Australia's Energy Plans Crumble Ahead of Critical Election

• Grace Stanke, 2023 Miss America and nuclear engineer, conducted a national tour in Australia to promote nuclear energy and address misinformation. The tour was successful in generating interest and positive media coverage.
• Australia has an upcoming federal election where energy policy and cost of living are major issues. The incumbent Labor government is at risk of losing its majority. Nuclear energy is a contentious topic.
• The U.S. and other countries are imposing tariffs on Australia, straining trade relations. However, there may be an opportunity for a deal exchanging U.S. nuclear technology for Australian uranium and rare earths.
• Many green hydrogen projects in Australia have failed or been abandoned by companies due to high costs and lack of profitability. Government modeling assumes unrealistic green hydrogen demand to balance renewables.
• Global uranium supply remains constrained as prices are below incentive levels for many new mines. However, potential nuclear restarts in Japan, Germany and elsewhere could increase near-term uranium demand.

As the world grapples with an ongoing energy crisis and the urgent need to transition to cleaner sources of power, Australia finds itself at a critical juncture. The country's energy policies, trade relationships, and political landscape are all undergoing significant shifts that will have far-reaching implications for investors. Jonathan Fisher, CEO, Cauldron Energy, sheds light on several key issues that are poised to shape Australia's energy market in the years ahead.

The Political Landscape and Federal Election in Australia

One of the most pressing issues facing Australia's energy sector is the upcoming federal election, which is expected to be called sometime between late April and mid-May. The incumbent Labor government, led by Prime Minister Anthony Albanese, is at risk of losing its majority due to a number of factors, including voter dissatisfaction with rising energy prices and cost of living. Fisher says with surety:

"Labor will lose majority government no doubt. The question is whether they hang on to a minority government with the help of the Greens party in Australia and what we call the teals, which are these sort of independents that are not a party but they have a common funder."

The outcome of the election will have significant implications for Australia's energy policy, particularly with regard to nuclear energy. While nuclear power is currently banned in Australia, there is a growing push to overturn this ban and embrace nuclear as a clean, reliable source of baseload power. However, this remains a contentious issue, with the Labor party and other left-leaning groups strongly opposed to nuclear energy.

Australia's Energy Policy Challenges

Regardless of which party emerges victorious in the upcoming election, Australia will need to grapple with a number of pressing energy policy challenges. One of the most significant of these is the country's heavy reliance on coal and natural gas for electricity generation, which has led to high energy prices and growing concerns about the environmental impact of these fossil fuels.

At the same time, Australia has set ambitious targets for renewable energy adoption, with the government aiming for 82% of electricity to come from renewable sources by 2030. However, as Fisher noted, achieving this goal will require significant investments in energy storage and other technologies to balance the intermittency of wind and solar power.

"What our energy market operator has sneakily done is assumed that there will be 14 GW of green hydrogen demand put into the system, which will only turn on when there's enough green energy excess produced and then conveniently switch off when the market needs it. Now, when you start going, 'That's just not going to freaking happen,' that means okay, well, we're going to need a shitload more storage, pumped hydro, whatever it is to smooth that out, or you're just not going to get the system stability that you need."

Jonathan Fisher, CEO of Cauldron Energy

Global Trade Tensions and Opportunities

Australia's energy sector is also being shaped by global trade tensions, particularly with regard to the country's relationship with the United States. In recent months, the U.S. has imposed tariffs on a range of Australian exports, including aluminum, leading to a strain in the traditionally close alliance between the two countries.

However, there may also be opportunities for Australia to leverage its vast reserves of uranium and other critical minerals to secure more favorable trade terms with the U.S. and other allies. As Fisher noted,

"There is an interesting parallel to what's happening in Western Australia, where we're providing, well, we're getting nuclear submarines from the U.S. and from the UK. It's called AUKUS. But we're still refusing to just simply give the U.S. mined uranium out of Western Australia. I'm kind of hoping, and there's been a bit of chatter, that Trump likes a good deal. He might try and deal on that. And that'll be great for our sector."

The Struggles of Green Hydrogen in Australia

Another key challenge facing Australia's nascent green hydrogen industry. While the government has touted green hydrogen as a potential game-changer for the country's energy sector, many projects have struggled to get off the ground due to high costs and lack of profitability.

"My favorite energy minister, Chris Bowen, did support about eight of these projects through some federal funding. Well, unfortunately, seven of them have just fallen over, including one from BP recently. They walked away from the Kwinana hydrogen project."

Fisher attributed these failures to a number of factors, including the unrealistic assumptions embedded in the government's energy modeling.

"It is a really fundamentalist assumption buried underneath our energy modeling that Joe Public doesn't understand, and it's not going anywhere because all of these projects just keep getting shelved."

European Nuclear Policy Shifts Signal Global Renaissance

The state of the global uranium market, which has been struggling in recent years due to persistently low prices and a lack of new nuclear power plant construction. However, there are signs that this may be starting to change, with a number of countries, including Japan and Germany, considering restarting or extending the lifetimes of their existing nuclear reactors.

"New supply is absolutely elastic to that price. So that is why, you know, the majority of your analysts are still saying fundamentally that price has to be high. Although you've had a couple of them start saying this year is just a bit icky because there's all sorts of signals going either way."

Spain's parliament recently passed a non-binding resolution to maintain its nuclear fleet beyond 2027, following substantial public support demonstrated by approximately 10,000 people marching to protest potential plant closures. Belgium has similarly reversed course on its nuclear phase-out plans, choosing to keep its plants operational.

Germany's upcoming February 23rd elections could mark another pivotal moment for nuclear energy in Europe.

"If it rolls the way it looks like it'll roll, you're going to get German restarts being considered" 

Among major economies, only Taiwan remains firmly committed to its nuclear phase-out plans, despite growing concerns about energy security.

Key Takeaways for Investors

A number of critical issues that investors in Australia's energy sector will need to keep a close eye on in the months and years ahead. These include:

• The outcome of the upcoming federal election and its potential impact on Australia's energy policy, particularly with regard to nuclear power.
• The challenges of balancing Australia's ambitious renewable energy targets with the need for reliable, affordable baseload power.
• The potential for Australia to leverage its uranium and rare earth reserves to secure more favorable trade terms with the U.S. and other allies.
• The struggles of Australia's green hydrogen industry and the need for more realistic assumptions in the government's energy modeling.
• The potential for a rebound in the global uranium market as more countries consider restarting or extending the lifetimes of their existing nuclear reactors.

By staying informed about these and other key issues, investors can position themselves to take advantage of the opportunities and navigate the challenges that lie ahead in Australia's dynamic energy market.