Australia to become the 2nd North Sea ?

During the recent G7 summit held in Hiroshima, Japan, over the weekend, a groundbreaking agreement was reached between Australia and the United States, aiming to enhance and accelerate the clean energy transition in Australia.

Following a series of influential initiatives, such as the Global Methane Pledge in 2022, where Australian officials joined forces with 130 other governments to pledge a reduction of methane emissions by at least 30% by 2030, the United States and Australia have solidified their commitment to collaborate on climate actions.

In fact, both countries need absolutely to accelerate the shift from fossil fuels to renewables. This includes ending coal-fired power and preparing steps beyond gas which remain key major source of exports in Australia. It also requires reshaping transportations and decarbonizing the entire supply chain of heavy industries such as steel and cement (For your information, steel and cement represent more than 25% of worldwide emissions). In 2022, renewables were representing 31.8% of Australian energy mix, by 2050, country should be above 50%.

In this new deal, the US federal administration should include the entire energy supply chain, bringing targeted Australian companies into the list of “domestic supplier”. This should open the door to part of the +$350 billions Inflation Reduction Act subsidies. Integration of critical minerals such as Lithium or the expects renewables energy equipments should be included.

This agreement echoes to the unique position of Australia within the energy transition in term of source of raw materials and green energy potential. With more than +$100 billions already investments, on-going massive domestic projects to achieve 2050 net zero target in the country/continent are already comparable to European largest "Clean tech" zone: the North Sea.

Multiple +100 MW photovoltaic or wind projects, transformation of country grid or large hydro projects have been initiated recently. Enforcement of the cooperation framework with the US will enforce execution of these investments.

Part of all on-going investments in Australia, a good example is Snowy Hydro 2.0. This is a AUS$ 3.8 billion pumped-storage hydroelectricity project that will add 2GW of generation capacity and 350GWh of storage to the National Electricity Market. It will be completed by 2026. It links two existing reservoirs, Tantangara and Talbingo, through 27 kilometers of tunnels and a new -800m underground power station. When there is surplus renewable energy production and the demand for energy is low, water will be pumped to the upper dam. When electricity demand is high, the water will be released back to the lower dam to generate electricity.

Another example is the CopperString high voltage line project is a 1,100-kilometre (size of France), 500 kV transmission line that will connect the North West Minerals Province in Mount Isa to the National Electricity Market grid south of Townsville. The project is expected to cost $5 billion and it is scheduled to be completed in 2029. It will open the window to the massive integration of renewables into the country east grid.

However, while Australia is making significant strides in its energy transition, there are certain aspects of the Australian market that differentiate it from the US or Europe. The unique local standards and regulations in Australia may pose challenges and may necessitate substantial adaptation efforts for potential investors. This can potentially reduce the country's attractiveness compared to other regions where supply and demand may have already reached a balance. Therefore, it becomes crucial for Australia to capitalize on synergies with other regions to streamline interactions with suppliers and ensure a timely and successful energy transition. The urgency stems from the pressing need to address the environmental concerns and secure a sustainable future for our planet and future generations. By fostering regulation collaboration and adopting best practices from around the world, Australia can overcome the hurdles posed by its specific market dynamics and accelerate its progress towards a cleaner and more sustainable energy landscape. If accepted, this collaborative approach could not only enhance the country's energy transition efforts but also contribute to global sustainability goals.