Australia’s moment: How Trump’s fossil turn can supercharge our energy revolution

This week, the global climate movement is in mourning. Under Trump’s reign of executive orders, not only has the US out of the Paris Agreement, but they’ve bulldozed a $300bln wind energy project pipeline and promised to desecrate the incredible climate progress under the IRA.

Already, sceptical commentators are calling on Australia’s political contenders to follow suit, abandon climate concerns and double down on ‘bread and butter’ issues ahead of this election.

But what they fail to realise, is the incredible opportunity this now presents for Australia. 

On the back of our Climate election only three years ago, the Albanese government introduced one of the most ambitious energy transition plans anywhere in the world. To shift Australia from generating over two thirds of our electricity from coal and gas to a country run on 82% renewable energy by 2030 was and remains a truly transformational vision for the decade.

Straight off the bat, investors rushed in. South Korean steel giant POSCO announced a $60 billion green steel investment plan, and the Clean Energy Council reported more than $6 billion in new clean energy investments in 2022 alone.

However, not only was oil and gas-fuelled inflation about to send capex costs through the roof, but the Biden administration was busy negotiating the final elements of one of the world’s biggest investment plans in history, backed with over $124 billion (AUD) in direct public investment, and close to $2 trillion AUD of clean energy subsidies and loans. 

This IRA-inflation matrix sent Australia’s new renewable energy investments into a spiral. Inflation was up. Housing costs went up. The cost of electricity was going up.

By the end of 2023, annual new investments in Australian clean energy projects had hit their lowest point since 2017, with Australians being crushed by the fossil fuel price hyperinflation, thanks to Putin. Money was incredibly hard to come by, and the USA had laid a trillion dollar pillow for investors to rest their weary heads. 

Throughout 2024, we’ve seen this headwind shift. With inflation beginning to ease, and eye-popping cost reductions in solar modules and batteries, investment is back. The Clean Energy Council is now projecting 2024 to be a bumper year for new energy investments, with $3.3 billion committed in the third quarter of 2024 alone. 

But we still have an incredibly long way to go. At the end of last year, the Climate Change Authority warned that “Australia is currently deploying renewable energy infrastructure at about half the annual rate needed to reach the 2030 renewables target”.

They also warned that there remains an 8 GW gap in our estimated 33 GW of additional renewable energy needed to meet the 82% target. Climate Energy Finance takes a more optimistic view, reporting we are halfway to delivering on Minister Bowen’s 82% by 2030 vision, with six years to go.

That is where we need to heed the words of Adam Smith’s era-defining tome.

Many investors predicted a Trump ascendancy far earlier than political pundits, but as the U.S. offshore wind, climate commitments and IRA roll back begins to bite, clean energy investors face a new stranded asset risk.

We’ve already seen wind behemoth Orsted announce billions in impairment costs, critical cuts in international financing, and with tariffs on Chinese EVs in the wings, clean energy capital will be racing to secure a new safe-haven for their investment.

That’s where Australia needs to be quick to capitalise on our newly realized comparative advantage.

Rather than shy away behind the Trump administration’s clean energy lynch-mob, Australia’s needs to lean into the idea that we could be in the drivers seat of an era-defining opportunity for trillions in stranded clean energy capital fleeing the US.

And there really are billions out there right now. China’s economic woes have been well documented this year, but investments in renewable energy utilities and grid infrastructure grew by AUD $370 billion last year alone. They installed an incredible 370 GW of new clean energy capacity in just 12 months, led by over 45 per cent growth in solar capacity in the last year.

What’s more, Chinese companies are looking to accelerate battery and clean energy projects globally. In the last 12 months Hubei Engineering Co. has built the world’s biggest integrated battery system in Saudi Arabia, using BYD’s low cost batteries. The project went so well, the Saudi government has just commissioned five more.

This comes off the back of Chinese battery company CATL and Stellantis announcing an almost $7billion (AUD) joint venture investment to build one of Europe’s largest electric vehicle battery factories in Spain. Collaboration with Chinese technology leaders is reducing EU fears of deindustrialisation. 

Along with regional powerhouses Brazil and Indonesia, a new competitive landscape is taking shape, seeking to capture clean energy capital. Last year, Brazil raised over $200 billion (AUD) in solar and wind investments, and will look to ramp that up in 2025 as host of the UN climate negotiations. Similarly Indonesia will be seeking to increase its annual clean energy investments by 10x in order to meet its 2030 targets. 

What’s clear with Trump’s clean energy withdrawal this week, is that we are no longer competing with the US on climate investments. Instead, we are now competing with countries like Indonesia, Brazil, Spain and Saudi Arabia to be the new destinations of choice, for what still is history’s biggest investment opportunity of all time.

This week, supporting its Future Made in Australia ambitions, the government has announced $2 billion in green aluminium credits, and a further $2 billion top-up for the Clean Energy Finance Corporation. This builds on the >$40bn of budget support for our energy transformation transformation over 2023 and 2024.

It is a great lift to what we’d like to call the “Trump-era clean energy opportunity”, but there are clear policy opportunities that could further advance Australia’s clean-energy investment environment, particularly in leveraging our $100bn+ opportunities for joint investment and collaboration with our Asian trade partners as they pursue their energy security, modernisation and decarbonisation agendas.

These might include pre-election policy announcements to extend the RET to 2040, ratchet up New Vehicle Efficiency Standards, commit to a science aligned 2035 NDC, re-engage with Chinese clean energy investors (like SunDrive plans with TrinaSolar), and openly embrace Green Metal statecraft, with a clear message to investors that we want help to build the world’s green iron.

With the right mix of diplomacy, domestic policy, and a government ready to stand up and be proud of our destiny as a clean energy Superpower, Australia could be poised to reap the benefits of a unique renewable investment opportunity, with billions of dollars of stranded capital looking for the most fertile soil to invest in.

It’s a gold rush, and with the US electing to sit this one out, it’s time for our second Eureka moment. 

Christopher Wright  is a strategic climate advisor – coal mine methane, with Ember Climate. Tim Buckley is director of independent think tank Climate Energy Finance.