Energy Strategy in an Era of Global Fragmentation

Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepgett in London with the hosts of the Bluebeg Daybreak Europe podcast. We're up early every week day keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break. So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens. It's smart, calm and to the point. And it fits into your morning. You can find new episodes of the Bluebeg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris. On Apple, Spotify, YouTube or wherever you get your podcasts. This is Kobraan Barbnegrie and you're listening to Switched On. The podcast brought to you by Bloomberg, EF. As geopolitical tensions rise and the global order becomes more fragmented, countries that sit between the world's major powers are being forced to rethink their economic and energy strategies. For these so-called "middle powers," navigating relationships with both the United States and China is no longer just a matter of diplomacy. It's increasingly about resilience, sovereignty and control over critical systems. Energy sets at the centre of that shift. As reliance on imported fuels becomes a strategic vulnerability, electrification and domestic clean energy are taking on a new role. Not just as climate solutions, but as tools of economic independence and national security. So how are middle powers adapting to a world of greater uncertainty? And what does that mean for the future of the energy transition? On today's show, we bring you a discussion from the BNF Summit New York, where I sat down with Malcolm Turnbull, the 29th Prime Minister of Australia. As leaving politics, Mr. Turnbull has returned to business as a senior adviser and investor in Australian technology companies. He is also president of the International Hydro Power Association and continues to speak and write on issues ranging from cybersecurity to geopolitics and renewable energy. BNF Summits bring together experts from across finance, energy and technology to share insights, build connections and explore how innovations in clean energy technologies are reshaping global markets. Held in cities around the world, they offer the ideas and perspective needed to navigate the transition to a cleaner future. If you'd like to join us at one of our upcoming events, including the BNF Summit Amsterdam on June 8, head to bnf.com and click on events where you can also watch highlights and videos from past summits. But for now, let's turn to my conversation with Malcolm Turnbull, titled "Energy Transition in a Multi-Polar World, the Middle Power Perspective." OK, well, good morning everyone and thank you very much for joining us Malcolm. It's a real pleasure to have you here on the stage with us in New York. Australia offers a really interesting perspective as a middle power navigating a more fragmented world. We've historically always been a staunch US ally, very tight ties with the United States on security politically, but China is our largest trading partner, deepening ties now with India. The two great powers and having to navigate the complexity of that shows and also historic ties with the United Kingdom and the EU. When you became Prime Minister back in 2015, Barack Obama was in the White House. The United States was still very much the linchpin of the global rules based order. A lot has happened since then. What is your diagnosis of the state of the global rules based order now and how does it fare for countries like Australia? Well, it's really important that we maintain it. I was Prime Minister, I overlap with the tail end of Obama and the first half of Trump in his first presidency. We're now dealing with a very different administration, the Trump 2.0. The United States government in its official publications says the international rules based order is and I quote a cloud castle abstraction. It's not just what Donald Trump says on truth social. The official position, this is from the national defence strategy, is to dismiss the international law, international rules based order as essentially BS. That's what that means. Now this is mind blowing for countries like Australia. I wrote about this in Foreign Affairs last year and the challenge is what do we do about it? We spoke about it very eloquently at Davos. What do the middle powers do? How do you deal in a world where the US now proudly says might is right and we will pursue our interests in America first regardless of its impact on others, whether they are friends or adversaries. The answer is you have to work together, we have to try to persuade our American friends that they should moderate or change course but in the absence of being successful there, we have to work together to maintain the rules based order upon which our sovereignty and security relies. What does that look like? Mark Carney at Davos talks about pursuing more strategic autonomy. What does that actually look like for middle powers? It means self-reliance, it means sovereignty, it means autonomy, it means ensuring that you are not as dependent on the whims and fancies and policy decisions of great powers as you have been