Saturday read: Dirty double standard on display

From pv magazine 08/2021

Have Australia’s political “climate wars” claimed another scalp? It’s the begging question when proceeding into the murky wetlands of Australia’s energy and climate policy. The question comes after Federal Environment Minister Sussan Ley rejected the expanded proposal for the 26 GW Asian Renewable Energy Hub (AREH). On the surface the decision appears premature, but scratch the surface and we find yet another example of the government’s double standards, whereby fossil fuel projects are offered a helping hand, while renewables are palmed off.

In 2020, the federal government gave Major Project Status to the AREH in the Pilbara region of Western Australia (WA). In June, however, Ley described the expanded proposal as “clearly unacceptable,” due to the potential impact on protected Eighty Mile Beach wetlands. Strangely, the decision was made before the project’s proponents had even completed their environmental assessment.

Considering how pre-emptive the decision looks from the outside, it is hard to imagine that the government of Prime Minister Scott Morrison is genuinely concerned about the Ramsar Convention site. Nevertheless, if the expanded proposal would negatively impact tides and migratory birds, why wouldn’t the federal government work to find alternatives?

“It’s relatively common for large construction projects to get a ‘no’ at first and then come up with revisions that get approved,” Martin Tengler, a BloombergNEF green hydrogen production expert, told pv magazine.

The issue is that the AREH seems to have been flatly rejected without any of the governmental hand-holding that fossil fuel projects typically receive.

Expanded proposal

The AREH won environmental approval in December 2020, but recognising the impending wave of demand for green hydrogen and ammonia, the AREH consortium – including Intercontinental Energy (ICE), CWP Global, Vestas and the Australian National University’s Energy Change Institute – expanded their proposal. It now includes a port facility for green ammonia, a town capable of housing 8,000 project workers, more solar, desalination, storage facilities, and crucially, a marine pipeline to transport green ammonia and other materials to an offshore export platform.

It’s clear that the revised application is no small expansion, but neither is it a small sign from the government that they are not more willing to find solutions that would kickstart the hydrogen economy the government itself wants to pursue. According to a statement from the AREH consortium, Lay informed them that “an environmental referral for the project will not proceed in its current form.”

WA Hydrogen and Regional Development Minister Alannah MacTiernan said the state “government is very concerned and perplexed by the premature rejection of the expanded AREH project proposal. The decision appears to have occurred with no meaningful engagement by the federal government, with either the proponent or the state.”

MacTiernan did not shy away from the greater complexity of the expanded proposal. However, she said the federal government “typically” works “with the proponent and the relevant state government agencies” on particularly “complex projects” to highlight “issues of concern” and address “environmental impacts before making a final ruling. This does not appear to have occurred on this occasion and the project has been summarily rejected.”

Doubling down

The rejection comes at a curious time. It directly follows Resources Minister Keith Pitt’s decision to veto an AUD 280 million ($206.5 million) loan to the Kaban Green Energy Hub (a 157 MW wind farm and 100 MW of battery storage) in northern Queensland (QLD), only to approve a AUD 175 million loan to Pembroke Resources’ Olive Downs coal mine in the same region just weeks later.

In March, the Australian Broadcasting Corporation (ABC) revealed that the mine was granted approvals even though the environmental regulator raised serious concerns about permanent impacts on the Isaac River, its floodplain, and groundwater. In fact, Pembroke’s plans would be illegal, but the relevant bans didn’t apply to Pembroke because its applications were submitted prior to enactment.

Former QLD Coordinator-General Barry Broe even described Pembroke’s proposal as “unacceptable,” which is the same word Ley used to describe the AREH proposal, and yet the AREH was rejected and Pembroke received a government loan. Once operational, Olive Downs will be the third-largest coal mine in QLD.

More examples of this double standard abound. In 2019, then-Environment Minister Melissa Price surreptitiously approved the Yeelirrie Uranium mine the day prior to the federal election, despite an ongoing court case with the Tjiwarl traditional owners, and the West Australian Environment Protection Agency advising against the mine because it would likely cause the extinction of native species.

“It’s totally two-faced,” said Tim Buckley, director of energy finance studies at the Institute for Energy Economics and Financial Analysis (IEEFA). “It’s ludicrous. It’s political; has the federal government ever rejected any LNG development in Australian history? The answer is no.”

