Better the Devil You Know: Changes in the commodity market over the last 10 years | Lindsay Horn

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Less than 10 years ago the Wall Street Banks were on top of the oil trading heap and their client business in derivatives was an important source of profit for the banks and a major entry point for any corporate hedger. 

Things have changes in the last 10 years.

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Loy Yang B failure sends prices soaring, triggers supply safeguards | SMH

The Australian Energy Market Operator has kicked off emergency measures to protect power supply after Victoria's Loy Yang B brown coal-fired power station failed on Thursday afternoon, sending electricity spot prices soaring.

As temperatures rose around southern Australia Loy Yang B's generators failed at around 4pm, instantly taking around 528 megawatts of energy out of the state’s grid.

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How CO2 transparency helps companies grow | World Economic Forum

Studies show that companies that take steps to operate more sustainably outperform their peers in terms of shareholder return. In a recent study from the Henley Business School, researchers examined the relationship between carbon emission disclosures and financial performance for UK companies. They found that the mere act of disclosure results in improved share price performance, and that there is “a significant positive relation between corporate carbon disclosure and corporate financial performance”.

In another study, Harvard researchers examined the future financial impact of material and immaterial sustainability investments. Using SASB’s framework for materiality, they were able to determine that firms with strong ratings on material sustainability issues outperform their peers with inferior ratings. Specifically, they found that top performers achieved an estimated annualized alpha of positive 4.83%, while firms that made no investments had an estimated annualized alpha of negative 2.20%.

In October, Boston Consulting Group released a report that agreed – “investors rewarded top performers in specific ESG topics with valuation multiples that were 3% to 19% higher… than median performers”. In addition, they found that top performers had margins that were up to 12.4% higher. It is irrelevant whether this is due to correlation (executive teams that understand the need for sustainable business operations are better managers overall), or causation (because of their superior sustainability efforts, these executives are creating brand value and customer allegiance that enables them to financially outperform); there is credible evidence that sustainability disclosure can help investors make better decisions.

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Levelized Cost of Energy 2017 | Lazard

Lazard has conducted this study comparing the levelized cost of energy for various conventional and Alternative Energy generation technologies in order to understand which Alternative Energy generation technologies may be cost-competitive with conventional generation technologies, either now or in the future, and under various operating assumptions, as well as to understand which technologies are best suited for various applications based on locational requirements, dispatch characteristics and other factors. We find that Alternative Energy technologies are complementary to conventional generation technologies, and believe that their use will be increasingly prevalent for a variety of reasons, including RPS requirements, carbon regulations, continually improving economics as underlying technologies improve and production volumes increase, and government subsidies in certain regions. 

Download the full report here

China in 2017 | IEEFA, Tim Buckley

In 2017, China has continued to be the world’s dominant force in the building and financing of clean energy technology globally. Indications are that renewable energy will dominate global power capacity additions for at least the next two decades. China is preparing now to lead this new energy world. The withdrawal of the U.S. from the Paris climate agreement along with an increased U.S. government emphasis on coal and away from renewables is at odds with the direction being taken by China. 

"The clean energy market is growing at a rapid pace and China is setting itself up as a global technology leader whilst the U.S. government looks the other way,” Buckley said. Although China isn’t necessarily intending to fill the climate leadership void left by the U.S. withdrawal from Paris, it will certainly be very comfortable providing technology leadership and financial capacity so as to dominate fast-growing sectors such as solar energy, electric vehicles and batteries.

Download the full report here.

FERC gives Perry plan the cold shoulder | Politico

FERC (the US Federal Energy Regulatory Commission) is going back to the drawing board on how to gauge the power grid's resilience after the five commissioners unanimously rejected Energy Secretary Rick Perry's plan to prop up coal-fired and nuclear power plants Monday. After delivering a forceful defeat to the former Texas governor's Notice of Proposed Rulemaking and coal plants alike, the agency ordered U.S. grid operators to submit additional information about their ability to judge "naturally occurring and man-made threats" to their systems within 60 days, punting any potential action until at least April — and that’s only if the agency decides to act at all.  More

Colorado’s renewables revolution gathers steam | Carbon Tracker

On 28 December 2017, Xcel Energy filed their Electric Resource Plan (ERP) for Colorado. Over 350 proposals for renewable energy were received by Xcel Energy and highlight the incredible cost reductions in renewable energy with storage. According to the filing, the median bid price for wind plus storage was $21/MWh and for solar plus storage was $36/MWh. Around 26 GW of solar and wind with storage were bid.