in the past. We can't assume that for example the US will be as benign a headrimon as we always thought it was in the past. Again, this is not a criticism, this is just a statement of fact. We are living in a very different world. A lot of this is in line with what the administration wants by the way. JD Vance has said that General De Gaulle was right. He has prayed to De Gaulle who infuriated President Johnson and Kennedy in the 60s because of his insistence on France's independence and sovereignty. Vance has said no, he was right. Europe should not be permanent basalt of the United States. We have to be more self-sufficient. Probably enough, Canada has the biggest challenge because well over 70% of its trade is with the US. We were relatively small percentage of our trade is with America by the way and the US has a massive surplus so that's why I was able to persuade Trump in the first administration not to impose steel and aluminium tariffs on Australia. But I think a good example of what Middle Powers can do is the Trans-Pacific Partnership. This was a 12-nation trade deal, very ambitious trade deal. It was a hallmark of Obama's pivot to Asia and after the 2016 election, Trump pulled out of it. I persuaded Shinzo Abe to keep going with him. I say, "I, we, Lucy and I, who's Lucy's here, we persuaded Shinzo over dinner at our house in January 2017 that we should keep going without the United States." He kept on saying out of the room out of the deal and Shinzo was a bit cautious about that to begin with but we kept going, got lost one important member of the US, added two irrelevant adjectives, comprehensive and progressive so it's now the CPTPP. But it kept going, it was ratified and the UK has joined it and other countries will too. The next example of Middle Powers, meaning powers other than China and the US, being able to do things together. So does it also infer that Middle Powers may strengthen ties with China? I mean China has expressed some interest in winning the CPTPP. I think it happened in Manchu Pipe. Francois Philippe Champagne, who is then the French, so to say, the Canadian trade minister, was Sydney recently with Carney and he apologized for insisting on adding those two adjectives. One of those classic negotiations very proposed it and everyone said, "I don't be ridiculous." And then finally at the end he proposed it again, they went, "Oh, whatever. Okay." Everyone was in that negotiate. I wasn't there naturally. There was the trade negotiators, but everyone was there now, which as they hadn't. - So does this push middle powers? - Yeah, well, yeah, double it does. I mean, China, so in Trump one, China sort of emulated Trump in terms of, "aggression," if you like. And you remember the wolf warrior diplomacy phase, very, you know, you know, forward leaning, aggressive kind of public diplomacy in-- - By China. - By China, yeah. This, that was utterly counterproductive. And they've worked that out. I mean, whatever you think of their politics, very smart people, Beijing. And this time, China is on a charm offensive. They are, you know, Xi Jinping is giving speeches about the importance of the international rule of law, the importance of maintaining international law. He is literally, he's doing, he's differentiating from the Trump administration. And, you know, that is not going to, you know, turn Australia from being an American ally to a Chinese ally. I mean, that's not gonna happen. But there are a lot of countries in the middle for whom that will be very appealing. Because the, you know, you look at, I mean, this conference has been focused on this perhaps, you know, almost exclusively, but the consequences of the American Israeli attack or war, they've, you know, started with Iran and the consequence for our region, East Asia and Southeast Asia is a massive, much greater than it is for the US directly. So what lessons do you think Middle powers are taking out of that, out of the latest? - Well, it is sovereignty, self-reliance, don't be, you know, don't you cannot assume the US that we grew up with is the US that we've, well, certainly isn't the US, we've got today, all that that will be so in the future. Now again, this is not a criticism. I mean, I'm, you know, devoted admire of the United States and its, you know, its history, its political achievements and so forth, its values, but, you know, the Trump administration makes it very clear that this is a different administration. So what I'm saying about their different attitude to the rest of the world and international law is not a bug, it's a feature. And so we have to live with that, you know, we all have a stake around the world in what happens in Washington. It's just that we don't have a vote, only the Americans do. So, you know, we have to, we have to deal with the American administration we get. And that's, that's what, that's what all of that means. So people will be hedging, but self-reliance and working together. And that means, you know, cooperating with other middle powers. And that CPTPP is probably the best example of that. I mean, Marx, Karnie Sites, that whenever he