Australia faces $2.4 trillion bill to achieve net zero by 2050, BNEF report warns

A new report has estimated that Australia will need to invest $2.4 trillion to rapidly decarbonise its power sector if it hopes to meet a net zero scenario by 2050.

Research organisation BloombergNEF (BNEF) says the window for achieving net zero by 2050 is closing but the nation could still achieve a carbon emissions trajectory in line with the major goal of the Paris Agreement.

In its “New Energy Outlook: Australia” report, BNEF believes the nation needs to increase its renewable energy capacity by 135% before 2030, to more than 126 gigawatts.

‘Heavy lifting’ needed

Head of BNEF in Australia Leonard Quong said the firm’s analysis suggests that rapidly moving to a clean power system based on wind, solar and storage will be essential to cost-effectively reduce carbon emissions.

“But the heavy lifting must be done this decade,” Mr Quong said.

“A low-carbon power sector will also serve as a bedrock for future emissions reduction efforts in other areas of the economy in the years to come.”

He added that Australia’s energy mix will need to transform over the next decade, with all unabated coal and almost all unabated gas generation exiting the power system by 2035.

“Australia will rely instead on a lower-cost mix of renewables paired with flexible technologies like batteries, pumped hydro and gas.”

Two climate scenarios

BNEF created two updated climate scenarios – the Net Zero Scenario (NZS) and a base-case Economic Transition Scenario (ETS) – in assessing where Australia stands in its development of low-carbon transition strategies.

The report’s NZS, which is consistent with a 67% chance of holding global warming to 1.75 degrees celsius, shows there is no room for any further carbon emissions growth in any sector if Australia is to reach net zero by mid-century.

“Australia’s emissions from power, transport, industry and buildings sectors must have already peaked and now begin rapidly falling depending on what technology pathways are available for them to decarbonise,” the report contends.

Under the ETS, which assumes no new policies are implemented, the outcome breaches the Paris Agreement with a global warming result of 2.6 degrees celsius.

However, it also demonstrates how far the energy transition can go based on economical and commercially ready technologies.

Currently on target

BNEF said Australia’s current 2030 emissions reduction target is in line with the NZS energy-related emissions reductions.

If Australia is to remain on target with the Paris Agreement goal, at the NZS scenario it needs to target at least a 71% emission reduction from energy-related sectors by 2035 relative to its 2005 baseline for the next round of Nationally Determined Contributions (NDCs).

These NDCs are due for submission to the United Nations Framework Convention on Climate Change by November 2025.

Hydrogen must be included

“Australia’s abundance of world-leading wind and solar resources gives us an advantage in decarbonisation and combined they represent a $213 billion investment opportunity by 2050,” said BNEF Australia associate Tushna Antia.

“But getting there won’t be easy and we will need flexible demand from smart electric vehicle charging and hydrogen electrolysers, along with battery storage, flexible generators and investment in the power network.”

BNEF Australia senior associate Sahaj Sood said emerging technologies like hydrogen, biofuels and carbon capture systems will be essential for Australia to reach net zero.

“While questions still remain about their reliability, acceptability and scalability – if they aren’t able to be used, emission reductions will have to come from somewhere else in the economy and likely from more expensive solutions.”