Category: Uncategorized

An analysis has just been released that shows the drop in Australia’s emissions due to COVID-19. This is only going to be short lived with economy returning to pre COVID-19 levels in 2021.

Although the official government emission data has not been released that cover July to September 2020, an independent report has modelled the most likely outcomes.

The report shows emissions for the first quarter of the financial year are likely to be 124.2 Mt CO2-e. It is an increase of 1.5 Mt CO2-e compared to the previous quarter, however this would still result in a reduction of 9.1 Mt CO2-e compared to the previous year.

Previously the government have indicated the current reduction in emissions will keep Australia on track to meet its Paris target, but this latest data shows the Paris target will be missed.

Emission projections for Quarter 1 of FY21 for the electricity sector were the lowest on record as far back as 2001. Demand was impacted slightly by COVID-19 but the drop in emission is linked to the growth of renewable energy and the decline of coal fired generation.

As a result of COVID-19, domestic gas prices have dropped resulting in an increase in Gas powered generation, this has resulted in more emissions from this sector.

Interestingly the reduction in emissions of around 6.8 Mt CO2-e from the electricity and agriculture sectors has been offset from emissions from stationary energy, transport, fugitive, industrial and waste sources.

The electricity sector is doing its bit to help reduce climate change, now it is up to the other CO2 producing sectors to do their bit.

Tesla has failed to reach its 2020 goal of delivering 500,000 units for the full year, but not by much. In 2019 Tesla delivered 367,500 vehicles but this year sales have increase 36%. This resulted in the company now mass producing its market favorites to meet the growing worldwide demand for EVs.

The company delivered 180,570 vehicles in the last three months of 2020. This is an increase on the previous record of 139,300 in the third quarter of 2020, to reach 499,800 sales for the year.

2020 proved to be a good year for Tesla with the company joining the SP500 and 5 quarters of growth, resulting in share increase of 743% over the year.

If the worldwide sales trajectory of EVs occurs in Australia, we will need all those charging stations to be funded by taxpayers.

Prior to the outbreak of COVID-19, Tesla was predicting sales to comfortably exceed half a million cars. By October 2020, Tesla were still confident in meeting the target even as the production facility in Northern Spring was shutdown to slow the spread of COVID-19. Apart from the Californian facilities that were temporarily shutdown, its production outside the US and primarily in China remained high. The Shanghai plant has now started producing the Model Y.

As Tesla production increases to match their rocketing share prices, other mainstream vehicle manufacturers are taking note. Large manufacturers like General Motors, Ford and VW are likely to flood the EV market with new models in the next year or two.

In an attempt to stave off competition, Tesla is setting up production lines in Berlin to compete with the European car builders and will build it’s well publicised “Pick up” in Texas.

So as we all return to work from our Christmas road trips, will more of us be driving an EV on our next road trip?

If the worldwide statistics are repeated in Australia, the answer is yes!

All we need is for the charging station networks to be built.

Often in the build up to Christmas and the New Year, politically sensitive topics are quietly released or consulted on. This year it looks like a consultation on the Climate Change Bill featured in late December.

Following the Prime Minister and the Federal Energy Ministers’ announcements that Australia was on track to ‘‘meet and beat’’ its target of 26 to 28 percent carbon reduction based on 2005 levels by 2030, various companies and lobby groups have used the consultation on the Climate Change Bill to voice their opinions.

Behyad Jafari, the Chief Executive Officer of the Electric Vehicle Council of Australia (EVC), a national body representing companies involved in providing, powering and supporting electric vehicles, has raised concerns by making a submission to the Climate Change Bill 2020.

Behyad Jafari said flawed projections on transport emissions could put the emission reduction targets in doubt.

The Morrison Government has not provided incentives to buy electric vehicles and this will jeopardise Australia’s attempts to curb transport emissions to meet international climate targets, according to EVC.

The emissions projection report released in December showed the uptake of electric vehicles is projected to increase from 1% in 2020 to 26% in 2030, however the EVC highlight that the predicted uptake of EVs by the end 2030 is too ambitious under the current energy policy.

The uptake of EVs to 26% would take 6Mt of emissions out of the transport sector.

‘‘The really disappointing thing is we have the government picking and choosing a projection to help them reach a number… It’s sort of reverse-engineering their way to say they are going to meet their climate targets’’ Mr Jafari said.

As previously reported, the electricity sector is on track to reduce its emissions by 60Mt by 2030, but other sectors such as transport and fugitive emissions from extracting mining, are not reducing their emissions but in some cases are increasing emissions through the Safeguard mechanism.

EVC argue the government’s current approach to EVs, i.e. leaving the market to determine whether people drive internal combustion engine cars or EVs would not help boost the uptake of EV’s to achieve the 26% target by the end of 2030.