Interestingly, the AREH’s rejection took place during a time of internecine struggles in the coalition federal government, whereby climate change denier and robust supporter of the fossil fuels industry, Barnaby Joyce, was reinstated as head of the National Party, making him deputy prime minister. The move was thought by some to be an unconcealed shot across the bow of Prime Minister Morrison, who may have been on the verge of succumbing to growing international pressure for a net-zero 2050 commitment.

“I don’t think the timing of the rejection was a coincidence,” said Dan Gocher, director of climate and environment at the Australasian Centre for Corporate Responsibility. “As the Clean Energy Council noted, the project was rejected even before the proponent had conducted an environmental assessment. There’s clearly a bias toward supporting fossil fuels within the federal government… It is strange. The fact that the minister didn’t even follow the correct process suggests it was a political decision.”

When asked if the AREH was being used as a political football, Gocher said he could not say without doubt. “But it is just another episode in the federal government’s long battle to slow the transition and protect the (fossil fuel-driven) status quo.”

IEEFA’s Buckley agrees, noting that not only was the manner of the rejection “unprecedented,” but adding that it is also “unprecedented that the Australian government would ever block any investment. If it was a fossil fuel project, the environment minister would’ve done nothing but rubber stamp the proposal.”

‘Fast follower’

The impact of the AREH rejection is not yet clear, but BNEF’s Tengler believes it is not a “make or break moment for the project,” with financial close still years away. But Buckley said “it is a very clear symbolic setback for the renewable energy sector in Australia.” He claimed that global investors will now pause for thought before they invest AU$50 billion in a single project.

However, Buckley is optimistic that even if Australia’s political squabbles continue to handicap its energy transition and its future renewables-based export economy, losing “first mover” status might be an advantage. This is to say, Australia may not become the first mover in green hydrogen and its derivatives, but could be perfectly placed to be a “fast follower.”

“It’s all about the economics,” Buckley concluded. “The ability to be a fast follower is probably preferable. Electrolyser prices are going to drop 10% to 20% every year [over the next decade], so even if Australia is a year behind (and Australia is more than a year behind), that might accrue into a 50% capital cost advantage over the first mover. And that’s profound when we’re talking about the scale Japan and Korea need.”

In the end, said Buckley, the federal government’s squabbles are trivial compared to the green wave on the horizon. “The more the federal government tries to get in the way, the less effective they are at stopping it,” he added.

Western Green Energy Hub

The consortium behind the AREH have not only committed to resolving the issues raised with its expanded proposal, but are doubling down. In July, said proponents announced the 50 GW, AU$100 billion, Western Green Energy Hub (WGEH) in the Goldfields-Esperance region, at the other end of WA.

Clearly a bit of in-fighting at Australia’s federal level is not going to dull the ambitions of genuine green energy movers. The proposed WGEH (approximately the size of Australia’s National Energy Market) would also be used to produce millions of tonnes of green hydrogen or green ammonia, and would spread across 15,000 square kilometres (larger than the U.S. state of Connecticut) in the Shire of Dundas and the City of Kalgoorlie-Boulder.

Like the AREH, the consortium also plans to build the project in multiple phases, with an eventual capacity of 30 GW of wind and 20 GW of solar. The group aims to annually produce 3.5 million tonnes of green hydrogen, or 20 million tonnes of green ammonia, for domestic use and export.

WA’s MacTiernan welcomed the announcement and confirmed that the consortium has already obtained a license to collect data and further progress the feasibility of the site. However, what is even more remarkable about the WGEH is the support and partnership of the land’s traditional owners, the Mirning people.

In what Brendan Hammond, the chairman of the WGEH board, called “historic,” Mirning Green Energy Ltd., a wholly owned subsidiary of the Mirning Traditional Lands Aboriginal Corp., will have a genuine stake in the project. This will create “a truly long-term and sustainable multi-generational partnership that delivers enormous socio-economic benefits for the community,” said Hammond.

“As first nations land owners, the Mirning people are excited to hold such an integral and defining stake in this historical partnership with WGEH,” added Trevor Naley, chairman of Mirning Traditional Lands Aboriginal Corp. and the inaugural Mirning board member for WGEH.

The green hydrogen sector is predicted to become a US$2.5 trillion market by 2050. So, if both projects see completion by 2030, and if the federal government can stop shooting itself in the foot, Australia’s corner of the Asia Pacific has all the potential to corner the market.