Australia’s carbon past and present haunt green ‘superpower’ push

NEWCASTLE, Australia — Newcastle, the world’s biggest coal export hub once known as Australia’s “steel city,” is a growing gem of a metropolis on Australia’s eastern coast. Its million-dollar ocean views come with a sprinkle of the 4,400 ships that deliver millions of tons of the black stuff to customers across the globe every year.

The port’s operator, however, believes the future is green and does not want to be left behind. That future may arrive sooner than later, with Australia’s new Prime Minister Anthony Albanese vowing to turn the country into a “renewable energy superpower.”

“The question is always going to be, is it a graduated decline [of coal] or is it a fall-off-the-cliff moment?” Port of Newcastle CEO Craig Carmody wondered aloud in an interview with Nikkei Asia at the operator’s Newcastle headquarters, two hours north of Sydney in the Hunter Valley region.

“As a CEO in the United States said to me when I took up this role, ‘You guys sound more and more like Nokia every day.'”

Nokia once dominated the cellphone market but failed to adapt to the smartphone age. Its executives “thought they had time, too,” Carmody said.

Eighty percent of Newcastle’s coal cargo goes to Asia. But as leading economies including Japan and South Korea aim to transition to net zero emissions by 2050, the port hopes to become a green energy exporter as well, drawing 50% of revenue from non-coal sources by 2030. On land originally intended to accommodate an expansion for coal, the port is constructing a 3.1 billion Australian dollar ($2.1 billion) hydrogen hub due to open by 2027, creating 5,000 jobs.

“What we want to be is a future energy port,” Carmody said. “Whatever the hell it is, we want to be part of the future.”

Albanese and his center-left Labor Party are now positioned to shape that future. It won’t be easy: His government will have to kick-start delayed projects, overcome fractious politics and assuage the fears of communities like Newcastle still haunted by painful industrial transitions. Even so, the new prime minister appears determined to change Australia’s reputation as a climate laggard. In mid-June, Albanese formally committed to reducing greenhouse gas emissions by 43% from 2005 baseline levels in a letter to the United Nations’ climate change chief, beating his predecessor Scott Morrison’s 26% to 28% target.

The Morrison government in fact earmarked AU$100 million for the Newcastle hydrogen project, among other investment pledges, but was roundly criticized for its climate policy on the world stage.

The Climate Change Performance Index, a widely cited monitoring tool published by German advocacy group Germanwatch, late last year ranked Australia near the bottom. The report said Australia ranked “very low” in all assessment categories — greenhouse gas emissions, renewables, energy use and climate policy — and that it “has failed to take advantage of its potential.”

Albanese wants to unlock that potential and is promising to end the “climate wars” that have dominated the political landscape for well over a decade. The conflicts have contributed to the downfalls of several prime ministers. Morrison’s predecessor and fellow Liberal Party member Malcolm Turnbull, for instance, complained after his ouster that he had tried to establish a coherent climate policy but that his government succumbed to politics “hijacked by a toxic, climate-denying alliance” of right-wingers, conservative media and vested interests, “especially in the coal industry.”

Amid Canberra’s policy paralysis, every Australian state and territory committed to a net zero emissions target long before Morrison’s government reluctantly jumped on board in time for last year’s COP26 climate conference.

But political analysts say Albanese’s convincing electoral victory last month, coupled with a record number of Greens and climate-focused “teal” independents joining him in parliament, could mark a turning point.

“Middle Australia is no longer compliant, as it were, to kicking the climate change can down the road,” said Paul Williams, a political scientist at Griffith University. “The jig is up. ‘It’s time for action’ — that’s what the electorate has said.”

At the heart of Albanese’s plan is Labor’s AU$20 billion investment to rewire and modernize Australia’s aging power grid. Consultancy RepuTex, which modeled the scheme, estimates the upgrade could unlock another AU$58 billion in private investment across renewable energy and distribution projects.

Labor also wants to invest up to AU$3 billion in green metals and support 10,000 new energy apprenticeships, offering cash to trainees who go into fields like rooftop solar installation or green hydrogen.

Grid upgrades and energy reforms could not come at a more pressing time.

Electricity prices surged in recent weeks after several of Australia’s aging coal plants suffered outages. This is on top of the war in Ukraine pushing up gas prices and a domestic cold snap leading to a surge in power demand. About two weeks ago, Australia’s energy regulator suspended the wholesale electricity market for the first time to try to curb spiraling household bills and avoid blackouts.

“We have lost our old energy advantage,” said Tennant Reed, a national energy policy adviser with AI Group, a body representing Australian industry. “We had lost it even before the crisis of energy affordability, so if we don’t build new [transmission projects], we have got big problems with energy-intensive industry competitiveness.”

Reed said Labor’s “Rewiring the Nation” plan is a “hopeful and positive vision” that can help address the current energy crisis and boost investment in renewables. One challenge, he said, will be securing the necessary “social license” to complete the projects.

“People often don’t like big transmission lines with their properties, and we are already seeing difficulties with the existing rollout of major transmission lines,” he said.

