Battle of the billionaires: Cannon-Brookes and Forrest clash over Australia’s energy future

How many billionaires does it take to change a light bulb? None. Billionaires don’t change light bulbs, or so the joke goes. But they can invest billions to reshape the energy market, as Andrew Forrest and Mike Cannon-Brookes, Australia’s second and third-richest businessmen, are doing.

Forrest and Cannon-Brookes have each been on their own crusade to address climate change by forcing Australia, and the world, towards a faster adoption of green energy, away from fossil fuels. The two multi-billionaires even co-invested in a solar energy company Sun Cable, a $35 billion moon-shot project that wanted to supply electricity from the Northern Territory to Singapore via the world’s longest subsea high-voltage cable, which would have run through an archipelago known for its volcanic activity.

Since Sun Cable’s collapse earlier this month, Forrest and Cannon-Brookes, once kindred spirits in their push to elevate climate change to a national preoccupation, have been at loggerheads. They are each vying to buy Sun Cable out of voluntary administration and the battle is theatrical. Each side has leaked against the other, passions are high, massive egos are at stake, and big chequebooks are at the ready.

As the private companies of Forrest and Cannon-Brookes duke it out the question is: why aren’t either of the billionaires using the project to solve the big energy problem in Australia?

Sun Cable was focused on exporting power to Singapore – a tiny city-state with one-fifth of Australia’s population – and not Australia’s east coast, where in the medium-term there will be a shortfall in electricity supply to meet demand, thanks to the accelerated closure of coal-fired power stations.

Last year, Cannon-Brookes’ investment company Grok Ventures and Canada’s Brookfield Asset Management launched a failed takeover bid for the country’s largest electricity generator, AGL, with Cannon-Brookes publicly pushing for the early closure of the group’s coal-fired power stations to curb Australia’s carbon emissions. AGL, which is the nation’s biggest polluter and accounts for about 8 per cent of Australia’s total carbon emissions, owns the coal-fired power stations, Bayswater in NSW’s Hunter Valley and Loy Yang in Victoria’s Latrobe Valley.

After the failed bid, Grok used its 11 per cent stake instead to lobby against a dramatic restructuring of the company that would have split the business into two companies, coal power-focused Accel Energy, and retailer AGL Australia. Grok also nominated four directors to be appointed to the board, who were ultimately supported by the majority of AGL shareholders. New AGL CEO Damien Nicks pledged last week to map out firm plans to underpin the company’s accelerated closure of its coal-fired power plants and investment in renewables.

While coal-fired power closures across the nation will help cut greenhouse gases, and support the federal government’s 2030 target of reducing emissions by 43 per cent from 2005 levels – there remains substantial risk. Shutting coal-fired generators too soon, without enough reliable power to support wind and solar energy – and sufficient battery storage – could result in a messy energy transition, threatening power supply and prices.

For now, coal remains the dominant fuel source providing electricity to Australia’s national energy market. In figures released this past week, the Australia’s Energy Market Operator showed that coal still accounted for just over half of the fuel that fed into the national energy market in the final quarter of 2022.

In Australia, there are a lot of proposed renewable energy projects, which may or may not go ahead. And even if they do, experts argue it’s still not enough to replace the electricity generated by coal-fired power stations, most of which are slated for closure by 2036.

As a co-investor in Sun Cable, Cannon-Brookes’ Grok could have the solution to the problem of delivering more renewables into the Australian market. But instead he remains a believer in the vision that the project, of which he was chair, should export energy to Singapore. Grok has argued there is already enough renewable capacity being developed to meet demand to service customers in Australia.

Sun Cable, a project deemed investment ready by Infrastructure Australia, wanted to supply 15 per cent of Singapore’s electricity from a 12000-hectare solar farm with a capacity of as much as 20 gigawatts located 5000 kilometres away, near Tennant Creek in the Northern Territory. Some of the electricity generated from that farm would have also been supplied to Darwin.

