1 00:00:00,320 --> 00:00:02,960 Speaker 1: This is Dana Perkins and you're listening to Switched on 2 00:00:03,240 --> 00:00:06,720 Speaker 1: the BNAF podcast. Each week we bring on a different 3 00:00:06,840 --> 00:00:09,000 Speaker 1: B and EF analyst to the show and we talk 4 00:00:09,039 --> 00:00:11,479 Speaker 1: to them about a piece of research that they've written. 5 00:00:11,720 --> 00:00:13,800 Speaker 1: And really, if you're anything like me, I hope this 6 00:00:13,880 --> 00:00:16,360 Speaker 1: research helps you think about the things that might be 7 00:00:16,520 --> 00:00:19,000 Speaker 1: in your peripheral vision, the stuff that you're not working 8 00:00:19,040 --> 00:00:21,079 Speaker 1: on day to day, but to stay up to date 9 00:00:21,160 --> 00:00:23,440 Speaker 1: on all of the different things that are happening in 10 00:00:23,480 --> 00:00:26,360 Speaker 1: the transition now. It can be hard sometimes given that 11 00:00:26,400 --> 00:00:29,640 Speaker 1: there's so much going on within different sectors and different 12 00:00:29,680 --> 00:00:31,560 Speaker 1: parts of the world. And today we're going to dig 13 00:00:31,560 --> 00:00:34,040 Speaker 1: a little bit deeper on a specific country. We're going 14 00:00:34,120 --> 00:00:37,120 Speaker 1: to talk about Australia. The reason I'm really excited to 15 00:00:37,120 --> 00:00:40,400 Speaker 1: talk about Australia is because oftentimes people think about it 16 00:00:40,440 --> 00:00:43,280 Speaker 1: as a sandbox due to the size of the country 17 00:00:43,320 --> 00:00:46,120 Speaker 1: and the nimbleness of the government. When they do something, 18 00:00:46,400 --> 00:00:48,400 Speaker 1: they can move a little bit faster and the rest 19 00:00:48,440 --> 00:00:50,800 Speaker 1: of the world can really learn from it. We also 20 00:00:50,840 --> 00:00:52,800 Speaker 1: go to think about Australia and the role that they 21 00:00:52,800 --> 00:00:57,200 Speaker 1: have historically played as a hydrocarbon exporting nation for things 22 00:00:57,240 --> 00:01:01,360 Speaker 1: like coal, and increasingly now natural gas. But let's really 23 00:01:01,400 --> 00:01:04,720 Speaker 1: think about the role that Australia can play as that sandbox, 24 00:01:04,800 --> 00:01:07,880 Speaker 1: and let's think about the energy transition. They've announced that 25 00:01:07,920 --> 00:01:11,520 Speaker 1: they intend to double renewable energy capacity by twenty thirty 26 00:01:11,680 --> 00:01:14,759 Speaker 1: and the federal government has really underlined this aim by 27 00:01:14,760 --> 00:01:17,560 Speaker 1: handing the clean energy sector the equivalent of one point 28 00:01:17,640 --> 00:01:20,880 Speaker 1: two billion US dollars as a part of their federal budget. 29 00:01:20,920 --> 00:01:22,840 Speaker 1: One of the things we're going to drill into in 30 00:01:23,080 --> 00:01:26,480 Speaker 1: more detail will be solar because Australia's really been an 31 00:01:26,560 --> 00:01:30,240 Speaker 1: adopter of this, both at the utility and residential level, 32 00:01:30,560 --> 00:01:33,400 Speaker 1: and that has actually led to some negative power prices. 33 00:01:33,600 --> 00:01:35,880 Speaker 1: So what does that do to the economics? Now. To 34 00:01:35,920 --> 00:01:38,920 Speaker 1: tell us more about Australia and what's happening there is 35 00:01:38,959 --> 00:01:42,160 Speaker 1: Bonif's head of Australia Research, Leonard Kwang. He's based out 36 00:01:42,160 --> 00:01:44,680 Speaker 1: of our Sydney office and certainly knows a thing or 37 00:01:44,680 --> 00:01:47,200 Speaker 1: two as he lives and breathes this. He's going to 38 00:01:47,280 --> 00:01:49,640 Speaker 1: use a recent report that he wrote, which is about 39 00:01:49,640 --> 00:01:51,760 Speaker 1: the first half of twenty twenty four and what is 40 00:01:51,800 --> 00:01:54,520 Speaker 1: called our Australia Market Outlook. If you want to take 41 00:01:54,560 --> 00:01:57,240 Speaker 1: a closer look at that market outlook and read the report. 42 00:01:57,320 --> 00:01:59,600 Speaker 1: BNEF subscribers are going to be able to find it 43 00:01:59,680 --> 00:02:02,440 Speaker 1: at bu go on the Bloomberg terminal or at BNF 44 00:02:02,520 --> 00:02:05,040 Speaker 1: dot com. Make sure to subscribe to switched on wherever 45 00:02:05,120 --> 00:02:07,160 Speaker 1: you get your podcasts, and give us a review to 46 00:02:07,200 --> 00:02:10,000 Speaker 1: help other people discover the show. But right now, let's 47 00:02:10,040 --> 00:02:22,959 Speaker 1: talk to Lenny about our outlook for Australia. Lenny, great 48 00:02:23,000 --> 00:02:25,080 Speaker 1: to have you here today and thanks for joining the show. 49 00:02:25,480 --> 00:02:28,880 Speaker 2: Dang, long time listener, first time call up, overall, big 50 00:02:28,919 --> 00:02:30,680 Speaker 2: fan of your work and it's a pleasure to be here. 51 00:02:31,200 --> 00:02:34,799 Speaker 1: And you're joining us from our Sydney office and we're 52 00:02:34,840 --> 00:02:38,520 Speaker 1: here to talk about Australia and what is really a 53 00:02:38,720 --> 00:02:41,880 Speaker 1: true energy transition story. I mean one where a country 54 00:02:41,880 --> 00:02:44,800 Speaker 1: that has a lot of natural resources and is largely 55 00:02:45,240 --> 00:02:48,480 Speaker 1: known as one of the world's exporters of things like 56 00:02:48,560 --> 00:02:51,160 Speaker 1: coal is going through the transition as other parts of 57 00:02:51,200 --> 00:02:54,120 Speaker 1: the world are, but actually in some respects at a 58 00:02:54,160 --> 00:02:56,639 Speaker 1: faster pace depending upon the industry that we're looking at. 59 00:02:56,680 --> 00:02:58,320 Speaker 1: So we're going to get into that today and talk 60 00:02:58,320 --> 00:03:01,280 Speaker 1: about what that transition looks like in Australia. But can 61 00:03:01,360 --> 00:03:04,480 Speaker 1: you set the baseline how should the world be thinking 62 00:03:04,520 --> 00:03:08,520 Speaker 1: about Australia and well, essentially in their place where they're 63 00:03:08,560 --> 00:03:09,800 Speaker 1: at in this transition. 64 00:03:10,200 --> 00:03:13,040 Speaker 2: Absolutely so, I think it's important to give context to 65 00:03:13,120 --> 00:03:15,679 Speaker 2: listeners who might be familiar with the idea of Australia 66 00:03:15,680 --> 00:03:18,160 Speaker 2: but not with the country itself. We recognize we're a 67 00:03:18,200 --> 00:03:20,880 Speaker 2: long way away from the rest of the world now. 68 00:03:20,919 --> 00:03:24,840 Speaker 2: By some of the numbers, Australia has a relatively wealthy population, 69 00:03:25,120 --> 00:03:28,400 Speaker 2: but an incredibly low number of people compared to its 70 00:03:28,480 --> 00:03:31,720 Speaker 2: land mass. To give some relative figures, it is thirty 71 00:03:31,760 --> 00:03:34,960 Speaker 2: seven times larger than the United Kingdom, but it has 72 00:03:34,960 --> 00:03:38,520 Speaker 2: only about forty percent of its population. For our US listeners, 73 00:03:38,560 --> 00:03:40,840 Speaker 2: Australia is about eighty percent of the land masks of 74 00:03:40,880 --> 00:03:44,200 Speaker 2: the US, but only the population of Texas. So it 75 00:03:44,240 --> 00:03:47,440 Speaker 2: has a lot of land that's sparsely populated, but it 76 00:03:47,480 --> 00:03:49,480 Speaker 2: does have a lot of stuff in it. It has 77 00:03:49,640 --> 00:03:51,600 Speaker 2: a lot of animals that can kill you, which I 78 00:03:51,640 --> 00:03:53,560 Speaker 2: think a lot of people think about when they think 79 00:03:53,560 --> 00:03:56,520 Speaker 2: of Australia, unless like the late Great Stevia, when there's 80 00:03:56,600 --> 00:03:58,880 Speaker 2: not much you can do with dead animals to drive 81 00:03:59,040 --> 00:04:00,720 Speaker 2: economic growth in a country. 82 00:04:00,840 --> 00:04:03,160 Speaker 3: It also has a lot of very high quality. 83 00:04:02,840 --> 00:04:05,560 Speaker 2: Wind and solar resources some of the best in the world, 84 00:04:05,600 --> 00:04:07,320 Speaker 2: and as a result it can produce some of the 85 00:04:07,440 --> 00:04:10,960 Speaker 2: least cost wind and solar generation. And while that is 86 00:04:11,280 --> 00:04:13,960 Speaker 2: likely to play a role in its economic prosperity in 87 00:04:14,040 --> 00:04:18,159 Speaker 2: the years ahead, today it has very little role in 88 00:04:18,200 --> 00:04:21,039 Speaker 2: the domestic energy system and the economic story. But what 89 00:04:21,120 --> 00:04:26,719 Speaker 2: Australia also has is an enormous bounty of natural resources. Really, 90 00:04:26,800 --> 00:04:29,719 Speaker 2: any mineral or resource you can think of, Australia probably 91 00:04:29,760 --> 00:04:33,279 Speaker 2: has somewhere in its borders. It has precious and rare 92 00:04:33,279 --> 00:04:36,799 Speaker 2: earth metals, has a large amount of industrial metals exports 93 00:04:37,160 --> 00:04:40,039 Speaker 2: copper and bulk side. It's the world's largest exporter of 94 00:04:40,080 --> 00:04:42,560 Speaker 2: iron or It also has an enormous amount of battery 95 00:04:42,600 --> 00:04:47,160 Speaker 2: and transition metals, an enormous amount of hydrocarbons like gas 96 00:04:47,440 --> 00:04:49,719 Speaker 2: where it's vye with the US and guitar to be 97 00:04:49,760 --> 00:04:52,839 Speaker 2: the world's largest exporter of LNG, and an enormous amount 98 00:04:52,880 --> 00:04:53,360 Speaker 2: of coal. 99 00:04:53,440 --> 00:04:56,080 Speaker 3: And it is the world's largest exporter of coal. 100 00:04:56,200 --> 00:04:59,200 Speaker 2: Now, if you put some numbers about production to exports, 101 00:04:59,360 --> 00:05:02,800 Speaker 2: about ninety one percent of all the black coal produced 102 00:05:02,839 --> 00:05:05,120 Speaker 2: in Australia were sent off shore, and about the same 103 00:05:05,120 --> 00:05:07,880 Speaker 2: time about seventy five percent of its natural gas extraction 104 00:05:08,120 --> 00:05:11,720 Speaker 2: was destined Velini exports, and this was to countries like China, Japan, 105 00:05:12,080 --> 00:05:13,960 Speaker 2: South Korea and other countries. 