New energy investments planned, Greens to challenge gas and coal projects, and more – What do they mean for us?

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It was a busy March this year as we saw a few new updates across the National Energy Market (NEM) mainly meant to address energy security gaps and increase stability in the grid. Newsworthy events include Brookfield announcing its plan to invest heavily to hasten the decarbonisation of Origin Energy, the Greens vowing to dispute new coal and gas projects presented to the government during their term, and Callide C’s co-owner Genuity going into voluntary administration.

Brookfield pledges billions to speed up Origin Energy’s decarbonisation

Canadian multinational Brookfield and its US partner EIG have vowed to pour in billions to expedite Origin Energy’s climate transition. After the deal was announced on 27 March, shares for the Australian electricity and gas supplier rose the following day. The outcome was generally seen as positive, with Origin’s Frank Calabria deeming it a “great outcome” and investors backing it this early. 

Brookfield intends for Origin’s new energy markets business to be a pioneer in large-scale renewable energy deployment and retiring from coal power dependence. To do so, at least $20 billion of Brookfield’s investment will be directed towards renewable energy and storage. This will make up a significant portion of Australia’s requirement for large-scale renewables investment for the decade.

It should also be noted that the planned closure of Origin’s Eraring generator in Hunter Valley will push through under Brookfield’s ownership. There have been some concerns voiced regarding pushing back the closure, but Brookfield Asia-Pacific president Steward Upson responded that they will close the power station down “as soon as we possibly can under those constraints, and it will close down as fast as or faster than it would have, with our ownership.”

Regarding these events, Origin Chairman Scott Perkins said that the board believed that the takeover would serve the best interests of those involved. It will, of course, affect prices. Mr Perkins said, “We have to be careful that if we push too much underinvestment in the industry, it’s going to have an impact on prices and it’s going to have an impact on public support for the energy transition.”

According to Mr Upson, the current investment and the intention to invest $ 20 bn more to accelerate Australia’s decarbonisation is in the best interest of the Australian public and “creates a very strong net benefit case.” 

The Greens have promised to use a new pollution benchmark as a safeguard mechanism to oppose upcoming coal and gas projects

The Greens have announced their intent to fight future coal and gas initiatives with a new pollution trigger that resulted from negotiations with the government over its key emissions reduction policy.

The mechanism will require top polluters to offset their emissions by 4.9% annually until 2030. The laws can also make the minister’s approval of future coal and gas projects conditional, depending on how they would affect emissions reduction targets. 

While the Greens have backed the bill, they also believe that it still does not do enough towards climate change, saying that putting a stop to new coal and gas projects is the better approach, based on science.

The Greens’ amendment to the government’s safeguard mechanism will impact high-polluting initiatives, notably including the Beetaloo Basin gas project. While the emissions reduction deal between Labor and the Greens isn’t a full-on ban on gas and coal, companies can expect to take a hit with this as they may end up spending billions on offsets and carbon capture technology. 

Callide C co-owner goes into voluntary administration

Callide C has been in the news often lately with the earlier announcement of its return to service being pushed back further, and in late March it was reported that co-owner Genuity (formerly known as InterGen Australia) has gone into voluntary administration. 

The decision was made after Genuity’s shareholders could not settle on future funding for the Callide C joint venture which is co-owned with CS Energy. This development brings uncertainty to Callide C’s long-term future, but state-owned CS Energy remains determined to bring the Central Queensland power station back online later this year with minimal disruptions.

Following the announcement of the delayed return of Callide C, future wholesale electricity prices rocketed by up to $15 mWh. There have also been questions about the 932 MW of capacity lacking from Queensland’s energy security and electricity prices.

Queensland still relies heavily on coal-fired power although the government has already committed to making the state 80% renewable by 2035. But with Callide C’s future in flux and the transition ongoing, there’s bound to be some instability in the grid. So the question is, will there be enough transmission to keep the lights on?

With the flurry of developments surrounding Brookfield’s energy investments, safeguard mechanisms, and Callide C’s delayed return just in March alone, it’s without a doubt that the energy market is fraught with uncertainty. And if you’re a commercial or industrial energy user hoping to work out a strategy to forward contract, the volatile market can be challenging to follow alongside everything else you have to do to keep your business running. 

Mitigating Market Risks: Strategies for Managing Uncertainty in Energy Costs

The best approach? Work with a consultant who will take care of you through the transitions – one who can alert you about these topics and help you create a data-based strategy to forward contract. Market timing is key and Leading Edge Energy’s expert consultants can guide you through the current market.

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