Several energy projects are running well behind schedule including the AU$5 billion expansion of the country’s biggest hydro project, Reed added. The Snowy Hydro expansion is now facing a 19-month delay and will not open until 2028, the same year it is due to start compensating for three coal-fired power stations that are set to close.

Despite such hurdles, Albanese claims 82% of Australia’s national energy market will come from renewables by the end of the decade, up from 32% now. Yet some experts argue Australia will have a hard time kicking its addiction to fossil fuels.

“We are gradually, over time, decarbonizing our electricity supply,” said Richard Denniss, chief economist at The Australia Institute, a progressive think tank. “But I don’t think it’s accurate to say we are transitioning the economy away from fossil fuels.” He noted that Australia is the third-largest exporter of fossil fuels behind Saudi Arabia and Russia, and that gas production has tripled since 2015.

“There will probably be more gas being built in 20 years’ time than there is now, if the gas industry’s plans come into fruition,” Denniss added.

Outside of the obvious logistical challenges, Albanese faces political complications. Ironically, it could be parliamentarians who want even more aggressive climate action who give him headaches. Griffith University’s Williams said these lawmakers will be Labor’s “real opposition” after the center-right Liberal-National coalition suffered its worst seat losses in over 70 years.

Although Labor has a majority in the lower house, Albanese will have to rely on the Greens’ 12 senators in the upper house to push through bills once parliament reconvenes in July. Greens leader Adam Bandt has criticized Labor’s 43% emissions reduction target as not being bold enough.

“They could,” Williams said, “make life quite uncomfortable for Albanese and extract all sorts of reforms, and push Labor further down the climate change road than it wanted to [go] in order to get legislation through the Senate.”

Still, few deny Australia’s potential. Some giants of the resources industry are already seeing green.

Iron ore magnate Andrew Forrest is aiming to transition his Fortescue Metals Group into the world’s biggest green energy company. The billionaire miner wants to produce 15 million tons of green hydrogen by 2030, a figure 50% more ambitious than the European Union’s own end-of-decade target.

Along with fellow billionaire Mike Cannon-Brookes, founder of software developer Atlassian, Forrest is also backing the construction of the world’s largest solar farm and battery facility in Australia’s Northern Territory. The AU$30 billion Sub Cable project — which will comprise 20 gigawatts of solar generation capacity and 42GW of battery storage — will export energy from the Australian outback to Singapore via a 4,200 km submarine cable running through Indonesian waters.

EY, the global professional services company, is also bullish on Australia’s green energy sector, last month placing the country sixth on its latest renewables attractiveness index, a measure of markets’ investment appeal.

“We will become, I’m sure, a country with a reputation for exporting energy in various forms to the rest of the world,” said Tony Wood, director of the Energy Program at the Grattan Institute.

Wood said he is confident Australia can “more than double the export revenue that comes from our coal and gas exports” through renewables and the country’s abundant minerals. He says Australia’s diverse climate, small population of about 26 million, large amount of wind and solar resources and proximity to Asia can help turn it into a renewable energy powerhouse, just as Albanese envisions.

Likewise, AI Group’s Reed sees a wealth of export potential. “We have got impressive project proposals for direct electricity exports via cable to Southeast Asia, proposals for exporting liquid hydrogen and ammonia,” he said. And “potentially we have good prospects for green metals.”

Reed added that a stable political and regulatory environment also makes Australia attractive to foreign capital. But success is not guaranteed.

Australia needs “to reach for those opportunities; they are not going to be handed to us on a plate,” Reed warned, stressing that effective collaboration between tiers of government and the business community will be key.

It’s a view shared by business groups that worry government officials are not doing enough to prepare Australia’s resource-reliant communities for this economic overhaul, despite promises of job creation.

Singleton, a one-hour drive from Newcastle, is in the heart of coal country. Surrounded by open-cut mines, the town is filled with families who have worked in the pits for generations. Billboards advertising mining apprenticeships greet drivers on the way in. Dynamite is readily available on the outskirts.

“A lot of the businesses around here depend on coal,” said Sue Gilroy, president of the Singleton Business Chamber. “That is their only source of income. What we need to do is give them other markets they can chase.

“The government keeps talking about transition but gives us nothing to understand what that looks like in place of coal. The biggest missing link is a plan around what it looks like and how we are going to do it.”

The Port of Newcastle’s Carmody said the region has seen a similar story before.

A BHP steelworks operated for over 80 years and was the area’s largest employer, with about 13,000 people on the payroll at its peak. No longer able to compete with Asian producers, the mill closed in 1999.

“This city was once the center of steelmaking in the world,” the port CEO said. But “23 years ago [the mills] closed down and one in five people in the community lost their job. It was the largest deindustrialization event in Australia’s history.”

Now, he said, “we sit here today, as the world’s largest coal port, and you can literally see history repeating itself.”

As if to hammer home the parallel, BHP announced this month that it will close its Mt. Arthur coal mine in Hunter Valley in 2030.

Carmody says the Port of Newcastle is promising residents they will not suffer another 1999 “BHP moment.”

“We will be ready,” he said, “for when coal finally stops.”

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