106 00:05:13,560 --> 00:05:15,839 Speaker 3: Across the Asia Pacific region as well. 107 00:05:16,000 --> 00:05:19,880 Speaker 2: And so as you might expect, these export industries, these extractions, 108 00:05:19,920 --> 00:05:23,400 Speaker 2: these mining industries have played a very significant role in 109 00:05:23,440 --> 00:05:26,640 Speaker 2: the country's economic story and have formed a very important 110 00:05:26,680 --> 00:05:29,760 Speaker 2: part of the Australian sense of national identity and of 111 00:05:29,800 --> 00:05:33,520 Speaker 2: its national politics. And of all these extraction industries, historically, 112 00:05:33,680 --> 00:05:36,200 Speaker 2: at least in many parts of the country, coal was keen. 113 00:05:36,480 --> 00:05:39,440 Speaker 2: To give you a particularly shining example of this, former 114 00:05:39,440 --> 00:05:42,640 Speaker 2: Prime Minister Scott Morrison once got up in Federal Parliament 115 00:05:42,760 --> 00:05:45,000 Speaker 2: holding a lump of coal in an attempt to scare 116 00:05:45,080 --> 00:05:47,040 Speaker 2: the opposition. Now this sounds like it might be an 117 00:05:47,040 --> 00:05:49,640 Speaker 2: anecdote for many decades ago, but this happened just back 118 00:05:49,760 --> 00:05:53,480 Speaker 2: in twenty and seventeen, and this is a real example 119 00:05:53,640 --> 00:05:56,880 Speaker 2: of the dynamics, the complicated politics and the relationships with 120 00:05:56,960 --> 00:06:00,479 Speaker 2: coal and extraction industries that Australia has faced. Because of 121 00:06:00,480 --> 00:06:03,359 Speaker 2: these challenges, for much of the past twenty years, Australia 122 00:06:03,400 --> 00:06:09,000 Speaker 2: has struggled with its decarbonization trajectory, often flip flopping on policies, ambitions, 123 00:06:09,040 --> 00:06:11,440 Speaker 2: and targets. Being famously the first country in the world 124 00:06:11,480 --> 00:06:14,479 Speaker 2: to both introduce and remove a price on carbon, it 125 00:06:14,520 --> 00:06:17,839 Speaker 2: has increased and decreased and removed and increased again renewable 126 00:06:17,960 --> 00:06:21,600 Speaker 2: energy targets and aspirations. And while over recent years it 127 00:06:21,760 --> 00:06:25,480 Speaker 2: feels like Australia is turning a corner on its decarbonization 128 00:06:25,800 --> 00:06:29,640 Speaker 2: plans and becoming more paras aligned to the years ahead, 129 00:06:29,800 --> 00:06:33,200 Speaker 2: it's expected that extraction industries and things like coal and 130 00:06:33,279 --> 00:06:35,800 Speaker 2: gas will continue to play an important role in the 131 00:06:35,839 --> 00:06:38,200 Speaker 2: economy of Australia for the foreseeable future. 132 00:06:38,600 --> 00:06:43,279 Speaker 1: That was an incredible amount of information around numerous industries 133 00:06:43,320 --> 00:06:45,520 Speaker 1: that Australia is in and why don't we start with 134 00:06:46,040 --> 00:06:48,680 Speaker 1: the exporting part of the market, because really, when we 135 00:06:48,760 --> 00:06:52,320 Speaker 1: talk about hydrocarbons, that is the starting point for a 136 00:06:52,400 --> 00:06:55,200 Speaker 1: transition and the baseline with which we can really have 137 00:06:55,279 --> 00:06:57,760 Speaker 1: that discussion about what is changing. And one of the 138 00:06:57,800 --> 00:07:00,400 Speaker 1: things that Australia has actually had is headline in the 139 00:07:00,400 --> 00:07:03,039 Speaker 1: news more recently has been around really a commitment to 140 00:07:03,120 --> 00:07:06,279 Speaker 1: natural gas in saying that they intend to continue with 141 00:07:06,400 --> 00:07:08,839 Speaker 1: natural gas through twenty fifty and I'd really like to 142 00:07:08,839 --> 00:07:12,360 Speaker 1: better understand from your perspective where you think that really 143 00:07:12,400 --> 00:07:16,280 Speaker 1: originates from, given that the transition is certainly happening. Is 144 00:07:16,280 --> 00:07:19,400 Speaker 1: it more around the export revenues or the role that 145 00:07:19,600 --> 00:07:22,240 Speaker 1: natural gas can play is an important source of flexible 146 00:07:22,240 --> 00:07:24,760 Speaker 1: capacity for knowables or is there something else that maybe 147 00:07:24,800 --> 00:07:28,040 Speaker 1: I'm not understanding regarding the commitment to natural gas in 148 00:07:28,080 --> 00:07:28,880 Speaker 1: the long term. 149 00:07:29,400 --> 00:07:30,440 Speaker 3: It's a great question. 150 00:07:30,760 --> 00:07:33,160 Speaker 2: And let me give you some context of natural gas 151 00:07:33,240 --> 00:07:36,040 Speaker 2: as an extraction and export industry for Australia to put 152 00:07:36,080 --> 00:07:39,520 Speaker 2: it in some context. Now, amongst this stable of export 153 00:07:39,560 --> 00:07:43,200 Speaker 2: commodities that Australia has through mining an extraction, natural gas 154 00:07:43,280 --> 00:07:45,600 Speaker 2: is one of the most recent additions that has really 155 00:07:45,720 --> 00:07:48,679 Speaker 2: just scaled up over the past decade really from about 156 00:07:48,680 --> 00:07:51,800 Speaker 2: twenty and sixteen, so really quickly, Australia went from a 157 00:07:51,880 --> 00:07:55,280 Speaker 2: very closed off self supplying market for all its gas demand, 158 00:07:55,480 --> 00:07:58,960 Speaker 2: began to rapidly scale up its extraction, particularly of coal 159 00:07:59,000 --> 00:08:02,920 Speaker 2: seam gas throughout many different states Queensland, Western Australia and 160 00:08:02,920 --> 00:08:05,560 Speaker 2: now the Northern Territory as well, to become a global 161 00:08:05,600 --> 00:08:08,960 Speaker 2: player in this export commodity. And due to that rapid 162 00:08:09,120 --> 00:08:12,600 Speaker 2: change of pace, Australia has struggled to keep up with 163 00:08:12,640 --> 00:08:16,240 Speaker 2: its longer term vision around what natural gas and other 164 00:08:16,320 --> 00:08:20,680 Speaker 2: hydrocarbons might mean for its economic story, either domestically or 165 00:08:20,680 --> 00:08:24,440 Speaker 2: from an export's perspective, and this becomes increasingly important when 166 00:08:24,440 --> 00:08:28,239 Speaker 2: we've established valuable trading relationships with other nations both around 167 00:08:28,280 --> 00:08:31,640 Speaker 2: the Asia Pacific region from China, Japan, South Korea, Taiwan 168 00:08:31,720 --> 00:08:34,040 Speaker 2: and many others, as well as our visions of what 169 00:08:34,120 --> 00:08:37,560 Speaker 2: Australia might transition to over the longer term in terms 170 00:08:37,559 --> 00:08:39,880 Speaker 2: of exports as the world transitions to. 171 00:08:39,840 --> 00:08:41,840 Speaker 3: A lower carbon future as well. 172 00:08:42,000 --> 00:08:44,720 Speaker 2: And so I think right now, particularly within political circles 173 00:08:44,760 --> 00:08:47,480 Speaker 2: across the country, they're not at the time they're looking 174 00:08:47,520 --> 00:08:48,240 Speaker 2: to make enemies. 175 00:08:48,280 --> 00:08:51,320 Speaker 3: They're not willing or looking to rule anything out. Even 176 00:08:51,360 --> 00:08:51,880 Speaker 3: if we look. 177 00:08:51,800 --> 00:08:56,040 Speaker 2: At commodities like thermal coal use for power generation far 178 00:08:56,080 --> 00:08:58,680 Speaker 2: more carbon intensive in terms of its scope three impact 179 00:08:58,760 --> 00:09:01,520 Speaker 2: on the world, we're sending it primarily to countries who 180 00:09:01,559 --> 00:09:04,680 Speaker 2: have targeted low or no carbon ambitions of their own 181 00:09:04,760 --> 00:09:07,520 Speaker 2: by twenty fifty or by twenty sixty, and that tells 182 00:09:07,559 --> 00:09:11,160 Speaker 2: Australia its investment and export communities that we are at 183 00:09:11,200 --> 00:09:14,080 Speaker 2: some point going to have to transition away from the 184 00:09:14,120 --> 00:09:17,120 Speaker 2: status quo. There is some hope that we might find 185 00:09:17,240 --> 00:09:22,400 Speaker 2: other economies to export these hydrocarbons to, particularly emerging economies. 186 00:09:22,480 --> 00:09:26,440 Speaker 2: They're rapidly growing appetite for energy, although that comes hard 187 00:09:26,559 --> 00:09:29,120 Speaker 2: up against the need for the world to decrease its 188 00:09:29,120 --> 00:09:32,320 Speaker 2: carbon emissions in line with the net zero future, to 189 00:09:32,360 --> 00:09:35,040 Speaker 2: stay in a well below two degrees scenario. And so 190 00:09:35,160 --> 00:09:38,480 Speaker 2: the government, who is in charge of directing policy, signaling 191 00:09:38,520 --> 00:09:42,679 Speaker 2: to investors, signaling to industry what the future might hold 192 00:09:43,000 --> 00:09:45,720 Speaker 2: is as of yet really welcoming all comers, and so 193 00:09:45,880 --> 00:09:48,560 Speaker 2: we might hold views that the future role of gas 194 00:09:48,720 --> 00:09:52,360 Speaker 2: isn't quite as rosy as the Australian government is currently suggesting, 195 00:09:52,520 --> 00:09:55,400 Speaker 2: and some of the newer industries it's looking at, like 196 00:09:55,520 --> 00:10:00,360 Speaker 2: transition metals, potentially hydrogen and hydrogen drived clean products play 197 00:10:00,480 --> 00:10:04,160 Speaker 2: a more important role, although this transition from traditional to 198 00:10:04,320 --> 00:10:07,000 Speaker 2: new has to be managed and might not be as 199 00:10:07,040 --> 00:10:08,480 Speaker 2: smooth as the government is hoping. 