Peter Kupniewski, Chris Floreani and Nicole Mead summarise some key developments for businesses operating in the energy and resources sector.
The Federal Budget was announced in early October, and included spending aimed to address energy affordability and reliability. The most substantial announcement in this sector was $1.9 billion over 12 years for the Australian Renewable Energy Agency (ARENA), the Clean Energy Finance Corporation and the National Electricity Market for measures to, amongst other matters, increase productivity and reduce emissions, create a Future Fuels Fund to integrate electric vehicles and charging facilities, investigate microgrids in remote locations and continue research and development into emerging low emission technologies. Other investments include supporting industry led research projects for innovative solutions for recycling and reuse of problematic materials such as plastic and tyres, and a continued focus on a “gas-fired recovery” including unlocking gas supply and delivering an efficient pipeline/transportation market.
Released in early November, the South Australian state budget has a focus on jobs, renewable energy and reducing emissions. With the target of net-100% renewable energy by 2030, the government has proposed to create over 1000 new green jobs. The state government also intends to transfer its fleet of vehicles to electric cars, offer solar systems to 1000 concession holders, contribute $2 million to the renewable hydrogen export project, improve the energy efficiency of older government buildings and will continue to fund the Home Battery Scheme.
The South Australian government has launched its Energy and Mining Strategy, which outlines how these industries will assist in delivering an early recovery from the economic downturn triggered by COVID-19. The Strategy is expected to deliver 25,000 to 30,000 additional jobs by 2030. Investment will be made into helping new and expanding resource projects by addressing infrastructure and water issues, including sourcing water sustainably. The Virtual Power Plant trial in partnership with Tesla will continue. Growth areas identified in the Strategy include hydrogen, electric vehicles, mineral and extractive industry exports and carbon capture and storage.
Australia and Germany have agreed to a joint feasibility study to collaborate on the production of renewable hydrogen. The study will consider and examine all aspects of the hydrogen supply chain, technology, research and development, and potential barriers to developing a renewable hydrogen industry that is sustainable. For example, likely barriers include distance and transportation costs, as Australia will not be able to successfully export hydrogen if there are no cost-effective transportation options. Further, certification schemes for green hydrogen will need to be considered in order to create transparency and develop market confidence. It is hoped that this study will position Australia and Germany as future leaders in the hydrogen industry.
The Energy Security Board, which was established by the COAG Energy Council, is tasked with coordinating the implementation of the energy reform blueprint from Australia’s Chief Scientist, Dr Alan Finkel AO. The Board has recently released the next stage of its design, and is expected to make final recommendations to the government by mid-2021. The current challenges that the Board is focused on include future-proofing energy in Australia, updating market and regulatory arrangements and addressing decentralised home solar. Potential solutions being explored include resource adequacy mechanisms, an aging thermal generation strategy, two-sided markets, distributed energy resources integration and transmission access and the coordination of generation and transmission.
The ACCC has recently released its interim Gas Market Inquiry 2017 – 2025 Report, which focusses on the effects of on the east coast gas market from COVID-19 and the significant fall in oil and LNG prices. The interim report signals that supply will meet demand, but significant uncertainty remains due to increased reliance on reserves that are currently undeveloped. The ACCC has concerns that the ability of LNG suppliers to increase domestic supplies could lead to broader competition and market power concerns. There have been announcements from the NSW, Victorian and Queensland governments that will continue to support the gas industry. Upcoming policy challenges for the gas industry include how to address likely shortages in the short-term.
This article provides general comments only. It does not purport to be legal advice. Before acting on the basis of any material contained in this article, we recommend that you seek professional advice.
Peter Kupniewski, Principal in our Corporate Team
Direct Telephone: +61 8 8210 2223
Chris Floreani, Senior Associate in our Transactions Team
Direct Telephone: +61 8 8210 2251
Nicole Mead, Associate in our Disputes Team
Direct Telephone: +61 8 8210 2270