A Note from The Publisher
Friday, 2 October 2020
By James Woodburn
Our biggest and most important conversation of the year…
Unearthing Investment Opportunities for a Low-Carbon Future
By James Woodburn, Publisher
I landed in Melbourne at 6am on 31 August 2011.
On that grey, drizzly last day of winter, I was whisked off to my digs in a Ford Falcon.
Back then, you couldn’t walk more than 30 metres without bumping into one.
At the start of the last decade, Ford was still making the Falcon and its SUV stablemate, the Territory, locally. In fact, some four million Falcons were made in Australia between 1960 and 2016.
Rival GM’s local brand Holden employed thousands of Australians at its plant in Elizabeth, just north of Adelaide.
This is where, since 1978, they had pumped out several six and eight-cylinder variants of Aussie icon the Commodore.
As we swooped down the Tulla toward the city, it seemed like every third car was a Commodore.
And in fact, it probably was. In 2011, the big Holden sedan was Australia’s bestselling car — a title it had held for fifteen consecutive years.
Nine years on, the Commodore doesn’t exist.
Holden doesn’t even exist anymore.
The Falcon…the Territory — both gone too…since 2016.
Are fossil fuels next?
The swift passing of these great Aussie stalwarts — sad though it may be — isn’t just symptomatic of changing automotive tastes and fashions.
This is about a world moving beyond petroleum to drive its cars…beyond coal to power its factories…and beyond oil to fuel its economies.
And when I say ‘moving’, I mean faster than a supercharged HSV barrelling down the Hume Highway.
Now let me just tap the brakes for a second, to reassure you…
This is NOT a political piece about this subject.
No matter how you feel about climate change, its causes, cheerleaders and deniers…
The fact is, a globally coordinated move to decarbonise the world is happening.
It involves governments…cutting-edge technology…and trillions of dollars in private capital.
And I believe that it’s going to create an investment opportunity unlike anything any of us has ever seen before — or ever will again.
That’s why I’m writing.
Because over the coming days, all of our editors here — and a few globally renowned special guests — are going to help you put a plan together to make the most of this emerging megatrend.
See, what’s most surprising about this isn’t that the transition to a low-carbon economy is taking place.
It’s how quickly Australia is getting with the program.
In South Australia — home of the V8 Commodore — up to half of the state’s power now comes from renewable sources.
In Tasmania, it’s an astonishing 94%. The Apple Isle has been big into hydroelectricity for more than 100 years now.
In July, the Australian Energy Market Operator (AEMO) reported that this changeover is moving at such a clip that by 2035 almost 90% of our total electricity demand could be met by grid-scale solar and wind energy, along with pumped hydro.
Any talk of ‘creaking infrastructure’ is off the mark, says AEMO. The Aussie power grid will be able to safely accommodate up to 75% renewables by as soon as 2025.
WA is gearing up for this clean energy future. Some estimates suggest that more than 45% of households in Western Australia will have rooftop solar in just five years’ time.
These will be linked to so-called ‘smart batteries’ and ‘micro grids’ — linking houses in a single neighbourhood to provide continual, de-centralised community power in the event of prolonged cloud cover.
We may soon be exporting clean energy to our neighbours in Asia, too.
Just this August, The Washington Post reported how the government is backing Australia-based ‘renewable megaprojects’ to help power Asian economies:
Of course, back in 2011, you’d have been forgiven for scoffing at this idea.
There just seemed to be no appetite or political will for change. Back then, a mere 9.6% of Australia’s power grid was supplied by renewable energy.
Prior to that, in the run up to the 2007 federal election, then Labor leader Kevin Rudd had pledged that renewables would supply 20% of the Aussie grid by 2020.
This was a shrewd move.
I don’t mean in the sense of providing dynamic, forward-thinking, responsible leadership.
I mean politically shrewd. Attract votes now with a big headline pledge. Then set the deadline far enough in the future that some other bloke would have to answer the difficult questions in Paris, Tokyo, or wherever the big climate summit of the day was.
The federal government’s lack of interest in seeing this clean energy project through became obvious when they unveiled the ‘tsar’ they’d chosen to oversee the 20% project: Dick Warburton — one of the most outspoken climate change sceptics in the country.
In 2011, Dick famously wrote a two-part article for Quadrant, questioning climate change and its causes. The article was titled ‘The Intelligent Voter’s Guide to Global Warming’.
So how, then, did Australia not just hit — but surpass — its 20% renewables supply target one year early?