200 00:10:08,800 --> 00:10:11,520 Speaker 1: So there's certainly a pivot there for Australia in terms 201 00:10:11,520 --> 00:10:14,040 Speaker 1: of the fact that there just really are an abundance 202 00:10:14,120 --> 00:10:17,240 Speaker 1: of natural resources to call upon. So you're even saying, 203 00:10:17,240 --> 00:10:19,839 Speaker 1: you know, natural gas has a future, but it may 204 00:10:19,840 --> 00:10:22,280 Speaker 1: not be quite as long as predicted at this point 205 00:10:22,320 --> 00:10:25,120 Speaker 1: in time. But then there are these transition metals that 206 00:10:25,160 --> 00:10:27,280 Speaker 1: we see or battery metals that we see as a 207 00:10:27,320 --> 00:10:30,280 Speaker 1: part of you know, the electric vehicle and stationary storage 208 00:10:30,280 --> 00:10:32,600 Speaker 1: supply chain. But then how about the thing that they 209 00:10:32,600 --> 00:10:36,200 Speaker 1: are known for being the largest exporter of coal. Now 210 00:10:36,240 --> 00:10:39,160 Speaker 1: that is actually huge because you see coal retirements happening 211 00:10:39,280 --> 00:10:41,800 Speaker 1: in developed countries all over the world, saying that we 212 00:10:41,840 --> 00:10:44,400 Speaker 1: are committed to bringing these down as a really kind 213 00:10:44,440 --> 00:10:47,720 Speaker 1: of quick way to reduce emissions from the power sector. 214 00:10:47,920 --> 00:10:49,800 Speaker 1: When it comes to coal, what is the state of 215 00:10:49,800 --> 00:10:52,880 Speaker 1: play for Australia. Are they seeing fewer exports? Is that declining? 216 00:10:52,920 --> 00:10:55,640 Speaker 1: Have we reached peak demand? And then after we talk 217 00:10:55,679 --> 00:10:57,520 Speaker 1: about the exporting element, I then want to come to 218 00:10:57,880 --> 00:11:01,080 Speaker 1: domestically are they using it? Is it largely exported but 219 00:11:01,280 --> 00:11:05,800 Speaker 1: internally being used only sparingly in that transition to renewables 220 00:11:05,880 --> 00:11:07,599 Speaker 1: is happening. Can you talk a little bit about the 221 00:11:07,679 --> 00:11:09,560 Speaker 1: role of coal both out of the country and in 222 00:11:09,600 --> 00:11:10,079 Speaker 1: the country. 223 00:11:10,200 --> 00:11:12,400 Speaker 2: So I think it's important to break coal out into 224 00:11:12,400 --> 00:11:15,440 Speaker 2: two major classes, if you will. Thermal coal which is 225 00:11:15,520 --> 00:11:18,760 Speaker 2: used for power generation, and that's for the production of electricity, 226 00:11:18,760 --> 00:11:21,320 Speaker 2: which you're talking about in terms of major uses, being 227 00:11:21,320 --> 00:11:25,120 Speaker 2: carbon intensive but important for electricity supply in global markets. 228 00:11:25,280 --> 00:11:28,720 Speaker 2: The other is metallurgical coal coal which is often used 229 00:11:28,800 --> 00:11:31,840 Speaker 2: in metal processes, particularly for steel manufacturing. 230 00:11:31,960 --> 00:11:34,160 Speaker 3: Now we've seen some very interesting trade. 231 00:11:33,960 --> 00:11:37,920 Speaker 2: Dynamics unfold for Australia over recent years, particularly more volatile 232 00:11:38,000 --> 00:11:39,880 Speaker 2: on the end of thermal coal. It was only a 233 00:11:39,920 --> 00:11:42,480 Speaker 2: couple of years ago where famously China banned or thermal 234 00:11:42,520 --> 00:11:44,920 Speaker 2: coal imports for the country, although at the same time 235 00:11:44,960 --> 00:11:47,920 Speaker 2: they did continue to allow metallurgical coal. And we've seen 236 00:11:48,040 --> 00:11:51,760 Speaker 2: very volatile global markets for coal prices, in part driven 237 00:11:51,800 --> 00:11:54,560 Speaker 2: by the energy crisis as much as invasion of Ukraine, 238 00:11:54,800 --> 00:11:57,880 Speaker 2: in part due to waxing and waning supply and demand 239 00:11:58,000 --> 00:12:01,000 Speaker 2: dynamics across the region. Now, if we look into the future, 240 00:12:01,320 --> 00:12:04,199 Speaker 2: what we see in our longer term analysis here at 241 00:12:04,240 --> 00:12:07,200 Speaker 2: BNF is that the world is going to have to 242 00:12:07,440 --> 00:12:11,360 Speaker 2: dramatically reduce its reliance on thermal coal, in particular in 243 00:12:11,480 --> 00:12:14,839 Speaker 2: order to stay on a low carbon trajectory to stay 244 00:12:14,880 --> 00:12:18,360 Speaker 2: within the Paris targets. If we look within the Australian market, 245 00:12:18,400 --> 00:12:22,079 Speaker 2: the story is similar, if slightly more advanced. Now, given 246 00:12:22,080 --> 00:12:24,200 Speaker 2: what I've said and what we've talked about the role 247 00:12:24,240 --> 00:12:27,560 Speaker 2: of coal being a superpower of economic force in Australia 248 00:12:27,559 --> 00:12:30,040 Speaker 2: in years gone by, it probably wouldn't surprise you to 249 00:12:30,080 --> 00:12:33,080 Speaker 2: hear that coal generation made up the backbone of power 250 00:12:33,120 --> 00:12:37,120 Speaker 2: supply in the country's electricity system. But now Australia's once 251 00:12:37,240 --> 00:12:41,360 Speaker 2: mighty coal fleet is facing structural decline, and the question 252 00:12:41,520 --> 00:12:46,040 Speaker 2: is increasingly when, not if it will exit the market completely. Now, 253 00:12:46,120 --> 00:12:49,240 Speaker 2: to put some numbers to that, about fifteen years ago 254 00:12:49,720 --> 00:12:53,560 Speaker 2: coal accounted for about seventy five percent of Australia's electricity generation, 255 00:12:53,760 --> 00:12:57,320 Speaker 2: and today it accounts for roughly forty seven percent. Now, 256 00:12:57,440 --> 00:13:00,719 Speaker 2: coal generators are a bit like old car. As they 257 00:13:00,720 --> 00:13:02,840 Speaker 2: get older, it can get a little bit less efficient. 258 00:13:02,960 --> 00:13:05,880 Speaker 2: It might have a harder time speeding up and slowing down, 259 00:13:06,040 --> 00:13:08,560 Speaker 2: and they might start to break down more often, becoming 260 00:13:08,640 --> 00:13:12,280 Speaker 2: less reliable and more costly to repair, maintain, and retrofit 261 00:13:12,320 --> 00:13:14,319 Speaker 2: to keep them running efficiently. And when you take into 262 00:13:14,400 --> 00:13:17,920 Speaker 2: account that many of Australia's coal assets were never built 263 00:13:17,960 --> 00:13:21,320 Speaker 2: to be particularly flexible or efficient to begin with, you 264 00:13:21,320 --> 00:13:23,440 Speaker 2: can begin to see some of the challenges that Australia 265 00:13:23,520 --> 00:13:26,880 Speaker 2: might face when you realize that Australia hasn't built a 266 00:13:26,920 --> 00:13:30,040 Speaker 2: new coal generator in its domestic market for over ten 267 00:13:30,120 --> 00:13:32,680 Speaker 2: years now, but we continue to send coal offshore to 268 00:13:33,000 --> 00:13:35,920 Speaker 2: supply others who are building you coal generation. But the 269 00:13:35,960 --> 00:13:39,800 Speaker 2: domestic fleet is of now about thirty one years old 270 00:13:40,000 --> 00:13:42,360 Speaker 2: on average, and most coal plants around the world are 271 00:13:42,360 --> 00:13:45,240 Speaker 2: built with an expected operational life of between forty to 272 00:13:45,240 --> 00:13:47,240 Speaker 2: fifty years, and so if you run the numbers on 273 00:13:47,280 --> 00:13:49,880 Speaker 2: the age of these assets, by twenty thirty, you would 274 00:13:49,880 --> 00:13:52,360 Speaker 2: expect about twenty three percent of the fleet twiggs of 275 00:13:52,400 --> 00:13:54,520 Speaker 2: the market just due to aging out, and by twenty 276 00:13:54,559 --> 00:13:56,480 Speaker 2: forty this would be about fifty two percent of the 277 00:13:56,520 --> 00:13:57,360 Speaker 2: remaining assets. 278 00:13:57,559 --> 00:13:57,760 Speaker 3: Now. 279 00:13:57,840 --> 00:14:02,080 Speaker 2: Over the past decade, Australia has seen a rapid rise 280 00:14:02,120 --> 00:14:06,040 Speaker 2: in investment and supply coming from variable newbal energy sources 281 00:14:06,120 --> 00:14:08,320 Speaker 2: and this has had a pretty big impact on the 282 00:14:08,400 --> 00:14:11,040 Speaker 2: coal fleet. Again, going back fifteen years to two thousand 283 00:14:11,080 --> 00:14:14,480 Speaker 2: and nine, Australia had about twenty nine gigawatts of operating 284 00:14:14,559 --> 00:14:17,400 Speaker 2: coal capacity. This was running with a capacity factor a 285 00:14:17,480 --> 00:14:21,600 Speaker 2: utilization of about seventy three percent. Today, coal capacities down 286 00:14:21,640 --> 00:14:24,160 Speaker 2: to about twenty three gigawatts and it's operating with the 287 00:14:24,240 --> 00:14:27,360 Speaker 2: utilization rate closer to sixty percent, and it is really 288 00:14:27,400 --> 00:14:30,640 Speaker 2: not ideal for capacity designed to operate as a base 289 00:14:30,680 --> 00:14:35,040 Speaker 2: load where you want higher utilization to disperse your returns. 290 00:14:34,520 --> 00:14:36,360 Speaker 3: Over higher capex and running costs. 291 00:14:36,480 --> 00:14:38,880 Speaker 2: So we can see coal is beginning to be squeezed 292 00:14:38,920 --> 00:14:42,600 Speaker 2: out now. Following the last federal election in twenty twenty two, 293 00:14:42,840 --> 00:14:45,720 Speaker 2: the newly elected Labor government came in with a raft 294 00:14:45,760 --> 00:14:49,200 Speaker 2: of new commitments to decarbonization, including a commitment to reach 295 00:14:49,240 --> 00:14:51,880 Speaker 2: a forty three percent missions reduction on two thousand and 296 00:14:51,920 --> 00:14:54,800 Speaker 2: five levels by twenty thirty, as well as reaching eighty 297 00:14:55,080 --> 00:14:58,600 Speaker 2: two percent renewable energy supply in the domestic market over 298 00:14:58,600 --> 00:15:01,840 Speaker 2: the next six years. Some other commitments like reaching eighty 299 00:15:01,920 --> 00:15:04,880 Speaker 2: nine percent of all new light duty vehicles being electrified 300 00:15:04,880 --> 00:15:07,160 Speaker 2: by the year twenty thirty as well. And overall you 301 00:15:07,200 --> 00:15:10,240 Speaker 2: can see that these policy ambitions and increasingly the policy 302 00:15:10,280 --> 00:15:13,160 Speaker 2: mechanisms that support them, are likely to have a dramatic 303 00:15:13,280 --> 00:15:14,840 Speaker 2: impact on the remaining. 