your options.  To save on electricity spend, you can also join our Edge Utilities Power Portfolio, read more: https://edgeutilities.com.au/edge-utilities-power-portfolio/ or call us on: 1800 334 336 to discuss.