  • The filing shows the median bid price for wind plus storage was $21/MWh and for solar plus storage was $36/MWh. As far as we know, these are the lowest renewables plus storage bids in the US to date.
  • Several details remain unknown, but the median bid for wind plus storage appears to be lower than the operating cost of all coal plants currently in Colorado, while the median solar plus storage bid could be lower than 74% of operating coal capacity.
  • New research shows US coal burn declined 2% y-o-y, confirming coal is not coming back and will likely remain at the mercy of cheap gas and renewables.

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British billionaire who saved the Whyalla steelworks has bigger ambitions in the energy sector | AFR

British billionaire Sanjeev Gupta spent almost $700 million buying unloved steel businesses when he rescued the stricken Arrium in mid-2017 in his first foray into Australia, but he expects those operations will end up being dwarfed by a much larger energy division which is growing rapidly because of huge demand in a country grappling with soaring energy prices.

"Our energy business is probably going to be the largest business we do in Australia," Mr Gupta told The Australian Financial Review.

The industrialist, who runs Liberty House, teamed up with his father's company SIMEC under the banner of the GFG Alliance to officially take ownership of the former Arrium assets at the end of August and the early signs are good.

"It's already a profitable business," he said.

The assets comprise the Whyalla steelworks in South Australia, an associated iron ore mine in the nearby Middleback ranges, electric arc furnaces and mini-mills in Sydney, Melbourne and Newcastle, and a national steel scrap and recycling business that handles about 1.4 million tonnes of ferrous scrap annually.

More than 3500 people rely on the steelworks for employment in Whyalla, so he is lauded as a saviour. On December 22 he announced plans to proceed with a $1 billion upgrade of the Whyalla steelworks to lift its output by 50 per cent and modernise the technology in the plant. 

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Colonial First State prepared to dump managers ‘lagging’ on climate change, ESG | AFR

Colonial First State, the wealth arm of Commonwealth Bank of Australia, has warned the fund managers it invests with to take the financial risks of climate change seriously or risk being dumped.

A CFS survey of more than 75 of its global and domestic investment managers found less than half (45 per cent) believe climate change is an investment risk, with less than 20 per cent measuring the carbon footprint of their portfolios. None are using carbon prices in valuing companies.

Scott Tully, head of investments at CFS, which manages $87 billion on behalf of nearly 1 million superannuation fund clients, said the findings were "lower" than the wealth manager had hoped.

"We've now got to assess [and ask] 'what are they doing about it?' It is a process where we might remove managers, not because we think they're not doing the right thing, but because they're not identifying risks which we think are material to portfolios," he told The Australian Financial Review.

This comes as the prudential regulator last year outlined plans for an industry-wide review of climate-related disclosure, warning insurers, superannuation funds and banks they place their "futures in jeopardy" by ignoring risks related to climate change.

"Increasingly, APRA will expect more sophisticated answers, especially from well-resourced and complex entities," said Australian Prudential Regulation Authority executive director Geoff Summerhayes in November.

"APRA intends to gain insights in areas such as how exposed regulated entities are to physical, transitional and liability risks, and whether they're taking steps to protect themselves and their customers."  More

More Than 100 Years of Climate Change in 20 Seconds | ScienceAF

The data in the video above goes back to 1880, when we began collecting temperature records - culminating at today's 6,300 weather stations, ship- and buoy-based observations, and Antarctic research stations. 

Until around the 1970s, you can see that the temperature fluctuates much like you'd expect, with the oranges and reds reflecting warmer temperatures, and the blues showing cooler years.

But from the 1980s onwards, there's very little blue left on the globe, and it's slowly covered in orange, yellow, and red, taking us right through to 2016.