304 00:15:14,440 --> 00:15:15,880 Speaker 3: Coll asets in the country. Now. 305 00:15:16,000 --> 00:15:18,360 Speaker 2: Last year we did a piece of work looking asset 306 00:15:18,440 --> 00:15:21,720 Speaker 2: by asset at both the policy drivers, the underlying economics 307 00:15:21,800 --> 00:15:25,080 Speaker 2: the assets life and operational health, along with various corporate, 308 00:15:25,320 --> 00:15:28,160 Speaker 2: government and owner commitments for closure, and we found that 309 00:15:28,200 --> 00:15:32,200 Speaker 2: by twenty thirty five, about eighty three percent of Australia's 310 00:15:32,240 --> 00:15:35,160 Speaker 2: remaining coal assets are likely to exit the market, which 311 00:15:35,240 --> 00:15:37,760 Speaker 2: is a very dramatic fall from both where we are 312 00:15:37,760 --> 00:15:40,560 Speaker 2: today and certainly from where we were just a decade ago. 313 00:15:40,960 --> 00:15:43,840 Speaker 1: So, Lenny, you just mentioned how coal is getting squeezed 314 00:15:43,840 --> 00:15:46,680 Speaker 1: out by renewable So let's then do that pivot to 315 00:15:46,760 --> 00:15:49,520 Speaker 1: this part of the transition. What's happening. How large of 316 00:15:49,520 --> 00:15:53,640 Speaker 1: a role do renewables play in the national electricity market 317 00:15:53,640 --> 00:15:55,600 Speaker 1: in Australia's mix, So the. 318 00:15:55,640 --> 00:15:58,720 Speaker 2: Role of renewables is rapidly increasing, and thank you for 319 00:15:58,800 --> 00:16:02,320 Speaker 2: mentioning the national tricity market. That the initiation should probably 320 00:16:02,320 --> 00:16:05,880 Speaker 2: give you a very quick geography lesson. So Australia's almost 321 00:16:05,920 --> 00:16:08,480 Speaker 2: land masks can be broken up into several different grids. 322 00:16:08,720 --> 00:16:12,040 Speaker 2: By far, the largest, representing about eighty five percent of 323 00:16:12,040 --> 00:16:15,360 Speaker 2: electricity demand, sits on the east to southeast coast of 324 00:16:15,400 --> 00:16:18,359 Speaker 2: the country and covers most of the major cities and townships. 325 00:16:18,400 --> 00:16:20,600 Speaker 2: There are a series of smaller grids throughout the rest 326 00:16:20,640 --> 00:16:23,040 Speaker 2: of the countries and are being for the larger towns 327 00:16:23,040 --> 00:16:25,400 Speaker 2: and are being for mining sides, but really a lot 328 00:16:25,440 --> 00:16:27,720 Speaker 2: of the action in the country does happen within the 329 00:16:27,800 --> 00:16:30,280 Speaker 2: national electricity market. But if you zoom out and look 330 00:16:30,320 --> 00:16:33,240 Speaker 2: at what role of what impact renewables are having across 331 00:16:33,240 --> 00:16:35,320 Speaker 2: the country, it can be useful to put some numbers 332 00:16:35,360 --> 00:16:37,240 Speaker 2: to that as well. Back in two thousand and nine, 333 00:16:37,400 --> 00:16:41,040 Speaker 2: renewable energy accounted for about eight percent of total electricity 334 00:16:41,040 --> 00:16:44,880 Speaker 2: generation in Australia. Today this is closer to thirty four 335 00:16:44,920 --> 00:16:47,800 Speaker 2: percent of the market. Now, this is a pretty significant 336 00:16:47,840 --> 00:16:50,120 Speaker 2: amount of growth, even if it's over quite an extended 337 00:16:50,160 --> 00:16:52,760 Speaker 2: period of time. But this is an annual figure and 338 00:16:52,800 --> 00:16:54,800 Speaker 2: if we drill into it, we can see some pretty 339 00:16:54,880 --> 00:16:58,920 Speaker 2: extraordinary incidences within the market being caused by renewable energy. 340 00:16:58,960 --> 00:16:59,600 Speaker 3: If you look at the. 341 00:16:59,680 --> 00:17:02,800 Speaker 2: Fourth quarter of last year, across that East Coast market, 342 00:17:02,960 --> 00:17:05,320 Speaker 2: on average in the middle of the day, wind and 343 00:17:05,359 --> 00:17:10,280 Speaker 2: solar combined accounted for about sixty three percent of electricity generation. 344 00:17:10,520 --> 00:17:12,840 Speaker 2: And again if we drill and even further, there were 345 00:17:12,880 --> 00:17:16,560 Speaker 2: particular days in certain hours where wind and solar accounted 346 00:17:16,560 --> 00:17:20,399 Speaker 2: for over one hundred percent of electricity demand in certain 347 00:17:20,480 --> 00:17:23,119 Speaker 2: regions of the grid, in this case in South Australia, 348 00:17:23,200 --> 00:17:26,000 Speaker 2: and there were even still hours of the day when 349 00:17:26,119 --> 00:17:31,520 Speaker 2: behind the meter solar capacity alone was supplying more demand 350 00:17:31,760 --> 00:17:34,000 Speaker 2: than the state had at that point in time. So 351 00:17:34,080 --> 00:17:37,120 Speaker 2: to spell that out, consumers in South Australia have been 352 00:17:37,160 --> 00:17:41,040 Speaker 2: producing more power at certain hours of the year than 353 00:17:41,280 --> 00:17:44,160 Speaker 2: the whole state is consuming in terms of electricity. It's 354 00:17:44,280 --> 00:17:47,320 Speaker 2: pretty remarkable. Now, other firms of generation were operating at 355 00:17:47,320 --> 00:17:50,800 Speaker 2: that same time, the interconnectors to other states were able 356 00:17:50,840 --> 00:17:53,960 Speaker 2: to move that excess supply into other regions. But just 357 00:17:54,000 --> 00:17:56,520 Speaker 2: from those figures alone, you can see that the impact 358 00:17:56,520 --> 00:17:59,760 Speaker 2: that wind and particularly solar is having on the market. 359 00:18:00,200 --> 00:18:02,200 Speaker 1: The question what is it doing to prices? 360 00:18:02,480 --> 00:18:05,560 Speaker 2: So this is really where we're seeing Australia becoming an 361 00:18:05,640 --> 00:18:08,680 Speaker 2: interesting case study in the impact of high amounts of 362 00:18:08,720 --> 00:18:11,840 Speaker 2: renewable energy generation. So, on one hand, as I mentioned, 363 00:18:11,920 --> 00:18:15,600 Speaker 2: we have this immovable object, a fleet of baseload coal 364 00:18:15,880 --> 00:18:19,320 Speaker 2: assets which were inflexible and getting more inflexible as they 365 00:18:19,320 --> 00:18:22,680 Speaker 2: get older. They don't or can't ramp down when renewable 366 00:18:22,760 --> 00:18:25,199 Speaker 2: energy generation are ramping up, and so they might be 367 00:18:25,240 --> 00:18:28,199 Speaker 2: tempted to bid into the market negative pricing, that is, 368 00:18:28,359 --> 00:18:31,359 Speaker 2: paying to stay online in order to not further damage 369 00:18:31,359 --> 00:18:34,119 Speaker 2: their assets or to be available when prices might increase 370 00:18:34,200 --> 00:18:34,600 Speaker 2: later on. 371 00:18:34,720 --> 00:18:37,520 Speaker 3: And on the other side, we have this unstoppable force. 372 00:18:37,320 --> 00:18:41,199 Speaker 2: This wave, a tsunami of renewable energy generation, particularly in 373 00:18:41,280 --> 00:18:43,280 Speaker 2: the middle of the day and with rooftop solar and 374 00:18:43,400 --> 00:18:46,000 Speaker 2: not responding to price signals from the wholesale market. 375 00:18:46,160 --> 00:18:48,359 Speaker 3: These two forces are colliding now. 376 00:18:48,440 --> 00:18:53,080 Speaker 2: These renewable energy resources are hollowing out this midday demand period. 377 00:18:53,359 --> 00:18:55,280 Speaker 2: We've talked about a duck curve. This is beyond that. 378 00:18:55,320 --> 00:18:57,720 Speaker 2: It's beyond a swan curve. It's into a Bronzsaurus curve 379 00:18:57,800 --> 00:19:00,000 Speaker 2: or any other form of long neck dinosaur that might 380 00:19:00,160 --> 00:19:03,639 Speaker 2: be your favorite. And the impact on electricity prices is remarkable. 381 00:19:03,800 --> 00:19:06,520 Speaker 2: Across all of last year, in that East Coast system, 382 00:19:06,680 --> 00:19:10,520 Speaker 2: prices and the spot market were below zero fourteen percent 383 00:19:10,600 --> 00:19:12,959 Speaker 2: of the time. This is a seventy four percent increase 384 00:19:12,960 --> 00:19:15,200 Speaker 2: from the year prior. In the fourth court of last year, 385 00:19:15,200 --> 00:19:18,440 Speaker 2: in South Australia, spot price and electricity market were below 386 00:19:18,560 --> 00:19:21,840 Speaker 2: zero thirty two percent of the time. And this is 387 00:19:21,880 --> 00:19:23,879 Speaker 2: of course having a massive impact on the value of 388 00:19:23,920 --> 00:19:27,600 Speaker 2: the rest of the generation fleet, in particular self cannibalizing 389 00:19:27,640 --> 00:19:30,600 Speaker 2: effect on other forms of renewable energy generation there have 390 00:19:30,680 --> 00:19:34,480 Speaker 2: been multiple months now across the country where the value 391 00:19:34,680 --> 00:19:38,480 Speaker 2: of large scale solar generation is below zero. To give 392 00:19:38,520 --> 00:19:41,359 Speaker 2: you a more clear example, in December of twenty twenty two, 393 00:19:41,480 --> 00:19:45,919 Speaker 2: in South Australia, utility solar generators paid an average of 394 00:19:45,960 --> 00:19:49,119 Speaker 2: twelve Australian dollars per mega what hour for the privilege 395 00:19:49,119 --> 00:19:52,560 Speaker 2: of generating. That's how low and how frequently below zero 396 00:19:52,720 --> 00:19:55,280 Speaker 2: wholesale prices were. And if we look to the future 397 00:19:55,359 --> 00:19:59,080 Speaker 2: as the government races towards its ambitious renewable energy targets 398 00:19:59,080 --> 00:20:02,480 Speaker 2: in years twenty three, if we can't see this bulk 399 00:20:02,520 --> 00:20:05,280 Speaker 2: of coal capacity getting out of the way fast enough, 400 00:20:05,359 --> 00:20:07,880 Speaker 2: and if we can't manage to shift demand either through 401 00:20:07,960 --> 00:20:11,320 Speaker 2: flexible price signals or through energy storage, we would expect 402 00:20:11,359 --> 00:20:13,760 Speaker 2: this trend of negative prices to only get worse. 403 00:20:14,080 --> 00:20:16,560 Speaker 1: So I want to better understand how that market is 404 00:20:16,560 --> 00:20:20,360 Speaker 1: structured because you have varying degrees displayed around the world, 405 00:20:20,400 --> 00:20:22,800 Speaker 1: but one that is often talked about as being very 406 00:20:22,840 --> 00:20:25,840 Speaker 1: liberal is urcut in Texas. That's the Texas grid. So 407 00:20:25,840 --> 00:20:29,040 Speaker 1: I want to know how similar is the national electricity market, 408 00:20:29,200 --> 00:20:31,680 Speaker 1: given that this is eighty percent of the country's demand, 409 00:20:31,880 --> 00:20:35,520 Speaker 1: How similar is that to air cut and is installing 410 00:20:35,680 --> 00:20:38,960 Speaker 1: this capacity really just down to whether or not companies 411 00:20:39,040 --> 00:20:41,560 Speaker 1: want to do it, And they're building this network of 412 00:20:41,600 --> 00:20:43,840 Speaker 1: the future, and we're hoping that demand will actually end 413 00:20:43,920 --> 00:20:45,880 Speaker 1: up kind of evening out in the prices, will level 414 00:20:45,920 --> 00:20:48,600 Speaker 1: out with natural market forces, or is it more regulated 415 00:20:48,720 --> 00:20:52,040 Speaker 1: and is this very intentional and intentional push to actually 416 00:20:52,040 --> 00:20:53,480 Speaker 1: get more renewables online. 