Donald Leaves Paris
The other big event this week was America’s withdrawal yesterday from the Paris climate agreement.
As I wrote in The Australian this morning, it’s empty political theatrics – all about the speech. We know that because the Paris deal is voluntary, with no enforcement, so nobody has to do anything, and withdrawing is unnecessary.
Although I must say I’m on board with Trump’s opposition to the US paying billions of dollars into the Green Climate Fund for developing countries. America can’t afford it, and most of it will probably be wasted anyway.
But don’t think for a moment that America’s Paris withdrawal means anything for investments in renewable energy.
It’s true that the Australian renewable energy industry effectively shut down for three years between 2012 and 2015 before and after Tony Abbott became Prime Minister, but it’s back on track with a vengeance.
That was shown by this week’s deal between Telstra and RES Australia to build a 70MW solar farm in Queensland, with Telstra contracting to take all of the power – and sell it into the grid, at a profit!
Big electricity users like Telstra, along with super funds and other big investors, are queueing up to do similar deals, and the whole thing will get a big kick along this month when Alan Finkel produces his “Independent Review of the Future Security of the National Electricity Market”.
In it he will almost certainly recommend that the Australia Energy Market Operator move to 5-minute settlement in the national electricity, which AEMO will do.
It has been looking at this for years but lobbying by the big fossil fuel power generators has stopped it.
At the moment payments to generators bidding electricity into the grid are averaged over half an hour, which benefits the coal and gas generators because it takes them so long to fire up that they couldn’t otherwise take advantage of the quick price spikes that occur.
Grid-scale battery operators can respond in seconds, so 5-minute price averaging would give them an advantage over gas and coal. As a result, there’s likely to be a boom in grid-scale batteries.
There aren’t many opportunities to invest in this. Two I know of are Redflow (RFX:ASX) and Carnegie Clean Energy (CCE.ASX). Another one, 1414 Degrees, is planning an IPO this year.
Redflow’s share price has fallen to a third of what it was a year ago because of concerns that its zinc bromide technology can’t compete against lithium-ion, while Carnegie has tripled.
Meanwhile the big incumbent power companies, AGL and Origin are working hard to catch up and change their cultures. Can they do it? It’s very hard, and history is not on their side.
The Constant Investor is the new home of Alan Kohler, founder of Eureka Report and the ABC's finance presenter. Join to receive - Kohler's Weekly Overview, exclusive stock tips, investment ideas, podcasts and much more. Click here to learn more.