talks about this, but we need to do a lot more. And on energy strategy, what does this changing world order you think mean? I mean, we have to be, you have to be more self-reliant. Elected, you know, those countries that are very dependent on imported liquid fuels as Australia is. I mean, we're an energy exporter because of our gas and coal. But we're very dependent on imported liquid fuels. We have to, you know, electrification is clearly the way to go. I mean, because, and, you know, the, the remarkable thing about, you know, renewables, which I'm very committed to, as you know, I'm president of the International Hydro-Parassociation, Lucien A of Renewable Energy Developers, developing hydro-wind batteries in Australia. So we're very committed to this and I was in politics. But, but now more than ever, the clean energy transition is absolutely critical to national sovereignty. I mean, if you want to be, if you want to be genuinely independent, you need to be economically independent. And energy is vital. More, you know, you can't have an economy without the sources of energy. And electrification means you can achieve that independence because most of us, most countries, are able to, you know, can generate as much sun, solar power and wind as they need. And, you know, with combination of batteries and pump hydro, you have the storage to turn those intermittent renewables into 24/7 power. So, the US are on war and also the Russia-Ukraine war. What, what lesson do you think middle powers will be taking? What does this mean for nuclear proliferation? I'm, I'm, I'm, I'm what, really worried about that. I mean, if there's one thing that keeps me awake at night, that's it. I mean, the message, if, if countries in full, I mean, you know, what is the, what is the takeout that the Iranians will take from these recent conflicts? Their, their takeout will be that they should have developed the nuclear weapon already. Right. So, you know, it is very, yeah, I mean, I guess they've got, they've, they've got their own nuclear weapon with being able to block the straits of Hormuz, which they've threatened for 47 years and have only just done. So, maybe they, maybe that might qualify. But look at, look in the region. If countries feel the US nuclear umbrella is not to be relied on, they will seek their own nuclear deterrent. And the country is in our region that could race to that very quickly, if they chose Japan and South Korea. Now, you know, you say that about Japan, given their constitution, their history, it sounds inconceivable. But there's one of our great prime ministers, Paul Keating, always used to say in the great race of life, always back self-interest, because you know it's trying. And so, I think if that's what, if that's what countries need to do, they will acquire that capability. Yeah, and we can see that the political discourse in Japan has been changing, I mean, not quite to that extent, yes, yet, but there is talk of constitutional reform on self-defense. So, if we pivot to talk a bit more about climate and energy, so that the US obviously has very checkered history of engagement and participation in the global climate process, we've seen their climate commitments unravel and emissions target, obviously, you know, be canceled. But we haven't seen that happening and spreading to other countries. So, you know, why do you think that is? Why haven't other countries followed suit taken the United States as lead and said, you know what, we're not interested in decarbonization? Drill, baby, drill. Well, I mean, look, when I was an environment minister in the Australian government in 2007, back in the Halcyon days, when it was bipartisan consensus to support an emissions trading scheme, I might add. They did last very long. That did not last very long, no. I'll start to twitch. I've got PTSD from the climate wars. The, when those days, the argument we were making was to say, how much are you prepared to pay to save the planet? Because renewables are more expensive, right? Now we're in the situation and your BNEF's excellent LCOE, you know, analyses demonstrate this is true pretty much everywhere in the world. The cheapest form of new generation is solar plus storage, you know, supplemented by wind, you know, match supported by gas and some circumstances. But it is, you know, this revolution of solar, you know, this solar is gets cheaper and cheaper. It is growing at in excess of 25% per annum, referring to Antoine's presentation. You saw the figures in Pakistan. I mean, Pakistan and Australia, quite an interesting contrast, because both have got very high penetrations now of solar, of roof to what we'd call rooftop solar. But Pakistan hasn't been as well integrated into their grid, has been in Australia. But I think, yeah, I mean, I think that's, regardless of your views on climate change, renewables are the cheaper solution. And that's the way it's going. I mean, no one would build in the energy business in Australia. No one would build a new coal-fired power station today. I mean, regardless, even if they thought, you know, as one of my predecessors once said, you