417 00:20:53,640 --> 00:20:55,159 Speaker 3: So it's a bit of both and a bit of 418 00:20:55,200 --> 00:20:56,119 Speaker 3: all the above really. 419 00:20:56,320 --> 00:20:59,119 Speaker 2: Now to explain the Australian market structure again, particularly the 420 00:20:59,200 --> 00:21:01,320 Speaker 2: national electricity market, and I'm just going to call it 421 00:21:01,320 --> 00:21:05,000 Speaker 2: in then for now, it's a very liberalized, very open market. 422 00:21:05,320 --> 00:21:09,120 Speaker 2: Now in terms of market players, utilities in our system 423 00:21:09,359 --> 00:21:12,560 Speaker 2: can operate power generation capacity and they can hold a 424 00:21:12,600 --> 00:21:15,560 Speaker 2: retail a demand book, so you can create electricity and 425 00:21:15,560 --> 00:21:18,480 Speaker 2: you can sell electricity in the middle within the networks. 426 00:21:18,680 --> 00:21:22,080 Speaker 2: These are largely natural monopolies and they're held by separate entities, 427 00:21:22,119 --> 00:21:25,679 Speaker 2: so distribution companies or transmission companies who build, maintain and 428 00:21:25,720 --> 00:21:29,360 Speaker 2: operate the polls and wires that move those electrons around. Now, 429 00:21:29,440 --> 00:21:32,960 Speaker 2: what's been driving this renewable energy capacity in the years 430 00:21:33,000 --> 00:21:33,960 Speaker 2: gone by has. 431 00:21:33,840 --> 00:21:36,080 Speaker 3: Been a mix of improving economics. 432 00:21:36,240 --> 00:21:39,880 Speaker 2: For years, building new wind and solar has been cheaper 433 00:21:39,880 --> 00:21:42,760 Speaker 2: than building any other form of new electricity generation in 434 00:21:42,800 --> 00:21:46,920 Speaker 2: the country, and with sawing fuel prices particularly over recent years, 435 00:21:46,960 --> 00:21:49,840 Speaker 2: building new wind and solar has been cheaper at times 436 00:21:49,920 --> 00:21:53,040 Speaker 2: then operating the existing coal and gas assets in the market. 437 00:21:53,119 --> 00:21:56,000 Speaker 2: It's also been driven by government policy to some extent. 438 00:21:56,080 --> 00:21:58,399 Speaker 2: This has been done at the federal level, but also 439 00:21:58,560 --> 00:22:01,760 Speaker 2: state and territory governments playing a very important role in 440 00:22:01,840 --> 00:22:05,040 Speaker 2: driving up renewable energy generation in their home grids, and 441 00:22:05,080 --> 00:22:07,640 Speaker 2: corporates too have a role to play. We've seen quite 442 00:22:07,640 --> 00:22:10,960 Speaker 2: a rise of demand from corporate entities and utilities looking 443 00:22:10,960 --> 00:22:13,520 Speaker 2: to on sell clean power to their own consumers, who 444 00:22:13,560 --> 00:22:16,720 Speaker 2: are all contributing to this rise in recent years of 445 00:22:16,760 --> 00:22:17,879 Speaker 2: renewable energy supply. 446 00:22:18,359 --> 00:22:22,200 Speaker 1: So, if I'm understanding things correctly, Australia really has times 447 00:22:22,200 --> 00:22:24,600 Speaker 1: of day where negative prices are a real problem from 448 00:22:24,680 --> 00:22:27,920 Speaker 1: market design standpoint and also creating profitability for some of 449 00:22:27,960 --> 00:22:30,919 Speaker 1: the companies that are actually operating in the energy system. 450 00:22:30,960 --> 00:22:32,680 Speaker 1: So can you talk to me a little bit about 451 00:22:32,720 --> 00:22:35,080 Speaker 1: where the opportunities lie. You know, what is it that 452 00:22:35,119 --> 00:22:38,000 Speaker 1: companies are actually looking to invest in in Australia or 453 00:22:38,080 --> 00:22:40,440 Speaker 1: is this really causing a bit of a standstill. 454 00:22:40,520 --> 00:22:43,200 Speaker 2: I think one of the things we've seen in Australia recently, 455 00:22:43,240 --> 00:22:46,159 Speaker 2: particularly driven in by the rise in volatility and the 456 00:22:46,200 --> 00:22:49,760 Speaker 2: increase in negative pricing events, is a real reassessment of 457 00:22:49,800 --> 00:22:54,040 Speaker 2: what investment opportunities look like across the energy system. Now 458 00:22:54,240 --> 00:22:57,880 Speaker 2: in some of the causes of this volatility the rooftop 459 00:22:57,960 --> 00:23:01,520 Speaker 2: solar market, which again respond to very different price signals 460 00:23:01,560 --> 00:23:04,080 Speaker 2: from other large scale generating assets. 461 00:23:04,359 --> 00:23:07,080 Speaker 3: The impact of negative pricing has. 462 00:23:06,760 --> 00:23:10,320 Speaker 2: Eroded some of the value of these investments, but they 463 00:23:10,359 --> 00:23:14,240 Speaker 2: still remain fairly attractive for the typical Australian household, although 464 00:23:14,240 --> 00:23:17,919 Speaker 2: to a lesser extent to small businesses and industrial consumers 465 00:23:17,960 --> 00:23:20,199 Speaker 2: as well. Now it's important to highlight here the history. 466 00:23:20,320 --> 00:23:24,400 Speaker 2: Australia is one of the world's most decentralized markets and 467 00:23:24,560 --> 00:23:26,840 Speaker 2: if we look at the numbers and noscile, systems has 468 00:23:26,880 --> 00:23:29,679 Speaker 2: been sold around the country to now cover one in 469 00:23:29,800 --> 00:23:33,720 Speaker 2: three households, accounting for about twenty three gigawatts of rooftop 470 00:23:33,760 --> 00:23:36,879 Speaker 2: solar capacity. And with these negative pricings that we have 471 00:23:37,040 --> 00:23:41,160 Speaker 2: seen throughout the wholesale market, the value of electricity generated 472 00:23:41,200 --> 00:23:43,760 Speaker 2: from these systems has fallen both in terms of the 473 00:23:43,880 --> 00:23:47,360 Speaker 2: electricity fed into the grid through feed in tariffs, which 474 00:23:47,400 --> 00:23:50,960 Speaker 2: Australia doesn't really have outside of a few regions of 475 00:23:50,960 --> 00:23:54,160 Speaker 2: the country any mandatory feed in tariffs. Most of this 476 00:23:54,240 --> 00:23:56,720 Speaker 2: is up to the discretion of the local utility to 477 00:23:56,760 --> 00:24:00,800 Speaker 2: decide and value and potentially attract additional consumers through higher 478 00:24:01,000 --> 00:24:03,639 Speaker 2: solar feed and tariffs under certain rate designs. But this 479 00:24:03,760 --> 00:24:07,760 Speaker 2: erosion of midday prices has also caused an introduction of 480 00:24:07,880 --> 00:24:12,879 Speaker 2: new tariff design models for consumers, incentivizing shifting demand towards 481 00:24:12,880 --> 00:24:15,920 Speaker 2: the middle of the day when electricity prices are at 482 00:24:15,960 --> 00:24:19,720 Speaker 2: their lowest, and to reduce consumption in those afternoon periods 483 00:24:19,760 --> 00:24:22,640 Speaker 2: when solar ramps down and more expensive forms of generation 484 00:24:22,960 --> 00:24:25,840 Speaker 2: have to come online to keep the system in balance. Now, 485 00:24:25,840 --> 00:24:28,480 Speaker 2: there have been some teething problems with deploying these cost 486 00:24:28,520 --> 00:24:31,720 Speaker 2: deflective tariffs across the country. They're much more complicated than 487 00:24:31,720 --> 00:24:35,240 Speaker 2: the traditional flat tariff design and in some cases can 488 00:24:35,359 --> 00:24:39,320 Speaker 2: decentivize some of the cleaner technologies like rooftop solar that 489 00:24:39,440 --> 00:24:42,520 Speaker 2: customers across the country really like to see both to 490 00:24:42,640 --> 00:24:45,280 Speaker 2: manage electricity bills but also feel like they're having a 491 00:24:45,320 --> 00:24:48,800 Speaker 2: positive impact on their own carbon footprint, and even though 492 00:24:48,840 --> 00:24:51,800 Speaker 2: across the world we have seen falling solar module prices, 493 00:24:51,960 --> 00:24:54,920 Speaker 2: we haven't necessarily seen that trickle through into the residential 494 00:24:55,080 --> 00:24:57,119 Speaker 2: or small scale market In Australia. A lot of that 495 00:24:57,200 --> 00:24:59,880 Speaker 2: has to do with managing the inventory of price fluctuation 496 00:25:00,119 --> 00:25:02,399 Speaker 2: of the recent years. It has to do with rolling 497 00:25:02,440 --> 00:25:05,760 Speaker 2: off of upfront subsidy schemes and also a softening in 498 00:25:05,800 --> 00:25:08,840 Speaker 2: the Australian dollar. But that doesn't mean Australia is installing 499 00:25:09,040 --> 00:25:11,919 Speaker 2: less behind the meter solar generation. Last year was a 500 00:25:12,040 --> 00:25:16,040 Speaker 2: near record year for new installations in capacity terms, with 501 00:25:16,119 --> 00:25:19,159 Speaker 2: an estimated three point two gigawa's constructed. Now a lot 502 00:25:19,200 --> 00:25:21,959 Speaker 2: of that had to do with the energy crisis across 503 00:25:22,000 --> 00:25:24,200 Speaker 2: the world and here in Australia in twenty twenty two. 504 00:25:24,280 --> 00:25:27,680 Speaker 2: A direct consequence of that was rising retail tariffs, which 505 00:25:27,720 --> 00:25:30,399 Speaker 2: went up by about forty percent by July of twenty 506 00:25:30,440 --> 00:25:33,480 Speaker 2: twenty three, and as customers rolled on too larger bills, 507 00:25:33,640 --> 00:25:36,199 Speaker 2: they turned to solar in larger numbers in order to 508 00:25:36,240 --> 00:25:39,640 Speaker 2: reduce their consumption from the grid while retail electricity prices 509 00:25:39,640 --> 00:25:42,199 Speaker 2: were high. And the other factor is that Australians have 510 00:25:42,320 --> 00:25:44,720 Speaker 2: a love of these rooftop solar systems and they have 511 00:25:44,760 --> 00:25:47,679 Speaker 2: a comfort of playing manywhere between five to seven thousand 512 00:25:47,720 --> 00:25:50,720 Speaker 2: Australian dollars to install one, and as a consequence, any 513 00:25:50,720 --> 00:25:54,960 Speaker 2: cost reductions from modules or through subsidies results in larger 514 00:25:55,000 --> 00:25:57,680 Speaker 2: and larger systems being built, and by our numbers, towards 515 00:25:57,680 --> 00:25:59,800 Speaker 2: the end of last year, these were inching up closer 516 00:25:59,800 --> 00:26:03,160 Speaker 2: to nine kilowatts of solar per system in stall, which 517 00:26:03,200 --> 00:26:05,359 Speaker 2: compared to most of the rest of the world is 518 00:26:05,520 --> 00:26:07,320 Speaker 2: incredibly large. 