Currently EVs make up 0.6% of new car purchases in Australia, compared to 3.5% worldwide. This uptake has been fueled by government policy and financial incentives to buy an EV. The UK have imposed tough policies to ban petrol cars by 2030.

As with most sectors, COVID-19 has impacted transport emissions. In 2020 transport emissions dropped by 7Mt because of lower economic activity, lockdowns and people being cautious about travel. Through 2021 and into 2022, transport activity is expected to rebound as restrictions ease. It is expected emissions will peak at 101Mt in 2026, before declining to 100Mt by 2030. The heavy transport sector, including trucks and rail were not significantly affected by COVID-19, this sector is expected to grow over the next decade and be 1Mt higher by 2030.

The EVC also argue the federal government emissions modelling did not take into account the new state taxes which studies indicate could decrease EV uptake by between 25 and 38 percent.

South Australia and Victoria are considering new taxes to help make up for the future shortfall in petrol excise through a charge per kilometre for electric vehicles to be paid by drivers annually.

Another report released at the end of 2020 was the governments Future Fuels Strategy which outlined how the Commonwealth was going to deliver charging stations for EVs. The $71.9 million fund would work with private companies to address public ‘charging black spots’. The government has previously committed $21 million towards EV charging stations along Australia’s national highways through Australian Renewable Energy Agency (ARENA).

The Future Fuels Strategy states ‘‘ensuring consumer confidence in buying new vehicle technologies is a priority for the government.’’ The government has shown interest in commercial fleets, as well as the Commonwealth’s own Comcar network, to move to EVs.

Based on where the funding is going we will have a strong network of charging stations across Australia’s national highways and a small percentage of drivers using the charging stations.

The Clean Energy Regulator (CER) states that the Renewable Energy Target (RET) is there to “reduce emissions of greenhouse gases in the electricity sector and encourage the additional generation of electricity from sustainable and renewable sources.”

However, the question should be raised as to how successful the scheme is and how can this be exploited by companies wanting to increase their “green” credentials, without increasing their reliance on offtake agreements with renewable generators.

The idea behind the scheme is to allow for the purchase of the electricity produced from a renewable source to be traded alongside the green certification that shows you bought that renewable electricity.

Seems simple doesn’t it?

You want renewable power, so you buy from that generation mix to back off the certificates, to show you are supporting generation from that industry.

However, if a company either doesn’t require these certificates or has met its obligations and has surplus certificates, they can sell these on the open market. Thus, giving the illusion they are supporting the growth in renewable / green generation but still purchasing their electricity from the cheapest source possible, which is usually a higher emitting Gas / Coal plant.

So, what does that mean for renewable certificate pricing and growth?

With the duck curve deepening due to increased renewables on the system but vertical integrated suppliers / AEMO continuing to run baseload plant, the number of certificates being produced will decrease due to renewables being curtailed at their highest production times of the day. Thus, reducing the number of certificates being produced.

As such this already saturated market is going to have shortages within the market. But much worse, this can then be gamed with suppliers withholding those certificates which have been produced to create a perceived shortage in the market, only for the real length to return in the final quarter and the price correction to come through.

This week the Clean Energy Council (CEC) released their bi-annual survey of renewables industry leaders. It appears New South Wales (NSW) is the preferred place to develop clean energy projects.

The confidence index shows that NSW has the strongest levels of confidence with a rating of 7.6 out of 10. The next preferred locations across the National Electricity Market (NEM) were Queensland (QLD) and Victoria (VIC).

The survey of leaders was taken prior to the pre-budget announcements in November. The results may be skewed by the announcement of the NSW renewable roadmap. The Tasmanian and Victorian governments have made further commitment after the survey.

Some of the confidence is most likely due to a perceived view that the NSW government is making long term investment decisions. Transmission infrastructure is a key step in providing renewable developers certainty, in getting the output from their project to market. The NSW government released its NSW Transmission Infrastructure Strategy in 2018 and building on this the NSW Electricity Infrastructure Investment Roadmap.

While other regions such as QLD and VIC are receiving negative attention due to existing transmission constraints and recent transmission constraints due to the rapid uptake of renewables, NSW has been seen as identifying and addressing these key challenges.

The grid connection process and technical requirements remain the number one challenge for developers. The technical complexity needed to be overcome during the connection process to alleviate system strength issues have caused ongoing concerns in QLD and VIC.

Industry also found the clean energy industry could be a catalyst for strengthening rural and regional communities where projects are based, providing ongoing job opportunities and boost to local manufacturing businesses.

Overall, the confidence index has dropped to 6.7/10 compared to 7.3 when the CEC surveyed leaders in July. Apart from the grid connection issues the main reason for the drop in confidence was the federal governments interventions in the energy market.