Clean energy is no longer a fringe idea
As of late last year, 21% of the total Australian power grid is supplied by renewables. And that figure is growing fast…
Schneider Electric, the nation’s largest corporate energy adviser, forecasts that renewable energy’s share of the Aussie grid will surge as much as 6% this year — up to 27% — and could exceed 30% by the end of 2021.
In fact, as I mentioned a moment ago, by 2027 we may have captured and stored so much Outback sunshine that we export the excess to help Asia decarbonise.
This is the remit — and the potential — of the Sun Cable development, a $16 billion project that will see our export mix shift dramatically away from coal and into clean, solar energy.
If it all goes off as planned, they will build the world’s largest solar farm, in Elliott, Northern Territory. So big, in fact, it will be visible from space.
This is what it’s going to look like, according to the folks who want to build it…
Source: Sun Cable
To transport all this solar power to a newly built hub in Singapore, they’ll need to lay a cable six times longer than the world’s current longest submarine cable that runs under the North Sea from Britain to Norway.
Two years before that, the first power generated from the $4.5 billion ‘Snowy 2.0’ hydroelectric development is expected to hit the national grid.
Snowy 2.0 is currently the largest committed renewable energy project in Australia.
It will link the Tantangara and Talbingo dams by a 27-kilometre tunnel, bored right through the Blue Mountains of New South Wales.
They’re going to build an underground power station to turn the waterflow into enough electricity to power three million Aussie homes every week — by 2025.
Projects like these two are ambitious, to say the least. If they come off, Australia will be a bona fide clean energy powerhouse.
And we should be, shouldn’t we?
Let’s be honest. We’re in a pretty handy spot down here…
Australia has a year-round abundance of sunshine and wind…five of the world’s biggest lithium mines…a 100-year history of directing water flow…some of the finest engineering minds on the planet…
…and I haven’t even mentioned the nuclear option yet.
The known uranium supply in Olympic Dam alone would power Australia for 400 years based on today’s energy consumption.
I know even bringing that up is about as popular as letting slip a radioactive fart before you’ve zipped up your hazmat suit. But shouldn’t we at least talk about these things?
Because this transition is happening, one way or another.
How soon we’re all gliding around in our electric Volvos is a simple matter of economics.
When it becomes as cheap to power our lives with electricity captured from the sun’s rays and stored in giant batteries, as it is to dig a lump of coal out of the ground and set fire to it, the game is going to change. Fast.
And by fast, I mean set your investment horizons for 2025…
Damian Klassen, head of investment at Nucleus Wealth, reported in August:
‘Coal, gas and oil have economics based on a scarcity curve: the more we use, the deeper we need to dig and the more expensive it is to extract. Solar and battery power is on a technology curve, the more the world produces, the cheaper it becomes.’
He goes on to say:
‘In the last 10 years, solar costs have fallen around 20% per year. Given how low solar costs are, the critical assumption is battery prices. A 20% fall in battery prices will have a much larger impact than a 20% fall in the cost of solar. I suspect this will slow a little, but if it doesn’t the impact will be immense…
‘…If costs decline at 20% per annum (like they have for the last ten years) then in five years’ time, the cost of running new solar will be cheaper than the fuel cost of an existing power plant.’
Think about that for a second.
When the economics are right, the game will change.
And the economics of any major tech development are fairly easy to understand.
The more batteries we make…the better and more efficient they get…the cheaper they become to build…and the cheaper their output becomes.
Case in point: Tesla’s famous ‘big battery’ at Hornsdale is barely three years old — and already picking up the slack when the South Australian grid drops out.
Its operator — Neoen — just announced plans to build one that’s ten times bigger — at Goyder South in South Australia.
It will be connected to a wind and solar farm some 30,000 hectares in size — that’s bonkers — and its projected output will take South Australia close to the 100% renewables mark on its own.
See how far we’ve come in the last 10 years…since the gas-guzzling Commodore and Falcon ruled the highways?
Now think about what the next 10 years is going to look like, as technology…capital…and public and political will speed this transition up…
Suddenly…you could be looking at the most investable idea of your lifetime.
When the idea is ready, the market will appear
If you’re still rooting this story in the context of climate change, that’s up to you.
But you’re probably reading the wrong email.
This is no longer a question of whether you think Greta Thunberg is a modern-day prophet or an overexposed millennial weirdo.
It’s not even a question of whether you’d sooner crawl to work on your hands and knees than climb behind the wheel of a Nissan Leaf.
