Australia’s Trailblazing Global Energy Policy



MARKET INSIGHT:


  • AUSTRALIA IS UNIQUELY POSITIONED TO TAKE ADVANTAGE OF TRADE NETWORKS IN SOUTHEAST ASIA

  • IN AN ENERGY-RELATED CONTEXT, AUSTRALIA’S UNIQUE LOCATION MEANS THERE IS SUBSTANTIAL ENGAGEMENT WITH LARGER SEA FARING NATIONS, TO ENSURE THAT SEA TRADE IS NOT INTERRRUPTED

  • GEOGRAPHY HAS SET LIMITS ON RENEWABLE ENERGY PRODUCTION IN AUSTRALIA, IT IS DIFFICULT TO MATCH ENERGY PRODUCTION WITH ENERGY CONSUMPTION AND IN MANY CASES, THE ELECTRICITY GRID REQUIRES A LOT OF MAINTENANCE, HUGE DISTANCES MUST BE OVERCOME

  • AUSTRALIA IS ONE OF THE LARGEST PRODUCERS OF YELLOWCAKE IN THE WORLD

  • AUSTRALIA HAS SET ITSELF AMBITIOUS CLIMATE TARGETS



Australia’s energy policy depends quite significantly on its geography and population density


Australia has a unique location between the Indian Ocean and the South Pacific. The country is relatively far off the maritime trading routes of Southeast Asia which poses some problems. Historically speaking, Australia joined forces with the leading maritime power to keep open the maritime routes for the import and export of goods that the Australian economy cannot produce itself.


This includes machinery for mining and raw materials that are not available in Australia itself. Although Australia has huge deposits of iron ore, coal and uranium, these deposits are only a fraction of what is needed to produce industrial goods. In many instances, Australia and Singapore have joined forces; both nations require open sea lanes.


The wind is turning, China is growing, and new alliances must be forged to keep Australia’s sea routes open to export coal and iron ore and import machines and tools.


More than 60 years ago, the United States had replaced the British, who once secured the Indian Ocean and the Pacific for Australia. But the alliance with the United States is coming increasingly into conflict with China’s East Asia policy. We must remember that China is a rising power in East Asia and Southeast Asia.


As the United States claims to patrol and keep open the entire maritime space of the Western Pacific, Australian foreign policy is coming under increasing pressure as both China and the United States attach great importance to an alliance with Australia.


Australia’s existence depends on the export of its coal to South and East Asian countries. China is the main importer of Australian coal. At the same time, China is also the energy center of the Western Pacific. The mined uranium deposits are exported to the whole world. Mining, especially the extraction of coal, iron ore and uranium, guarantees the prosperity of the Australian population. Export demand for coal in particular has actually fallen steadily. At the moment it is unimaginable that Australia can only maintain its economic growth through the service sector.


Much more likely it would be that Australia would slip into recession in a very short time. Energy exports of uranium and coal also explain why Australia is one of the few Western countries that has not been in recession for a long time, not even during the economic crisis in 2007.


Australia is in the process of introducing a carbon credit system based on the objectives of the Paris Climate Agreement.


Australia is currently working on the introduction of a carbon tax, other western countries are doing the same, but the difference is that Australia wants to legislate a CO2 tax (carbon tax). Interestingly, other western countries want to do the same. The difference is that Australia wants to incorporate a carbon tax into national legislation. It is not yet really clear what such national legislation will look like, what deadlines will be set and how to measure the environmental damage caused by climate change.


While some businesses in the primary sector of the Australian economy support the introduction of a carbon tax, there may still be disagreement about how such a carbon tax is calculated. Industrial processes between industry subsectors vary widely. The primary sector is the backbone of the Australian economy and future prosperity, and these industries will require a lot of energy.


Renewable energies will hardly contribute to Australia’s climate targets


As a result of the Paris climate treaty, Australia is showing more interest in renewable energy solutions. However, it is not so easy for Australia to increase its share of renewable energy because of the enormous distance between production sites and electricity consumers.


Good production sites for wind energy are located in the western part of Australia. This part of the country is relatively sparsely populated. Energy is mainly needed in the southeast of Australia, in an area about the size of Western Europe.


However, problems similar to those in Western Europe would also arise in southeastern Australia, because if a certain weather situation prevails in one part of Western Europe, this would usually also apply to the other energy production locations. If electricity grids were laid from the west of Australia to the southeast of the country, the costs for maintaining the grids would be so high and the grid losses so enormous that the whole undertaking would no longer be worthwhile.


Bioenergy is not an ideal solution; Australia suffers from long periods of drought and the availability of water is not always a given. What may be needed is a combination of renewable energy and nuclear power to meet Australia’s energy demands.


So what is Australia’s energy future?


Australia will probably choose an energy mix based on nuclear energy and renewables. Smaller reactors have much lower capital costs, and Australia has yet to make friends with nuclear energy. In countries like France, which are more densely populated, there are nuclear power plants near megacities like Paris.


Nuclear energy is becoming more interesting because Australia’s population is exploding due to immigration, and most newcomers are settling in large cities. In addition, wind energy will play an important role in the western part of Australia, despite the volatile weather phenomena in Australia and periodic conditions with lower wind speed, among them such weather phenomena as La Nina.


Photovoltaic installations will play an important role, they will be useful in urban agglomerations such as Melbourne and Sydney, and in rural locations.


Will Australia and New Zealand strengthen their cooperation on energy issues?


Australia could seek a closer relationship with New Zealand on energy issues. The geographic distance between the two countries could make the supply of energy commodities prohibitively expensive. This is especially true for smaller quantities. It is possible that Australia would act as an energy exporter. The relative size of Australia’s energy sector compared to New Zealand’s makes it more attractive for Australian energy companies to export energy commodities to New Zealand than the other way around. On the other hand, New Zealand is a leader in renewable energy and can share its know-how with Australia.

There may be further opportunities now that both countries have joined the Regional Comprehensive Economic Partnership (RCEP).


Many thanks for the shared interest in the energy world!



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