The concerns around grid connection roadblocks are hardly surprising. At the end of a year where the Australian Energy Market Operator (AEMO) has consistently warned of network capacity being reached on parts of the NEM.

The CEC survey found it wasn’t just the known grid issues that were undermining confidence among investors in large-scale solar and wind energy projects, but “unpredictable changes” to grid connection requirements and protracted processes. “Grid-related issues remain by far the biggest challenge in development, construction and investment in general,” said one survey respondent in comments recorded by the CEC. “Not just that it’s hard, that it’s random.”

The investment in grid capacity to address grid congestion and constraints was highlighted as the second biggest business challenge. The $32 billion NSW Electricity Infrastructure Investment Roadmap, may be perceived as addressing the restrictions through investment in interstate transmission lines and the creation of Renewable Energy Zones.

Fifth on the CEC’s list of concerns was the lack of long-term integrated federal energy and climate policy.

The emission projections released by Federal Energy Minister Angus Taylor on Thursday, showed Australia is on track to reduce emissions by 28%.

This is based on 2005 levels by 2030, which is a 2% improvement on its previous commitments. If a further 56 million tonnes of emission are prevented, there will also be no requirement for the government to use its Kyoto credits from the previous Kyoto agreement. Australia has 459 million tonnes of carry-over credit available from the Kyoto agreement that the government could use as part of the latest Paris agreement. The international community believe using the Kyoto credits is not in the spirit of the Paris agreement.

COVID-19 has assisted the government to reduce emissions with:

• more people working from home
• fewer emission for transport including flights and road transport
• the continued uptake of roof-top solar offsetting grid connected fossil fuel generation

Modelling from the Morrison government’s $18 billion technology investment road map, will help reduce emission by 145 million tones over the next decade.

In a recent international conference of leaders, the Prime Minister restated when it comes to net zero emissions, “Australia would like to meet that as quickly as possible, as quickly as it’s able”.

The continued positive outlook for this year is that emissions from the electricity sector will continue to stay low, due to:

• fossil fuel generation being offset by renewables
• continued increase in the take up of roof-top solar

International Energy Agency has forecast, emissions from Liquified Natural Gas (LNG) and coal production are projected to increase to 2030, as Australia’s energy exports are projected to increase.

Are fossil fuels still driving Shell? Will they shift gear to greener fuels? What will the impact of this decision have on the Australian energy industry?

Over the last couple of weeks several executives in Shell’s clean energy arm have resigned. Announcements about the companies strategy for the energy transition have been made. Executives in the clean energy arm have pushed for a more aggressive shift toward clean energy and away from fossil fuels. Senior management prefers to stay with the current path of oil and gas.

Shell Chief Executive Officer, Ben van Beurden has told the media that his “single biggest” regret would be retreating from the oil business prematurely. Shell will be focused on fossil fuels for some time. Shells strategy update is planned for February and it is expected the business will lay out its plans to become a net zero emissions business.

As a sign of clean energy losing favour with Shell, in recent weeks the Head of Solar, Storage and Onshore Wind, the General Manager of the New Energies division and leaders in the energy transition strategy team have left the company. The Vice-President for offshore wind will also leave the business in coming months.

Shells CEO has said investment into lower-carbon businesses such as biofuels and solar power “needs to accelerate”. However, he has also said that oil will continue to be a huge cash generator and the company will expand its gas division. “There is going to be a place for our upstream business for many decades to come.”

BP, Shells main competitor announced in August that it would cut oil and gas production by 40% by 2030 as part of its energy transition plan.

It is likely the senior executives at Shell would prefer to invest into the traditional fossil-fuel divisions that provide better returns than the greener markets. They also believe the company has already moved aggressively in the green space and only needs to communicate better.

What is the impact of this stance in Australia?

Shell Energy Australia has been trying to build its business. Offering the backing of Shell with the innovation to provide innovative energy products including, energy from intermittent renewable energy sources. In November 2019 Shell also acquired ERM power.

ERM was to become Shell’s core power platform in Australia. In early 2020, Shell announced it would build and operate the 120MW Gangarri Solar Project near Wandoan in Queensland.

The Australian Petroleum Production & Exploration Association (APPEA) have commissioned a report by EnergyQuest. It shows overseas evidence that government intervention through domestic gas reservation systems and price setting does not guarantee lower prices.

The report forms part of its defence against the Morrison Government’s proposal for gas reservation on the east coast. The report shows that when governments step into free markets, capital investment dries up for exploration and production. In Thailand, Malaysia, Argentina, Mexico, India and China, under-investment in new supply, led to gas shortages and a need to import gas to provide domestic supply.

The report argues rather than improving gas supply or reducing prices, interventions can impede the very investment needed to bring on new supplies. Far more sustainable solutions are needed to support investment that increases supply.