519 00:26:07,000 --> 00:26:08,320 Speaker 3: And a result of these forces. 520 00:26:08,359 --> 00:26:12,480 Speaker 2: Looking forward, we think the march of rooftop solar across 521 00:26:12,480 --> 00:26:16,680 Speaker 2: Australia will continue. We believe installation rates have peaked back 522 00:26:16,720 --> 00:26:20,040 Speaker 2: in twenty twenty one at over three point three gigawatts 523 00:26:20,240 --> 00:26:22,880 Speaker 2: and these could fold to about one point six gigawats 524 00:26:22,960 --> 00:26:26,000 Speaker 2: vnual installations by twenty thirty maybe about one point nine 525 00:26:26,040 --> 00:26:28,679 Speaker 2: gigawats by twenty thirty five if we see an increase 526 00:26:28,680 --> 00:26:32,679 Speaker 2: in commercial and industrial systems. But the cumulative impact of 527 00:26:32,760 --> 00:26:35,600 Speaker 2: this area of technology in the market could represent about 528 00:26:35,640 --> 00:26:39,600 Speaker 2: forty five gigawatts of behind the meita capacity that responds 529 00:26:39,600 --> 00:26:43,399 Speaker 2: to very different price signals than generation assets connected to 530 00:26:43,440 --> 00:26:46,600 Speaker 2: the wholesale market. Which these other forms of either balancing 531 00:26:46,680 --> 00:26:50,359 Speaker 2: technologies or supportive infrastructure are going to have to work around. 532 00:26:50,960 --> 00:26:53,720 Speaker 1: You just noted that price signals are really used for 533 00:26:53,920 --> 00:26:56,800 Speaker 1: being used to manage demand and to spread it out 534 00:26:56,960 --> 00:26:59,120 Speaker 1: to the times when prices are lowest. But the other 535 00:26:59,160 --> 00:27:01,399 Speaker 1: way to tackle this is actually through storage. So I 536 00:27:01,440 --> 00:27:04,360 Speaker 1: want to better understand how Australia is approaching the concept 537 00:27:04,359 --> 00:27:06,679 Speaker 1: of storage, whether at the residential level, which pairs very 538 00:27:06,760 --> 00:27:10,200 Speaker 1: nicely with residential solar, or at the utility level when 539 00:27:10,240 --> 00:27:12,920 Speaker 1: we're thinking about battery infrastructure being used to really bring 540 00:27:13,000 --> 00:27:16,679 Speaker 1: down those peaks and to spread that, you know, solar 541 00:27:16,800 --> 00:27:19,200 Speaker 1: energy throughout the times when the sun isn't shining. 542 00:27:19,440 --> 00:27:22,639 Speaker 2: So Australia has a really interesting history within its storage 543 00:27:22,720 --> 00:27:25,920 Speaker 2: markets if you look at the utility scale of things. 544 00:27:26,000 --> 00:27:29,080 Speaker 2: It all kicked off back in twenty seventeen following a 545 00:27:29,119 --> 00:27:32,399 Speaker 2: Twitter bet between Elon Musk and the Australian tech billionaire, 546 00:27:32,560 --> 00:27:35,119 Speaker 2: And unlike most Twitter bets, this one actually ended in 547 00:27:35,160 --> 00:27:37,639 Speaker 2: a reasonably positive result. I mean that was the construction 548 00:27:37,720 --> 00:27:41,119 Speaker 2: of the one hundred and fifty megawatt Hornsdale Power Reserve, 549 00:27:41,160 --> 00:27:43,640 Speaker 2: which at that time was by far the biggest litimon 550 00:27:43,720 --> 00:27:46,720 Speaker 2: battery operating anywhere in the world, and in the years 551 00:27:46,720 --> 00:27:49,480 Speaker 2: that follows, batteries were continued to be built, pushed on 552 00:27:49,680 --> 00:27:53,600 Speaker 2: by governments, pushed on by independent power producers, pushed on 553 00:27:53,680 --> 00:27:57,320 Speaker 2: by network companies and utilities as well. Today Australia has 554 00:27:57,359 --> 00:28:01,880 Speaker 2: about one point for gigawatts of utility scale storage operating 555 00:28:01,920 --> 00:28:05,119 Speaker 2: across the country and this is particularly heavily weighted towards 556 00:28:05,160 --> 00:28:08,520 Speaker 2: li imaan batteries. State governments have continued to try to 557 00:28:08,600 --> 00:28:11,480 Speaker 2: outdo each other, building bigger and bigger systems and this 558 00:28:11,520 --> 00:28:16,480 Speaker 2: has peaked right now with the Acacia Energy Warata super battery, 559 00:28:16,600 --> 00:28:19,680 Speaker 2: which is eight hundred and fifty megawatts and is currently 560 00:28:19,760 --> 00:28:22,680 Speaker 2: under construction. Across the rest of the fleet under construction, 561 00:28:22,720 --> 00:28:26,240 Speaker 2: we have about four point four gigawatts of battery capacity 562 00:28:26,280 --> 00:28:28,919 Speaker 2: and this is expected to come online in the months 563 00:28:28,920 --> 00:28:32,320 Speaker 2: to years ahead. But the rapid increase in battery capacity 564 00:28:32,359 --> 00:28:34,800 Speaker 2: has had a really interesting result on the dynamics of 565 00:28:34,840 --> 00:28:38,160 Speaker 2: the power system and the rolls of these storage projects. 566 00:28:38,480 --> 00:28:42,880 Speaker 2: Years ago, frequency control and auxiliary services, which are the 567 00:28:42,920 --> 00:28:46,520 Speaker 2: services required to stabilize the power group. This is offering 568 00:28:46,640 --> 00:28:49,400 Speaker 2: energy over one second or four seconds, sixty seconds or 569 00:28:49,400 --> 00:28:52,880 Speaker 2: even five minutes and not participating directly in the wholesale market, 570 00:28:53,040 --> 00:28:56,640 Speaker 2: but these frequency control and auxiliary services represented the vast 571 00:28:56,720 --> 00:29:01,240 Speaker 2: majority of market revenues for batteries. Es are quite shallow 572 00:29:01,360 --> 00:29:04,160 Speaker 2: and it doesn't quite take a lot of capacity to 573 00:29:04,240 --> 00:29:07,600 Speaker 2: begin to flood these markets, and by twenty twenty three, 574 00:29:07,640 --> 00:29:10,560 Speaker 2: on the back of the energy crisis, arbitrage that is, 575 00:29:10,720 --> 00:29:14,120 Speaker 2: buying when prices are low and selling electricity when prices 576 00:29:14,160 --> 00:29:17,560 Speaker 2: are high became the majority form of market revenues for 577 00:29:17,680 --> 00:29:20,880 Speaker 2: most batteries operating around the country. And if we expect 578 00:29:20,880 --> 00:29:23,800 Speaker 2: that negative pricing events are likely to become more common 579 00:29:23,960 --> 00:29:27,600 Speaker 2: as Australia races to meet its renewable energy targets, batteries 580 00:29:27,600 --> 00:29:31,000 Speaker 2: are going to increasingly play an important role in moderating 581 00:29:31,040 --> 00:29:34,200 Speaker 2: these fluctuations in wholesale power prices. If we look to 582 00:29:34,240 --> 00:29:37,440 Speaker 2: the future, we continue to see batteries playing a bigger 583 00:29:37,480 --> 00:29:39,960 Speaker 2: and bigger role in the energy system. By our forecast 584 00:29:40,000 --> 00:29:42,880 Speaker 2: by twenty thirty in additional seven point four gigawats of 585 00:29:42,920 --> 00:29:46,080 Speaker 2: batteries could be constructed up to fifteen point three gigawats 586 00:29:46,080 --> 00:29:48,760 Speaker 2: by twenty thirty five, resulting in a total of about 587 00:29:48,840 --> 00:29:52,560 Speaker 2: twenty one point three gigawatts. Now increasingly these batteries aren't 588 00:29:52,640 --> 00:29:55,920 Speaker 2: just getting bigger in terms of megawatts of capacity, diggining 589 00:29:55,920 --> 00:29:58,680 Speaker 2: bigger in duration of storage as well. When we look 590 00:29:58,680 --> 00:30:02,280 Speaker 2: at the operations of these we can see shorter durations. Batteries, 591 00:30:02,320 --> 00:30:05,040 Speaker 2: whether it's five minutes fifteen minutes, can play a very 592 00:30:05,080 --> 00:30:09,720 Speaker 2: important role in these smaller balancing services, particularly managing frequency 593 00:30:09,920 --> 00:30:12,680 Speaker 2: in these power systems. But when you begin to shift 594 00:30:12,880 --> 00:30:16,320 Speaker 2: larger amounts of energy in response to fluctuating prices, whether 595 00:30:16,320 --> 00:30:19,880 Speaker 2: they're negative or near zero or incredibly high, you need 596 00:30:20,040 --> 00:30:23,040 Speaker 2: longer and longer durations as well. And across the country 597 00:30:23,080 --> 00:30:25,960 Speaker 2: governments have seen this and are responding in kind. Many 598 00:30:26,000 --> 00:30:28,720 Speaker 2: of the new policies coming forward to support storage across 599 00:30:28,720 --> 00:30:30,840 Speaker 2: Australia and now focusing. 600 00:30:30,400 --> 00:30:33,160 Speaker 3: On eight hours or more of duration, and. 601 00:30:33,120 --> 00:30:36,040 Speaker 2: This would include different types of technologies, whether it's pumped 602 00:30:36,120 --> 00:30:41,120 Speaker 2: hydro compressed air energy storage or other forms of electrochemical batteries. 