The Federal government’s green bank is channeling capital to drive decarbonisation in some of Australia’s toughest to abate sectors, ports and airports. As these critical transport hubs face mounting pressure to curb Scope 3 emissions, the CEFC’s targeted investments unlock sustainable growth opportunities and advance Australia’s transition to a low-carbon economy
The Clean Energy Finance Corporation (CEFC), has invested in more than 30 airports through infrastructure funds and directly financed one of the largest ports in Australia to help drive the transition to net zero.
Ports and airports happen to be assets that are among the hardest to abate their carbon footprints.
This is one good reason why the CEFC can seek to make a difference and to meet its own charter, which is to work towards the nation’s transition to a low carbon economy.
Since 2018, the CEFC has invested with IFM Investors, QIC and Macquarie Asset Management in their large infrastructure funds to establish a sustainability framework for the assets in their funds.
The CEFC has committed a total of $322 million to these funds, including $150 million to IFM Investors, $100 million to Macquarie and $72 million to QIC.
It also has exposure to core-plus infrastructure through investments with Morrison and Pacific Equity Partners (PEP).
Our first core infrastructure fund investment was with IFM in 2018. At that stage perhaps only one of its airports had an emission reduction target. Today, they all have net zero targets and they are reporting baseline emissions, so that is a major fundamental shift over that time
“Typically, we became more ambitious with the agenda each time. Between the three core infrastructure fund investments, we get access to 38 infrastructure assets,” Julia Hinwood, Head of Infrastructure at the CEFC, says in an interview with [i3] Insights.
These include all capital city airports, except for Canberra, key regional airports across the country and ports including Port Botany, Port Kembla in NSW, Port of Melbourne and Port of Brisbane.
“The fund managers are progressing well with the sustainability agenda for these infrastructure assets and are confident that the majority will achieve net zero Scope 1 and 2 greenhouse gas emissions by 2030. It is a fantastic achievement. My focus is now on Scope 3 for those assets,” she says.
“Our first core infrastructure fund investment was with IFM in 2018. At that stage perhaps only one of its airports had an emission reduction target. Today, they all have net zero targets and they are reporting baseline emissions, so that is a major fundamental shift over that time.
“We put in a framework of what we want the managers to achieve, and they have implemented it across all assets in the fund.”
The Challenges of Moving on Scope 3 Emissions
Hinwood explains the complexity of moving forward to Scope 3, as airports and ports rely on logistics and freight industries in their operations and they handle millions of passengers each year.
“I am looking at the heavy fleets servicing ports and airports to convert them to electric fleets quickly as the first step. We have other teams in the CEFC who are looking for alternative fuels and light vehicles.”
The emissions in the airport are generally produced from running aircraft engines during taxiing to and from terminals. Technology that can drastically reduce aircraft emissions while they are on the tarmac and at terminals is now available, she says.
It is now possible to offer ground power, but aircraft must be equipped to take the external power source and be prepared to switch off their engine. Grid electricity significantly reduces the emission because jet fuel has a much higher carbon content, Hinwood says.
She agrees this option will increase an airport’s scope 2 emission, but it decreases the overall emissions of the airport. Most major airports offer ground power to aircraft, but some aircraft carriers are reluctant to use it because of inconvenience or other technical reasons.
Hinwood says Australia does not mandate the use of ground power, although some airports overseas give airlines no option.
“Electric tugs are now becoming available which replace the need to keep jet engine running when the aircraft is being towed. The saving on emissions is considerable when considering some runways are long. The taxiing time on runways at Sydney Airport can sometimes take up to 10 minutes.”
Ports Require Different Approach To Scope 3 Emissions
For many ports in Australia, she says the most achievable option currently to address scope 3 emissions is to electrify all the ground handling fleet, including stevedoring equipment. Ports are a slightly different story, explains Hinwood, because not all landlord ports run their port operations, including Port of Melbourne.
The CEFC has also invested directly in combined landlord and port operators through a loan it provided recently to Flinders Port Holdings (FPH).
“FPH is interesting because it both owns and operates the port operations across its seven South Australian ports. CEFC capital will finance electrification initiatives across FPH’s ports, including investigating the transition from hybrid straddle carriers to an electric automated rubber tyred gantry at its Flinders Adelaide Container Terminal and the replacement of internal combustion engine light vehicles and vessels with electric and hybrid alternatives.
“Other initiatives include the installation of solar PV (photovoltaic) to reduce power consumption across the energy intensive sites and investigating the potential of cleaner shore-based power by connecting berthed ships to the grid to replace diesel bunker fuel,” Hinwood adds.
On the operational side, there is opportunity for behind-the-meter renewable generation at some of those ports in addition to use of grid power to run dockside equipment and machinery.
Australia doesn’t have regulation requiring use of shore power, but we are signed up to the international marine carbon reduction initiative so, in time, it’s possible that this will be mandated for certain types of vessels in Australia
Some of the ports are also assessing natural capital solutions to offset emissions. Others are considering or currently installing shore power for use by ships.
Bunker fuels are heaviest in carbon emission, and if vessels can switch to shore power, using grid or renewables generated power it will reduce emissions. But then, ships have to be equipped to take shore power and also sufficient grid, or other power has to be available.
Admittedly, she says, it can be quite challenging to make shore power available in all Australian ports currently.
An obstacle is the age of container vessels that come to Australia. They are old. Some ports in Europe will only let ships dock if they can use shore power.
“Australia doesn’t have regulation requiring use of shore power, but we are signed up to the international marine carbon reduction initiative so, in time, it’s possible that this will be mandated for certain types of vessels in Australia,” she says.
Cruise Ships Could Be Early Adopters of Shore Power
Most Australian containerised and general cargo ports have, or are in the process of, undertaking feasibility on the use of shore power, Hinwood says. She believes that early adopters of this technology will be cruise ships.
“Depending on the port location, some can source green energy, but even when using power from the grid, the emissions are still lower as grid power is still materially cleaner than bunker fuel,” she says.
“You have to run the conversion concurrently. You can’t wait for the grid to be green and then convert ships. Because there are too many of them. You must start converting ships and operations before green fuel is available.”
The Port Authority of NSW has announced plans to install shore power and work has started with the installation at its dry bulk precinct at the White Bay Cruise Terminal with the prospect of offsetting with renewable electricity. It has awarded a $20 million contract to begin installing wharf-side infrastructure.
Hinwood says the CEFC is also working to develop a business case to build charging stations for heavy vehicles, which is the priority when it comes to road transportation.
You can’t wait for the grid to be green and then convert ships. Because there are too many of them. You must start converting ships and operations before green fuel is available
The green bank is keen on the hottest asset of the day – data centres – but getting invested in the sector has been challenging because they are very well funded and the facilities typically do not have the necessary green credentials in Australia, Hinwood says.
While her team looks after traditional economic infrastructure assets, her colleagues in other divisions are working more specifically on energy transition, including a separate focus on spearheading investment in transmission infrastructure, long-duration storage, electricity distribution networks and distributed energy resources.
There is a commitment of up to $1.92 billion to finance two major energy infrastructure projects to be developed by Transgrid, representing the largest single investment in the CEFC’s history. The projects are HumeLink and the NSW element of the Victoria-NSW Interconnection (VNI West).
The CEFC is providing this finance via its $19 billion Rewiring the Nation Fund. The nationally significant projects, once completed, will be instrumental in Australia’s energy transition, helping to bring low-cost and low-emissions clean energy to energy users.
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