The Federal Government’s Resources Minister Keith Pitt released a discussion power in October on the design of a gas reservation system which would apply to future developments. This week is the deadline for feedback.

APPEA members include Australia’s largest oil and gas producers including Woodside, Santos, Origin, BHP, Shell, BP and Jemena.

The APPEA report warns against a framework that would discourage investment to develop new fields, particularly in a low-price environment and with an uncertain economic recovery.

The report also found when they analysed both gas exporters and importers, that none of the five developed Organisation for Economic Co-operation and Development (OECD) countries it studied made “material” use of government intervention in gas, while the intervention measures in the 15 developing countries were sometimes counterproductive.

It also argued that regulation does not necessarily produce low gas prices as an International Gas Union (IGU) survey found in countries that have intervention on prices such as Brazil, China, India, Malaysia and Thailand have average wholesale prices that are higher than Australia.

Recent reports from the United Nations and locally by the Climate Council are increasingly putting pressure on the gas industry.  The Climate Council report outlined that greenhouse emissions from the gas industry are expected to be higher than government data suggests and continues its call to switch to 100% renewable electricity.

However, this is not deterring the local gas industry with the industry filling another “missing link” in the national gas network after announcing a gas sales agreement between Blue Energy and Energy Australia (EA). To allow the gas sourced from Blue Energy’s Coal Seam Gas tenements in the Bowen Basin to be delivered to EA will require a pipeline to be built linking the Bowen Basin and Queensland gas hub at Wallumbilla. The Wallumbilla hub then connects into the southern states.

As part of the governments recovery plan for Central Queensland was the investigation into a 500km gas pipeline to connect gas reserves in the Bowen Basin to the east coast domestic market and overseas customers. This agreement is the next step in meeting the Morrison Government’s gas recovery plan.

The Morrison plan was for “reliable, cheaper gas supply that will boost local manufacturing and bring down domestic power bills.”

Manufacturers have been expressing growing frustration over recent months that gas producers have not dropped their long-term contract prices in line with the sharp price falls on the spot market caused by the virus-driven crash in energy demand. Gas on long-term contracts are still being offered at prices of $8-10/GJ where the Wallumbilla hub price is $5-6/GJ.

Industry representatives for gas intensive manufacturers said boosting east-coast gas supply would not solve all the issues in the market but would create greater competition and was a key part of the solution.

Queensland’s Minister for Resources Scott Stewart, recognised the importance, contribution and economic benefits of the oil and gas industry. The APPEA has welcomed the Ministers ongoing support. APPEA Queensland Director Georgy Mayo also said “the oil and gas industry is fully committed to working with the Queensland Government to support the state’s economic recovery and ensure the sector continues to support highly skilled jobs and economic growth, including across regional areas … oil and gas is a mainstay of Queensland’s economy with companies continuing to invest billions of dollars each year in on-going exploration and development … this industry has invested more than $70 billion into Queensland’s economy and the sector makes a significant contribution to the state including through petroleum royalties – which are forecast to increase to more than $2 billion over the forward estimates – to help build schools, roads and hospitals”.

The United Nations (UNs) recently published a report. It outlined the support provided to the energy industry as a result of COVID-19.

The study found the world’s largest economies provided more support to the fossil fuel industry compared to the clean energy sector. The major fossil fuel producers continue the course to increase the extraction of more coal, oil, and gas than in previous years.

At the latest G20 Summit, a group comprising of the 20 largest economies, committed $316 billion in public funds to recovery efforts that support fossil fuel extraction and consumption. These included subsidies for airlines, car manufacturers and fossil-based power consumers.

The renewable sector received $196 billion, funding renewable energy, energy efficiency and low-carbon alternatives.

Some of the money given to the fossil fuel industry went to reducing emissions. Canada put $2.4 billion towards methane emission reduction and the clean-up of orphaned and abandoned oil and gas wells.

The report showed that fossil fuel extraction declined during the pandemic however post pandemic plans are to increase production.

The UNs estimates, show the global fossil fuel production could drop by 7% in 2020, led by coal extraction by 8%, oil by 7% and gas by 3% compared to 2019.

The report also estimates what the UNs call a “production gap”, an indicator created by the report’s authors, that tallies national plans for coal, oil and gas production, and compares that with what can be burned while sticking to the UNs Paris Agreement.

“Five years since the adoption of the Paris Agreement, the world is still far from meeting its climate goals” United Nations Environment Program executive director Inger Andersen said, referring to the global agreement to curb greenhouse gases to keep the average global temperature rises to 1.5 degrees and “well below” 2 degrees, compared with pre-industrial levels.

This shows there is still a disconnect between Paris temperature goals and countries’ plans to extract coal, oil, and gas.

The UNs reports also point towards a potential turning point, as the pandemic has prompted unprecedented government action as China, Japan and South Korea have pledged to reach net-zero emissions.