The reference thermometer you can see in the top left-hand corner reflects the temperature difference (in degrees Celsius) between each year, and the mid-20th century mean - the '0' on the scale. More

BHP releases Industry association review

BHP today published a report relating to its membership of industry associations which hold an active position on climate and energy policy.  The report, which BHP committed to produce on 18 September 2017, sets out:

  • a list of the material differences between the positions BHP holds on climate and energy policy and the advocacy positions on climate and energy policy taken by industry associations to which BHP belongs; and
  • the outcomes of BHP’s current review of those industry associations.

Twenty-one industry associations were assessed as holding an active position on climate and energy policy, and were included within the scope of the review. The review focused on 10 climate and energy policies identified as being of key importance to BHP, with seven material differences in position identified across three associations:

  • The Minerals Council of Australia (MCA)
  • The United States Chamber of Commerce;
  • The World Coal Association (WCA).

The report sets out the principles which guide the Company’s membership of, and participation in, industry associations, and the methodology employed to identify material differences. It also describes considerations and possible courses of action for BHP where a material difference is identified. Considerations include the likely impact of the material difference on policy debate and the benefits BHP derives from the broader activities of the association, including in areas such as health, safety and environment.

Read more or download the report.

Cashing Out From the Climate Casino | New York Times

After years of effort from activists, there are signs that the world’s financial community is finally rousing itself in the fight against global warming. A foretaste came last month when Norway’s sovereign wealth fund — the world’s biggest — said that it is considering divestment from holdings in fossil fuel companies.  Read more

Climate change and human rights on ACSI’s radar | Governance Institute

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The Australian Council of Superannuation Investors (ACSI) recently released Governance Guidelines providing insights for the first time on how large investors expect climate change and human rights issues to be managed.

ACSI’s Governance Guidelines are updated every two years and outline its members’ expectations of the governance practices of the companies they invest in.

This year, a new chapter on environmental, social and governance (ESG) issues has been added, which covers climate change, labour and human rights, corporate culture and tax disclosure.

When it comes to climate change, ACSI expects to understand whether a company can:

  • successfully identify and manage the climate change risks and opportunities it faces
  • demonstrate future viability and resilience by testing business strategies against a range of plausible but divergent climate futures, including a 2°C scenario
  • achieve cost savings through efficiencies and identify low carbon opportunities.

Where companies identify climate change risks as material, ACSI says disclosures should extend to discussing the strategy, as well as metrics and targets, used to manage the risk.

Download the press release or read the full article.

AGL announces plans for Liddell Power Station

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AGL has outlined plans for Liddell Power Station beyond its announced retirement in 2022.

 

The NSW Generation Plan proposes a mix of high-efficiency gas peakers, renewables, battery storage and demand response, coupled with an efficiency upgrade at Bayswater Power Station and conversion of generators at Liddell into synchronous condensers. The feasibility of a pumped hydro project in the Hunter region is being explored with the NSW Government. Details of the plan, which was developed to align with the National Energy Guarantee, are attached.

Land clearing and Climate Change | The Saturday Paper

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There are lies, damned lies and Turnbull government statistics about Australia’s contribution to global climate change.  Take, for example, the figures it provides on greenhouse gas emissions resulting from land clearing. If you believe them, the cutting and burning of native vegetation by farmers and other landholders resulted in 1.7 million tonnes of carbon dioxide being added to the air in 2015-16.

In the same year that the federal government claimed 1.7 million tonnes of carbon emissions for the whole country, Queensland – the state that has both the nation’s worst record for land clearing and the best system for recording it – claimed by itself to have contributed some 26 times that amount.

In 2015-16, recently released data from the Queensland government’s Statewide Landcover and Trees Study (SLATS) shows, 395,000 hectares of land was cleared, producing 45 million tonnes of carbon dioxide.

If you believe the federal government, nationwide carbon pollution from land clearing was down 13 per cent that year, compared with 2014-15. Yet the SLATS numbers show the amount of land cleared in Queensland was up 30 per cent, year on year.

The federal figures show CO2 emissions from land clearing are down about 90 per cent since 2012-13. Yet the SLATS data shows the area of land cleared annually in Queensland has gone up fourfold over the same period. In total, some 1.5 million hectares – an area rather larger than Northern Ireland – was cleared over the five years to 2015-16. And that was just in Queensland.

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