A Grok spokesperson said the project was about “maximising outcomes for the Northern Territory, the Australian economy, shareholders and global emission reduction efforts”.

The Singapore project was the reason the founders started the company, and the reason investors invested in the company, in the first place.

Grok and every other investor, with the exception of Squadron, is firmly of the view that the Australia-Asia PowerLink, the cable to Singapore, is the project to back – it continues to hit important milestones and remains on-track to deliver affordable clean energy to Singapore. This lighthouse project will likely deliver significant outcomes for the company, attract further investor capital and create a new industry in Australia.

Currently, most of Singapore’s power is provided by gas, and for that reason, its per capita carbon emissions are high – almost as high as countries with significantly bigger populations such as Malaysia and Japan.

For this reason, it’s understandable why it would be an attractive target market for renewables. But five years after it was founded, Sun Cable still hadn’t secured contracts with Singaporean customers. Rather the company, after much rhetoric and optimism, had letters of intent. The project wasn’t due to begin construction until 2024.

Grok Ventures, says that as of October last year, Sun Cable had received letters of intent from potential Singaporean customers wanting to take 2.5 gigawatts of power versus a planned supply of 1.75 gigawatts.

Last year, Singapore began importing up to 100 megawatts of hydropower from Laos using existing infrastructure via Thailand and Malaysia.

Forrest’s Squadron Energy has argued that the Singapore venture is not commercially viable. It would prefer the project focused domestically, with a potential cable link to Darwin from the solar farm, with the energy maybe used to power a possible green hydrogen project that most likely would be for export.

However, an idea mooted by some in the energy industry is the possibility of running a cable, also known as an interconnector, from Sun Cable’s planned Northern Territory solar farm – the world’s largest solar farm and battery storage facility – to Queensland, where there is existing infrastructure that could feed into the national energy market. It would be significantly less complex and cheaper than original $35 billion spend to reach Singapore.

Forrest has a number of investments in central Queensland through Squadron Energy and also Forrest Future Industries. At Gladstone, FFI is developing a green energy manufacturing centre to build an electrolyser facility, which is needed to produce green hydrogen. Fortescue says the plant will make its first electrolyser this year, despite the withdrawal of its joint venture partner Plug Power from the project. Electrolysers from that facility are intended to be used in FFI’s planned green hydrogen facility at Gibson Island, near Brisbane.

Meanwhile, Squadron Energy is developing the $3 billion Clarke Creek wind, solar and battery project in central Queensland.

Pierluigi Mancarella, professor of electrical power systems at Melbourne University’s Energy Institute, says running a cable from the Northern Territory to Queensland is “viable”. “Once we have a very large-scale production of solar energy backed up by batteries, could we use it locally, with interconnectors to the east coast? That is definitely possible.”

Still, other experts such as Georgios Konstantinou, a senior lecturer in energy systems at UNSW, say there are already an enormous number of proposed renewable projects, particularly in Queensland and NSW, which are closer to existing transmission systems. For this reason, it would be commercially questionable to run a cable from the Northern Territory to Queensland.

Konstantinou was also sceptical of the viability of Sun Cable’s plans to deliver energy to Singapore, given his estimate that the cable length meant it could lose up to 20 per cent of its energy by the time it arrived at its destination.

Tony Wood, the Grattan Institute’s energy director, was also sceptical of the Singapore export plan by Sun Cable, and says building a cable to Queensland from the Northern Territory probably wouldn’t work unless Squadron Energy were to acquire it very cheaply.

Loading

“If he [Forrest] could buy it cheap enough, and finish it at a lower cost, at a cost point that would be cheaper than building a new, equally sized facility in western Queensland or central Queensland to supply that electrolyser plant that he’s talking about, and export hydrogen from Gladstone, that would be interesting. But it’s whether he could buy it at a low enough price,” says Wood. Forrest and Cannon-Brookes declined to comment.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.