603 00:30:41,160 --> 00:30:43,800 Speaker 2: That can play a role in this arbitrage is energy 604 00:30:43,840 --> 00:30:47,880 Speaker 2: shifting dynamics in the market now, despite the impact that 605 00:30:48,080 --> 00:30:52,240 Speaker 2: residential solar has had on causing these negative pricing events 606 00:30:52,240 --> 00:30:54,560 Speaker 2: and the need to begin to shift this energy around 607 00:30:54,600 --> 00:30:57,600 Speaker 2: to have a more efficient energy system. Australia has a 608 00:30:57,680 --> 00:31:02,240 Speaker 2: relatively small residential battery and this is really a artifact 609 00:31:02,320 --> 00:31:06,880 Speaker 2: of its policy dynamics. Australia has had some small local 610 00:31:06,960 --> 00:31:10,480 Speaker 2: schemes to support the uptake of battery storage technologies on 611 00:31:10,600 --> 00:31:12,880 Speaker 2: behind the meta level that we've never really had a 612 00:31:13,000 --> 00:31:17,240 Speaker 2: robust national policy, certainly none that would reduce the upfront 613 00:31:17,280 --> 00:31:20,120 Speaker 2: cost of these batteries like we've seen in the Australian 614 00:31:20,280 --> 00:31:23,280 Speaker 2: rooftop solar market, and as a consequence, we do see 615 00:31:23,320 --> 00:31:27,400 Speaker 2: continued growth, but it is significantly further behind compared to 616 00:31:27,680 --> 00:31:30,760 Speaker 2: rooftop solar adoption. Now, some of this also has to 617 00:31:30,800 --> 00:31:34,560 Speaker 2: do with the increased complications of installing and selling solar 618 00:31:34,560 --> 00:31:39,280 Speaker 2: systems to consumers. Australia has a hyper competitive residential solar market, 619 00:31:39,360 --> 00:31:43,560 Speaker 2: with many installers often operating within fairly small business operations, 620 00:31:43,680 --> 00:31:47,560 Speaker 2: and understanding how to economically model pitch to install a 621 00:31:47,600 --> 00:31:50,440 Speaker 2: solar system can be more challenging. But if you look 622 00:31:50,480 --> 00:31:53,560 Speaker 2: in the years ahead, by twenty thirty we expect residential 623 00:31:53,560 --> 00:31:56,560 Speaker 2: installations to reach about two point one gig what hours 624 00:31:56,600 --> 00:31:58,840 Speaker 2: per annum, increasing to about two point nine by the 625 00:31:58,920 --> 00:32:02,120 Speaker 2: year twenty thirty five. Which will mean humulatively, it will 626 00:32:02,120 --> 00:32:05,080 Speaker 2: play a greater and greater role in beginning to shift 627 00:32:05,120 --> 00:32:07,600 Speaker 2: some of this excess supply of electricity from the middle 628 00:32:07,600 --> 00:32:10,120 Speaker 2: of the day to other periods where it's more valuable. 629 00:32:10,480 --> 00:32:13,480 Speaker 1: So behind the meter storage hasn't quite gotten the same 630 00:32:13,520 --> 00:32:16,920 Speaker 1: adoption that residential solar has up until this point, perhaps 631 00:32:17,000 --> 00:32:19,320 Speaker 1: due to a lack of policy incentives as you outlined, 632 00:32:19,440 --> 00:32:23,280 Speaker 1: but it could potentially gain speed as the economics really 633 00:32:23,560 --> 00:32:26,160 Speaker 1: do end up playing into how people make decisions and 634 00:32:26,320 --> 00:32:28,320 Speaker 1: whether or not they find it to be useful. So 635 00:32:28,400 --> 00:32:32,360 Speaker 1: another thing that actually complements residential solar quite well are 636 00:32:32,480 --> 00:32:35,440 Speaker 1: electric vehicles. So it's a stability to not only be 637 00:32:35,560 --> 00:32:38,200 Speaker 1: your own energy generator, but also to be your own 638 00:32:38,240 --> 00:32:40,880 Speaker 1: generator for the fuel that goes into your car. And 639 00:32:41,040 --> 00:32:43,600 Speaker 1: what I want to know is have electric vehicles really 640 00:32:43,640 --> 00:32:45,840 Speaker 1: had a positive uptake in Australia as well, and is 641 00:32:45,920 --> 00:32:49,160 Speaker 1: that kind of come along with the residential solar boom 642 00:32:49,280 --> 00:32:50,080 Speaker 1: or has it been separate. 643 00:32:50,400 --> 00:32:53,280 Speaker 2: So it's really been quite separate for a whole host 644 00:32:53,320 --> 00:32:56,200 Speaker 2: of different reasons. But to lay it out, Australia is 645 00:32:56,280 --> 00:32:59,080 Speaker 2: a laggart in the adoption of electric vehicles compared to 646 00:32:59,320 --> 00:33:02,680 Speaker 2: many of its peers. This is largely due to the 647 00:33:02,760 --> 00:33:04,720 Speaker 2: dynamics of policy and supply. 648 00:33:05,080 --> 00:33:06,360 Speaker 3: It's not really on demand. 649 00:33:06,520 --> 00:33:09,680 Speaker 2: As I mentioned earlier, Australia is quite a wealthy country 650 00:33:09,720 --> 00:33:13,120 Speaker 2: despite its relatively small population. Households have quite a lot 651 00:33:13,120 --> 00:33:15,400 Speaker 2: of disposable income, and if we look at the data 652 00:33:15,440 --> 00:33:18,520 Speaker 2: of purchasing internal combustion engines, have quite a high appetite 653 00:33:18,520 --> 00:33:21,720 Speaker 2: for very large vehicles, often at quite high prices. But 654 00:33:21,760 --> 00:33:25,920 Speaker 2: what Australia doesn't have is an automotive industry of its own. 655 00:33:26,040 --> 00:33:29,840 Speaker 2: Its last car manufacturing plant closed sometime in twenty seventeen, 656 00:33:30,000 --> 00:33:33,640 Speaker 2: and for years many areas of politics and policy have 657 00:33:33,720 --> 00:33:36,680 Speaker 2: seen any move to support the increase or adoption of 658 00:33:36,720 --> 00:33:40,440 Speaker 2: electric vehicles simply being as a cost on the Australian 659 00:33:40,520 --> 00:33:44,600 Speaker 2: consumer without a broader economic benefit to a manufacturing base. 660 00:33:44,760 --> 00:33:48,000 Speaker 2: That's the consequence of a lack of policy. Has meant 661 00:33:48,000 --> 00:33:52,000 Speaker 2: that global automotive manufacturers, with a limitive number of evs 662 00:33:52,000 --> 00:33:56,120 Speaker 2: and their portfolios have simply chosen to prioritize sending those 663 00:33:56,240 --> 00:34:00,200 Speaker 2: lower missions vehicles to other markets that have more onerous 664 00:34:00,400 --> 00:34:04,080 Speaker 2: or looming decarbonization targets on their transport fleets. 665 00:34:04,360 --> 00:34:06,479 Speaker 1: And what sort of vehicles would I see on the ground. 666 00:34:06,720 --> 00:34:10,800 Speaker 1: Are Australians very keen on SUVs or is it more stowns. 667 00:34:11,120 --> 00:34:15,920 Speaker 2: Australians have an increasing love of SUVs, both in the 668 00:34:16,000 --> 00:34:18,520 Speaker 2: moderately priced range in the local market, which is north 669 00:34:18,520 --> 00:34:21,440 Speaker 2: of forty thousand Australian dollars up into the excess of 670 00:34:21,600 --> 00:34:24,960 Speaker 2: hundreds of thousands. But Australias have a particular love of 671 00:34:25,200 --> 00:34:27,360 Speaker 2: utes as we would call them in the local market, 672 00:34:27,520 --> 00:34:30,239 Speaker 2: or pickup trucks as you would call them offshore, and 673 00:34:30,280 --> 00:34:33,040 Speaker 2: this has been a problem for adoption as well. While 674 00:34:33,040 --> 00:34:37,799 Speaker 2: we are increasingly seeing electrified SUVs and some limited range 675 00:34:37,840 --> 00:34:40,360 Speaker 2: of pickup trucks that come with a battery and a plug, 676 00:34:40,480 --> 00:34:43,800 Speaker 2: there have been limited models available historically and very limited 677 00:34:43,840 --> 00:34:46,400 Speaker 2: supply available to Australian consumers. 678 00:34:46,680 --> 00:34:48,080 Speaker 3: This is beginning to change. 679 00:34:48,200 --> 00:34:50,920 Speaker 2: The Australian government has set itself an ambitious target of 680 00:34:50,920 --> 00:34:54,040 Speaker 2: decarbonators in the transport sector on its transition to a 681 00:34:54,040 --> 00:34:56,840 Speaker 2: low carbon economy and to drive the update of EVS. 682 00:34:56,880 --> 00:34:59,840 Speaker 2: It's looking to introduce a new policy, the New V 683 00:35:00,040 --> 00:35:03,400 Speaker 2: Vehicle Efficiency Standard, which will be the primary driver of 684 00:35:03,480 --> 00:35:04,520 Speaker 2: EVS to. 685 00:35:04,480 --> 00:35:05,520 Speaker 3: The year twenty thirty. 686 00:35:05,600 --> 00:35:09,560 Speaker 2: It's a crediting scheme that sits across automotive manufacturers, benefiting 687 00:35:09,560 --> 00:35:12,279 Speaker 2: those that sow a portfolio of low missions vehicles and 688 00:35:12,320 --> 00:35:16,120 Speaker 2: potentially penalizing those that sell carbon intensive cars into the market. 689 00:35:16,200 --> 00:35:19,360 Speaker 2: And when we've crunched what the policy suggests it might be, 690 00:35:19,640 --> 00:35:23,359 Speaker 2: we've calculated that light duty vehicles could be sixty five 691 00:35:23,400 --> 00:35:26,000 Speaker 2: percent electric by the year twenty thirty, which is a 692 00:35:26,000 --> 00:35:28,880 Speaker 2: pretty dramatic uptake from where the market is today. And 693 00:35:28,920 --> 00:35:31,439 Speaker 2: while we might see growth in the policy environment which 694 00:35:31,480 --> 00:35:34,080 Speaker 2: could be introduced in a few months time, it doesn't 695 00:35:34,080 --> 00:35:35,520 Speaker 2: mean the transition will be easy. 696 00:35:35,840 --> 00:35:37,960 Speaker 3: Barriers to deployment still remain. 697 00:35:37,800 --> 00:35:40,600 Speaker 2: A lack of model availability for right hand drive markets 698 00:35:40,640 --> 00:35:43,840 Speaker 2: in the types and cast segments that Australian consumers prefer, 699 00:35:44,080 --> 00:35:46,600 Speaker 2: as well as an increasing concern about of lack of 700 00:35:46,640 --> 00:35:50,600 Speaker 2: action on building out the charging infrastructure a very large, 701 00:35:50,800 --> 00:35:53,479 Speaker 2: very spread out country like Australia would need to see 702 00:35:53,680 --> 00:35:57,120 Speaker 2: for consumers to feel comfortable to transition over to electric vehicle. 703 00:35:57,320 --> 00:35:59,200 Speaker 1: So I want to now go back to where we started, 704 00:35:59,239 --> 00:36:02,600 Speaker 1: which is this fun mental premise of Australia natural resources, 705 00:36:02,719 --> 00:36:07,440 Speaker 1: exporting them around the world, and one form of power 706 00:36:07,480 --> 00:36:10,000 Speaker 1: that is going to be very useful for the hard 707 00:36:10,000 --> 00:36:12,440 Speaker 1: to abate sectors or could be very useful for the 708 00:36:12,480 --> 00:36:16,000 Speaker 1: hard debate sectors. Is hydrogen Australia has really, you know, 709 00:36:16,000 --> 00:36:18,080 Speaker 1: over the past few years, has been positioned as a 710 00:36:18,120 --> 00:36:21,880 Speaker 1: potential exporter of hydrogen and thinking of this idea of 711 00:36:22,000 --> 00:36:24,800 Speaker 1: generating it in Australia and potentially shipping it around the world. 