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ESG Impact: What you need to know - March 2024

This month we bring you positive indicators for an increase in appetite for large-scale renewable energy projects, a breakthrough likely to expand solar cell production across different sectors of the economy, and developments in a new scheme for soft plastics recycling in Australia, and more.


Clean energy report shows bumper year for renewables

The Clean Energy Council’s latest Clean Energy Progress Report highlights significant progress for renewable energy in Australia, with almost 40 per cent of the country’s electricity coming from renewable sources in 2023. This compares to just 17 per cent five years ago. 


It was a big year for energy storage with 27 large-scale batteries under construction at the end of 2023 – up from 19 in 2022. Rooftop solar continues to lead the way as the largest contributor to Australia’s renewables drive. The report shows it accounted for 28.5 per cent of all renewable energy and 11.2 per cent of energy generation overall in 2023. 


Despite the highlights for 2023, the report also shows a decline in Australia’s large-scale renewable energy projects. New financial commitments to large-scale generation projects in 2023 stood at AUD 1.5 billion, compared to AUD 6.5 billion in 2022.


Why does it matter?

In its Draft 2024 Integrated System Plan, the Australian Energy Market Operator (AEMO) advised that the country will need to add 6GW of utility scale generation to the National Electricity Market each year to meet the Federal Government’s target of 82 per cent renewables by 2030. 


With wholesale electricity prices plummeting in recent times, thanks to a boom in solar power, the recent growth in big batteries will play a vital role in soaking up electricity during the day. This will help to create more certainty around large-scale renewables projects. 


More energy in the wind for Victoria

Victoria continues to be a focus for Australia’s offshore renewable energy generation with the Department of Climate Change, Energy, the Environment and Water (DCCEEW) declaring an area in the Southern Ocean, off the state’s west, for offshore wind. 


Following extensive consultation, the zone is approximately a fifth smaller than originally proposed, but it is expected to generate up to 2.9GW of offshore wind energy, which is enough to power more than two million homes. However, more environmental assessments and investigations are required to inform future development options.


The site is one of the six priority areas identified by the Australian government in 2022, three of which are now declared. While there is currently no federal target for offshore energy, Victoria has targets of 2GW of offshore wind by 2032, 4GW by 2035 and 9GW by 2040.


Why does it matter?

Offshore wind is an important element in future renewable energy supply. It provides energy at different times to that of onshore wind and solar and is more stable in the evening. 


Australia’s offshore wind industry is less advanced than places like Europe, where there are fewer options for onshore generation. However, as offshore wind projects progress to the next phase of environmental planning, it looks set to play a critical role in the country’s energy mix. 


Data from DCCEEW shows that, depending on the size of turbines used in an offshore wind project, a single project may be capable of producing 1.5 to 2 gigawatts of energy, which is more than enough to power 1 million homes in a year. By comparison, Australia’s largest coal-fired power station, Eraring Power Station, has a generating capacity of 2.9 gigawatts and accounts for a quarter of New South Wales’ power requirements.


Breakthrough in solar cells technology

Australia’s national science agency CSIRO has announced a clean energy breakthrough for roll-to-roll printed solar cells. 


Working in collaboration with researchers from four universities, the development may help to meet the growing demand for renewable energy by expanding the potential application of solar cells across different sectors of the economy.


While traditional silicon solar panels are rigid and heavy, the technology creates solar cells by printing onto long, continuous rolls of thin, flexible plastic. It uses an emerging class of solar material called perovskite, which can be formulated into inks for printing.


CSIRO is exploring the technology’s potential as a reliable energy source for future space endeavours and sent its printed flexible solar cells to space earlier this month to test their performance.


Why does it matter?

Australia has been a leader in solar cell technology, but China dominates global solar PV supply chains with its share in all manufacturing stages of solar panels exceeding 80 per cent, according to data from the IEA. CSIRO’s latest breakthrough is particularly significant as it signals further potential to manufacture solar PVs locally.


As the printed solar cells are highly flexible and portable, there is a potential for deployment across areas like urban construction, mining operations, emergency management, disaster relief, space, defence and personal electronics.  


While the technology is not necessarily new, the breakthrough lies in the conversion efficiency. The more energy that can be produced from each square metre of solar cell, the less agricultural land required for solar farms.



Boost for soft plastic recycling campaign

The industry-led National Plastics Recycling Scheme (NPRS) was bolstered this month with corporates Metcash and 7-Eleven joining the fold. 