know, climate change has crept, you know, even if they took that view, you'd still, your solution is, re-variable renewable generation, solar and wind, plus storage. Yeah. But we've seen, so in the power sector, the economics are very clear. In the transport sector, the economic clearer, still difficult in industry, still difficult in agriculture. If you were Prime Minister today, and looking at setting emissions targets, how would you be balancing and thinking about the impact of the US withdrawal and absence from the global climate process? Would it affect What are you thinking? Well, not really. I mean, America has decided, well, you know, the government, the US administration has decided, I'm going to suspect to the regret of most people in this room, but certainly to Mike Bloomberg's regret, as we heard yesterday, to basically double down on fossil fuels. Now, you know, you and in fact, even to lean against renewables. Now, you could understand a technology agnostic approach, you know, to say, you know, let everyone, you know, deploy whatever you like, but leaning against renewables seems to me to be swimming against the swimming against the inexorable tide. I mean, or jumping against the frogs as well. Well, yeah, well, I mean, electric, you know, we all know, I mean, electric motors are much more efficient than internal combustion engines. I mean, most of the energy from burning, they're created by, you know, burning the petrol in your car is turned into heat, not into propulsion. So, I mean, there's a million other reasons too. So I think it's a mistake, but look, America has got tons of, it's got petrol or oil, I say, and hence lots of petrol and diesel, it's got gas, it's got all of these resources, you can afford to do that. Other countries can't. And of course, we have a strong view. I mean, as you know, Khabad, you know, we're both Australians. I mean, we are the land of droughts and flooding rains. I mean, our climate has always been extreme, but it's getting a lot more extreme. So we know what's happening. And, Father Middle powers, do you think that it's the same sort of balance as it in their interests to continue on the path of decarbonisation or to hence that way? Yes, absolutely. I mean, well, I mean, for sure, I mean, I, I, I, in some countries that don't have the same access to, you know, just have as much access to solar, for example, as, as others. But, but look, I think generally, yes, I mean, the, I mean, you know, look at India. I mean, India is focused on solar deployment, but putting huge effort into that, including building panels in India and a massive commitment to government commitment to pumped hydro, because they don't want to be dependent on imported batteries, or reduced dependence on imported batteries. China's roll out of renewables is pretty much equal to the rest of the world put together. And of course, they are investing massively in pumped hydro. They're, they're expecting to add about 200 gigawatts of pumped hydro between now and the mid 2030s. And, and of course, batteries as well. So I think, I, look, we, we, I think the economics of it dictates the direction in Australia. So, so middle power is probably taking more of the Chinese course on climate and energy than the American one? Yeah, well, it, yeah, for sure, well, it could be good. Look, can I just say to you, and this is my, I used to say this all the time, and I was in politics, Kobe, I'd heard it a thousand times. You know, our energy policy should be determined by engineering and economics, not ideology and idiocy. And, and, you know, that is that, that's the one, that is the one message. And, you know, I think that those countries that focus on engineering and economics will generally pursue decarbonisation. Now, the United States might be different because of its incredible endowment, and it is exceptional and unique. But look, let the, my attitude is, let the Americans run their country that don't need advice or lectures from us. But from our point of view, from most of the rest of the world, it is manifestly in our interest to pursue decarbonisation, clean energy, whether it's from an environmental point of view, which is hugely important, or from an economic point of view, which is often easier to sell politically. Malcolm Turnbull, thank you so much for sharing the middle power perspective with us. Thank you, thank you. Thank you. [Music] Today's episode of Switched On was produced by Cam Gray, with production assistance from Kamala Shelling. Bloomberg NEF is a service provided by Bloomberg Finance LP and its affiliates. This recording does not constitute nor should it be construed as investment advice, investment recommendations, or a recommendation as to an investment or other strategy. Bloomberg NEF should not be considered as information sufficient upon which to base an investment decision. Neither Bloomberg Finance LP nor any of its affiliates makes any representation or warranty as to the accuracy or completeness of the information contained in this recording, and any liability as a result of this recording is expressly declined. [Music]