712 00:36:25,000 --> 00:36:28,400 Speaker 1: Is that still actively being discussed, especially now that the 713 00:36:28,520 --> 00:36:31,839 Speaker 1: US has taken such an interest in hydrogen production through 714 00:36:31,880 --> 00:36:33,520 Speaker 1: the Inflation Reduction Act. 715 00:36:33,760 --> 00:36:37,120 Speaker 2: It absolutely is, although I find right now the conversation 716 00:36:37,200 --> 00:36:40,040 Speaker 2: has moderated to some extent now Australia still has said 717 00:36:40,040 --> 00:36:43,120 Speaker 2: its cites on becoming a hydrogen exporting superpower to the 718 00:36:43,160 --> 00:36:46,360 Speaker 2: world and establishing its role in the global energy transition, 719 00:36:46,560 --> 00:36:51,080 Speaker 2: particularly as concerns around its current suite of export commodities 720 00:36:51,200 --> 00:36:54,160 Speaker 2: begins to grow. The abundance of land the high quality 721 00:36:54,280 --> 00:36:56,880 Speaker 2: nature of wind and solar resources means that Australia is 722 00:36:57,080 --> 00:37:00,279 Speaker 2: well positioned for the production of low cost hydrae in 723 00:37:00,320 --> 00:37:03,560 Speaker 2: the years ahead. It has additional advantages in its position 724 00:37:03,640 --> 00:37:06,120 Speaker 2: in the Asia Pacific region, with many of its existing 725 00:37:06,160 --> 00:37:10,120 Speaker 2: trading relationships being with countries who might have energy security 726 00:37:10,160 --> 00:37:12,719 Speaker 2: concerns of their own, particularly as they look to their 727 00:37:12,840 --> 00:37:16,400 Speaker 2: decarbonization targets by twenty thirty or even by twenty fifty, 728 00:37:16,520 --> 00:37:20,400 Speaker 2: and many companies are beginning to capitalize on this opportunity 729 00:37:20,600 --> 00:37:24,360 Speaker 2: or their perception of it, particular example being Forteskew Future 730 00:37:24,360 --> 00:37:27,359 Speaker 2: Industries and the Fortskew Metals Group, who have high pline 731 00:37:27,360 --> 00:37:31,160 Speaker 2: of proposed projects about twenty gigwats of electoralizer capacity and 732 00:37:31,239 --> 00:37:35,560 Speaker 2: have recently opened a two gigawatt proton exchange membrane electoralizer 733 00:37:35,719 --> 00:37:39,719 Speaker 2: manufacturing facility in Queensland in Australia. Now, on aggregate, if 734 00:37:39,719 --> 00:37:42,720 Speaker 2: we look across the country, Australia has about one hundred 735 00:37:42,760 --> 00:37:47,640 Speaker 2: and twenty six gigawatts of proposed electoralizer opacity to produce 736 00:37:47,719 --> 00:37:50,319 Speaker 2: green hydrogen, which is an enormous amount and it would 737 00:37:50,320 --> 00:37:53,600 Speaker 2: produce somewhere in the ballpark of about thirteen million tons 738 00:37:53,640 --> 00:37:57,239 Speaker 2: of green hydrogen per year, far more than the Australian 739 00:37:57,400 --> 00:38:00,880 Speaker 2: economy domestically could ever hope to can and this is 740 00:38:00,920 --> 00:38:04,399 Speaker 2: really because of this export opportunity. Now, how that will 741 00:38:04,400 --> 00:38:09,040 Speaker 2: manifest is where the problems really begin. The challenges, the costs, 742 00:38:09,160 --> 00:38:13,640 Speaker 2: the infrastructure required to send liquid hydrogen or hydrogen derivatives 743 00:38:13,719 --> 00:38:16,880 Speaker 2: offshore could be a challenge, and the economics of their 744 00:38:17,000 --> 00:38:19,960 Speaker 2: use case in these markets is still being examined. We've 745 00:38:20,000 --> 00:38:23,160 Speaker 2: seen a lot of interest from markets like Japan, South 746 00:38:23,239 --> 00:38:26,920 Speaker 2: Korea and even increasingly Taiwan of the role of Australian 747 00:38:26,960 --> 00:38:30,040 Speaker 2: produced green ammonia to be co fired in their existing 748 00:38:30,040 --> 00:38:33,719 Speaker 2: coal assets to reduce their carbon emissions. But increasingly Australia 749 00:38:33,840 --> 00:38:37,000 Speaker 2: is looking at greener commodities that could be produced with 750 00:38:37,040 --> 00:38:39,840 Speaker 2: a hydrogen it makes locally with an abundance of iron 751 00:38:40,080 --> 00:38:42,759 Speaker 2: or in the local market. We're beginning to investigate whether 752 00:38:42,880 --> 00:38:46,840 Speaker 2: green iron or green steel production could play an important 753 00:38:46,960 --> 00:38:50,680 Speaker 2: role as an export industry within our existing trading relationships 754 00:38:50,800 --> 00:38:53,880 Speaker 2: more broadly across the Asia Pacific region, and the government 755 00:38:53,920 --> 00:38:56,279 Speaker 2: is really aware of this still. When we run the 756 00:38:56,320 --> 00:38:59,560 Speaker 2: numbers on promised support, we can account for about forty 757 00:38:59,680 --> 00:39:03,600 Speaker 2: three billion Australian dollars of earmarked funding a hydrogen or 758 00:39:03,640 --> 00:39:07,560 Speaker 2: hydrogen related industries or infrastructure, and a flagship program within 759 00:39:07,600 --> 00:39:11,360 Speaker 2: that is the two billion Australian dollar Hydrogen Headstart program, 760 00:39:11,440 --> 00:39:13,759 Speaker 2: and this looks to bridge the gap between the cost 761 00:39:13,800 --> 00:39:16,319 Speaker 2: of supply and the willingness to buy hydrogen from an 762 00:39:16,320 --> 00:39:21,160 Speaker 2: export perspective, to support over one gigawatt of electorallyzer capacity 763 00:39:21,320 --> 00:39:23,799 Speaker 2: by the year twenty thirty. So there still is a 764 00:39:23,840 --> 00:39:26,880 Speaker 2: lot of conversation. Some of the hype may have dried 765 00:39:26,960 --> 00:39:30,360 Speaker 2: out over recent years, but the conversation on exactly what 766 00:39:30,440 --> 00:39:33,080 Speaker 2: the opportunities are I think is getting more sensible and 767 00:39:33,160 --> 00:39:34,879 Speaker 2: in some cases more serious. 768 00:39:35,040 --> 00:39:38,120 Speaker 1: So within the power system, if Australia is considered to 769 00:39:38,200 --> 00:39:41,440 Speaker 1: be in some respects this Postcard from the future because 770 00:39:41,480 --> 00:39:46,879 Speaker 1: of the regulatory environment and just the dynamic nature of 771 00:39:47,000 --> 00:39:50,680 Speaker 1: the way Australia's power system works, what does that tell 772 00:39:50,760 --> 00:39:53,520 Speaker 1: us about the future of the energy transition. 773 00:39:54,040 --> 00:39:56,080 Speaker 2: So one of the things I think we've really learned 774 00:39:56,120 --> 00:39:59,080 Speaker 2: in this Postcard from the Future is that very often 775 00:39:59,440 --> 00:40:04,480 Speaker 2: energy setne systems, whether it's the infrastructure, policy, environment, the regulation, 776 00:40:04,800 --> 00:40:08,520 Speaker 2: or the perception of investment opportunity, have been built around 777 00:40:08,520 --> 00:40:12,680 Speaker 2: the idea of older technologies and older ways of doing business, 778 00:40:12,800 --> 00:40:17,840 Speaker 2: and that renewable energy, decarbonizing the technologies and accelerating the 779 00:40:17,840 --> 00:40:21,239 Speaker 2: deployment to a low carbon economy can be very disruptive 780 00:40:21,400 --> 00:40:26,080 Speaker 2: to their core. Whether that's around the deployment of physical infrastructure, 781 00:40:26,280 --> 00:40:29,840 Speaker 2: such as grids, poles, and wires to move electrons around, 782 00:40:30,000 --> 00:40:34,120 Speaker 2: whether that's the regulatory environment that creates price formations in 783 00:40:34,160 --> 00:40:37,440 Speaker 2: a wholesale power system, whether that's the way we view 784 00:40:37,719 --> 00:40:42,480 Speaker 2: flexible balancing services and technologies as well. The need to 785 00:40:42,520 --> 00:40:47,440 Speaker 2: accelerate decarbonization efforts brings the need to accelerate change in 786 00:40:47,480 --> 00:40:50,759 Speaker 2: the systems that support power markets, and those that are 787 00:40:50,840 --> 00:40:55,560 Speaker 2: too slow to transition, whether it's infrastructure, regulation or policy, 788 00:40:55,840 --> 00:40:59,120 Speaker 2: can come hard up against disruptive forces as a result, 789 00:40:59,360 --> 00:41:04,080 Speaker 2: whether that delays in network congestion, whether that's negative pricing, 790 00:41:04,440 --> 00:41:08,600 Speaker 2: or with that's new forms of volatility and disruptions in 791 00:41:08,760 --> 00:41:12,239 Speaker 2: wholesale market price design. It shows that the transition to 792 00:41:12,320 --> 00:41:15,440 Speaker 2: a low carbon future is a disruptive one, but an 793 00:41:15,480 --> 00:41:17,880 Speaker 2: incredibly important one for global markets. 794 00:41:18,560 --> 00:41:20,880 Speaker 1: Lenny, thank you very much for joining us today. 795 00:41:21,040 --> 00:41:21,880 Speaker 3: It's always a pleasure. 796 00:41:30,880 --> 00:41:34,000 Speaker 1: Today's episode of Switched On was produced by Cam Gray 797 00:41:34,200 --> 00:41:37,880 Speaker 1: with production assistance from Kamala Shelling. Bloomberg NEF is a 798 00:41:37,920 --> 00:41:41,040 Speaker 1: service provided by Bloomberg Finance LP and its affiliates. This 799 00:41:41,120 --> 00:41:43,839 Speaker 1: recording does not constitute, nor should it be construed as 800 00:41:43,880 --> 00:41:47,600 Speaker 1: investment in vice, investment recommendations or a recommendation as to 801 00:41:47,640 --> 00:41:50,480 Speaker 1: an investment or other strategy. Bloomberg ANIAF should not be 802 00:41:50,560 --> 00:41:54,360 Speaker 1: considered as information sufficient upon which to base an investment decision. 803 00:41:54,440 --> 00:41:57,399 Speaker 1: Neither Bloomberg Finance LP nor any of its affiliates makes 804 00:41:57,440 --> 00:42:01,160 Speaker 1: any representation or warranty as to the act or completeness 805 00:42:01,200 --> 00:42:04,200 Speaker 1: of the information contained in this recording, and any liability 806 00:42:04,239 --> 00:42:06,880 Speaker 1: as a result of this recording is expressly disclaimed