The biggest surprise about the stunning $8 billion takeover bid for AGL launched by billionaire Mike Cannon-Brookes and Canadian funds juggernaut Brookfield is that it should be a surprise at all.
Two months ago, the Australian Energy Market Operator released a multi-decade planning blueprint that held – as its central assumption – the closure of all the country’s brown coal generators by 2032.
That “step change” scenario was supported by the overwhelming majority of energy industry stakeholders – more than 70 per cent – and nearly one quarter thought it was more likely that all coal generators would close by that time, under what has been called the “hydrogen superpower” scenario.
The reason is simple. Technology costs are plunging and legacy business models are being challenged. Decades old machinery designed for a different type of grid are being made rapidly redundant. The only thing missing was the forces of green capital to make the transition happen.
Cannon-Brookes and Brookfield have helped unlock those forces, lobbying their bid for AGL over the ramparts of the besieged fossil fuel industry, still under the delusion that it can keep operating its highly polluting brown coal generators for at least another decade longer than scientists say it is safe to do so, and analysts say it is financially wise.
Nothing speaks so powerfully of denial than AGL’s stubborn reaction to the Cannon-Brookes offer. It’s too low, they said, and then insisted they could re-invent themselves in their own good time. This from a company whose business model lurched from green to black, and is now facing a type of technicolour yawn.
It was as if AGL imagined themselves to be operating in a sort of energy bubble, protected from the forces of green by captured regulators and ideological political interests. That bubble of denial has now been pierced.
The biggest detractors of AEMO’s “step change” scenario are the likes of AGL and fossil fuel opportunists such as Trevor St Baker, along with the federal Coalition and its acting minister for technology denial Angus Taylor. Even the Australian Energy Regulator wasn’t satisfied.
But they can’t argue with the forces of technology change and global capital. In Australia, Cannon-Brookes and iron ore billionaire Andrew Forrest have changed the conversation about Australia’s energy future.
They have combined to launch what will be the world’s biggest solar and battery storage project in the Northern Territory, Sun Cable. Forrest has branched out into an extraordinarily ambitious program for green hydrogen and green ammonia, declaring targets that seem out of this world.
Cannon-Brookes has taken a different tack, attacking the energy industry from the inside out, isolating the biggest player and the biggest polluter. If the bid is successful, he will be in the guiding seat for the speed of decarbonising Australia’s grid.
And he thinks it can be done by 2035. So does the market operator. And so most other experts.
See: Cannon-Brookes: We have $20 billion to push net zero on grid by 2035
Both Forrest and Cannon-Brookes have vast wealth, and are not afraid of taking on incumbents, be they industry or political. That, too, is a game changer. Cannon-Brookes started out in the public arena by calling out the nonsense of Scott Morrison’s mind-numbing “fair dinkum energy” rhetoric around coal and gas.
Forrest, who can lay claim to be the only person to get prime minister Scott Morrison to visit a solar farm, has been relentless in his attack on the Coalition’s fossil fuel hydrogen plans and the hyprocisy of the fossil fuel industry. He has no doubt that “hydrogen superpower” will be the reality.
See: Fortescue backs “hydrogen superpower” plan that models end of coal within decade
The head of transition for Brookfield, a $A1 trillion fund, is the former governor of the Bank of England, Mark Carney, who says the energy transition will be one of the biggest investment opportunities of our lifetime.
“It is estimated that more than US$150 trillion will need to be invested globally through 2050 to drive the decarbonisation of energy markets and our economy — that’s approximately US$5 trillion every year,” Carney says.
“The time to act is now. Investment firms such as Brookfield and Grok Ventures, with their access to capital and deep operating expertise and development capabilities in power markets and renewables, can make major contributions to businesses such as AGL to help them achieve their net-zero ambitions for the benefit of their shareholders, employees and the broader community.”
The challenge from here on in is not so much access to technology and capital, it is the ability for the country and its various political, policy and regulatory institutions to work towards a common goal – reaching net zero as quickly as possible.
That is, to date, something the federal Coalition and the various forces that unite it, and key regulatory institutions have so far refused to do.
Federal energy minister Angus Taylor’s instinct is to be obstructive, and it was no surprise that his first response to Origin Energy’s decision last week to fast-track the closure of the Eraring coal generator in NSW by threatening to double the size of the government’s proposed gas fired generator at Kurri Kurri.
Nothing can be more certain to dissuade private investment than the sort of government intervention Taylor threatens at every turn. He seems to wear it as a badge of honour. But Taylor and his accolytes have been proven to be so fundamentally wrong. And they still don’t get it.
See: Taylor sidelined from energy transition, and it might be the best place for him and his FUD
It doesn’t have to be that way. The NSW government, and treasurer and state energy minster Matt Kean in particular, has shown how it can be done, marshalling bipartisan support (even within his own Coalition) for the green energy transition in the country’s largest grid – all within a decade.
Kean has outlined a detailed infrastructure roadmap to get this done. Sure, so many details need to be worked out, and the whole program needs to be accelerated, but two problems he doesn’t have is access to projects, or capital.
There are more than 150GW of wind, solar and storage projects busting for a place on the grid, 10 times more than is needed to bring an end to coal in the state. It needs, however, a co-ordinated program, and all parties need to play a role in that.
The reality is that this transition will occur even more quickly than even the most optimistic current forecasts. It is exactly what has happened over the last two decades, and it is exactly what will happen over the next two decades.
The bid launched by Cannon-Brookes and Brookfield mean that this transition is no longer just a series of skirmishes at the edges of the grid and legacy business models. This is an assault on the citadel itself, from the inside out, and we should all be cheering from the sidelines. It’s our future at stake.