This is about a transfer of wealth estimated at US$95 TRILLION out to 2050.
The biggest in your lifetime.
The biggest in your parents’ lifetime.
This capital is on the march — right now — and it’s looking for a home. It will likely create millionaires, billionaires…maybe even a trillionaire or two before it washes through.
And it’s happening quicker than I can type these keys to tell you about it.
The global transition to a low-carbon economy will leave its mark on your life in some way.
Where and how these dollars are spent has the potential to change how you live, where you live, how you travel, how you shop, how and where you invest, how you do business and how you communicate — forever.
Markets are not oblivious to this. Nor are they especially sentimental. They are already shifting to accommodate — and perhaps even facilitate — this transition.
Here in Australia, our second largest super fund, First State, announced in July that it was preparing to dump shares in companies that mine thermal coal — by October this year.
It is actively looking to buy stock in Australian businesses that are gearing up for the transition to a low-carbon economy.
The fight back just isn’t materialising.
In the US, ‘big oil’ is on its knees.
Exxon just got cut from the Dow Jones after 92 years on the exchange.
I don’t know about you, but this feels monumental to me. Exxon was — for many years — the biggest company in the world.
What does that tell you about where capital is moving from…and where it might be moving to?
I know what it tells me.
And I know what I want to do about it…
Our biggest and most important
conversation of the year
It took me far too long to write this essay.
Why? Because each clean energy revelation revealed a new one. And each new one sent me off down a rabbit hole. And each rabbit hole sucked an hour out of my writing day.
So, I’m giving up.
Not on the idea. But on tackling it alone.
I’ve decided that we’re going to put on a clean energy investment conference. This year.
An online conference, to be accurate.
I’ve floated this idea past the editors and experts at both of the publishing houses I run here in Melbourne. And I’ve never received a more resounding ‘YES, WOODY’.
Everyone’s over COVID…and living under house arrest… We’re all more optimistic now!
So I’ve asked them to go away and think about it…to play to their strengths…and then to come back and present their thoughts and ideas to you.
Next, I called up my friend, James Allen, in London.
James is an energy market specialist who you may recall I spoke to at length back in early July. We recorded an hour-long video conversation that I shared with readers of The Insider.
(FYI, that one episode generated more reader emails than any other since I moved into the big chair at Port Phillip Publishing just over a year ago…)
James has been imbedded within the energy industry for 10 years.
He spent five of those years heading up an energy market bureau in New York City. Before that, he ran an energy price-reporting desk in London.
He knows plenty of the movers and shakers in the energy market trading community…including execs and CEOs from all the major energy companies and exchanges in Europe and the US.
But he’s on our side.
James is pretty clear about who the early winners are likely to be in the great low-carbon transition — and who may as well pull up stumps and go home now.
He also believes Australia occupies a unique place in this story…and that many of the poster children of this clean energy revolution will be home-grown.
You’ll be hearing from James a lot more over the coming days.
Big names mulling it over…
Outside of our publishing ecosphere, I’ve reached out to several world-class experts in the field of energy…investment…and technology…and invited them to put their case to more than 200,000 Australian investors (you guys).
I have received several expressions of interest. If I manage to snag even two of the people I emailed, you’re in for a real treat…
The date is almost set…and we’ve just about settled on a title.
But my goal for the event is clear.
Yes, I want to show you exactly what’s at stake for you in Australia’s clean energy future…
But my main aim is to share our best ideas for investing in this US$95 trillion megatrend.
Not in the future.
Now — while we’re still on the flat side of the low-carbon curve.
Then let me tell you the best bit.
If at all possible, I want this conference to be free to attend.
Normally when we put on shows of this scale and ambition — like ‘After America’, ‘World War D’ and ‘The Paradox of Prosperity’ — we charge in the region of $500 a ticket.
Not this time.
At least, not if I can help it.
Much will depend on speaker fees, of course. But if I can put this show on for free, I will. And if not, the cost to attend will be nominal.
You’ll be invited to get your name down on our delegate list soon. Then, as soon as I have confirmed speakers and dates, you’ll be able to reserve your ticket.
In the meantime, if you want to reach out to me about the ideas I’ve covered in this special report, please do.
If there’s a particular area of clean energy you want me to cover in our conference, let me know. If you’re a massive sceptic about all of this and you want to vent, feel free.
Or if — like me — you’re optimistic about a world beyond oil, tell me why!
Email me here: firstname.lastname@example.org
James ‘Woody’ Woodburn,
Group Publisher, The Insider