Developed by Australia’s food and grocery manufacturing industry, with funding support from the federal government, the NPRS aims to create a circular economy for plastics packaging and is supported by more than 40 brands, including Nestlé, Unilever and Fonterra. 


The scheme is expected to play a role in meeting Australia’s 2025 National Packaging Targets, which include 100 per cent reusable, recyclable or compostable packaging, 70 per cent of plastic packaging being recycled or composted, 50 per cent of average recycled content included in packaging, and the phase out of problematic and unnecessary single-use plastics packaging.  


The Australian Food and Grocery Council (AFGC) has called on all industries that use soft plastics, including manufacturers, fashion and general merchandise retailers, to join the NPRS. 


Why does it matter?

Soft plastics recycling presents a complex issue that requires a collective response from all sectors. The challenge is twofold – how to collect soft plastic and what to do with it?


The NPRS seeks to solve this by transforming soft plastics destined for landfill into food-grade packaging and other materials. It aims to increase the amount of plastic recovered by 190,000 tonnes a year, which is approximately a third of the soft plastic waste that currently goes to landfill each year. 


Household soft plastics, such as bread and cereal bags, frozen vegetable packets and confectionery wrappers, will be collected from multiple channels, including kerbside collection, and will fill a significant gap in the recycling chain.


Food-grade plastic represents a significant portion of plastics and the scheme aims to employ the circular economy as a long-term solution. 


Rio Tinto signs Australia’s biggest PPA

Rio Tinto has become the biggest industrial buyer of renewable energy in Australia following a new power purchase agreement (PPA) to supply its Gladstone operations in Queensland. These operations include Boyne aluminium smelter, Yarwun alumina refinery and Queensland Alumina refinery.

In a deal inked late last month, the global mining giant will buy 80 per cent of all power generated from Windlab’s planned 1.4GW Bungaban wind energy project. Located about 40km from the town of Wandoan, and 290 kilometres south-west of Gladstone, the Bungaban project is currently in early development. 

Rio Tinto’s Gladstone operations include Boyne aluminium smelter, Yarwun alumina refinery and Queensland Alumina refinery. The Bungaban PPA is a further step toward the company’s climate goal of halving its global Scope 1 and 2 emissions this decade. 


Why does it matter?

Aluminium is among the hard-to-abate sectors, and the PPA signals Rio Tinto’s commitment to decarbonising its Gladstone operations. The company is also seeking to decarbonise other areas of its Australian aluminium operations with progress underway to repower its majority-owned Tomago Aluminium Company near Newcastle. 


Tomago, Australia’s biggest aluminium smelter is the largest single consumer of energy in the country, with an annual demand of more than 8 terawatt hours of energy. A tender for wind and solar projects was announced this month as a means of sourcing renewable electricity for its operations. 


Aluminium demand will likely continue to grow as it is used in various products including smartphones, cars, food and beverage packaging. It is also essential for the energy transition as a key material for electric vehicles and renewable energy infrastructure. The switch to renewables for one of the country’s biggest consumers of energy signals increased confidence and commitment to the energy transition.



Green Treasury Bonds | AOFM

The Australian Office of Financial Management (AOFM) announced they will undertake a roadshow ahead of the first issue of the June 2034 Green Treasury Bond. The roadshow will run from Thursday 11 April to Friday 10 May 2024. Westpac is one of the 5 JLMS on this transaction supporting AOFM in this roadshow. This roadshow follows AOFM announcement to issue a 10 year Green Treasury Bond between April and June 2024 and the release of the Green Bond Framework setting out the Australian Government’s key climate change and environmental priorities and outlines how green bonds will be used to finance Eligible Green Expenditures. The Framework is aligned to the International Capital Market Association (ICMA) Green Bond Principles 2021. Sustainalytics, an independent sustainability expert, has provided a Second-Party Opinion.


South Australian Government Financing Authority (SAFA) Sustainability Bond

SAFA issued its inaugural $2bn fixed rate Sustainability Bond, following domestic and offshore investor engagement earlier in the year. The bond was issued under the Sustainability Bond Framework that was launched in November 2023, which sets out how SAFA’s borrowings can be used by the Government of South Australia to fund critical programs and services that deliver on the State’s environmental, social and governance priorities. Sustainalytics, an independent sustainability expert, has provided a Second Party Opinion. Westpac acted as JLM and Joint Sustainability Structuring Advisor.

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