Slow and steady wins the race: The future of energy reform in Australia
Written by: Paarth Rathore
Published: 26th September 2020
The past summer’s bushfires sparked significant public outcry against the federal government’s climate and energy policy stances. It appeared that only something extraordinary could divert people’s attention from energy reform. Of course, life always delivers the incredible.
Understandably, when the COVID-19 pandemic came along, the only things that were on the government’s mind (and the people, let’s not forget) were the health and security of the population, balanced with necessary recovery in economic growth and unemployment.
Before delving into the details, I believe there is one guiding principle that all of us must appreciate in this issue: it is a slow and steady race for renewable energy reform in Australia – and only that.
The Gas-led Recovery and Liddell Power Station
Firstly, the government pitched a ‘gas-led recovery’ from the coronavirus recession by canvassing the construction of five new gas fields and pipeline networks throughout Australia’s east coast. More controversially, the Australian government has set a ‘dispatchable capacity investment target’ for the country’s electricity sector to come up with 1000 megawatts of electricity as replacement of the Lidell coal-fired power station (in the NSW Hunter Valley), with the station due to retire in 2023. If this target is not met with the necessary private investment, the government has said it will move ahead in pushing for a new gas power plant by underwriting and streamlining approvals.
The controversy centres on the fact that energy conglomerate AGL intends to shut the Lidell coal-fired power station in 2023 but has already outlined plans to replace it with renewable energy and battery storage. With the last decade displaying significant developments in wind and solar energy, the environmentalists bring their case – why replace one fossil fuel in coal, with another fossil fuel in natural gas?
Economic and Policy Rationale for Gas
For the Federal government, its case lies both in an economic and environmental sense.
Energy analyst Hugh Saddler, from the Australian National University’s Crawford School of Public Policy, found that in NSW, coal still provides two-thirds of grid electricity and owing to operational inefficiencies, gas plants operate well below capacity. So with more and more coal plants being shut in the years ahead, the Lidell Taskforce measures that without significant capital deepening in natural gas, then electricity prices could potentially increase by 30% for households and firms in the next five years – given our infrastructure is not ready to support a complete overhaul to renewable technology. Therefore, the government’s decisive ultimatum to the private electricity sector, as well as the canvassing of more gas supply streams along the East Coast, is to safeguard not only families against the risk of a rise in retail electricity prices but also businesses. The federal government repeatedly maintains that an affordable, reliable, and secure electricity supply is critical to the success of the infrastructure projects initiated by JobMaker, which enables job growth and improvements in the social wage to propel our economic recovery.
However, as the party of the free market, obviously, this is not the government’s preferred path, but industry inaction has forced its hand. But Sarah McNamara, the chief executive of the Australian Energy Council, cautions that the government’s ‘threats’ of intervention could act as a deterrent for the very private investments they were attempting to encourage.
Environmental Arguments and Emissions Targets
In an environmental sense, although this sounds unconvincing, the government and gas industry argue that using more gas is an environmental good as it reduces emissions when compared with coal. It is usually held that gases release about half the emissions of coal when burned, although this is subject to scrutiny by the UN Environment Programme, that suggests the impact may be greater due to the leakage of methane. Also, the government claims it is ahead of its 2030 emissions target (set by the ratification of the Paris Agreement in 2016) by 16 million tonnes.
However, on Thursday, the Federal government unveiled its plans to continue funding the Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation (CEFC) to the tune of $1.9bn over the next decade. Although its mandate is to lessen investment in renewable energies like solar and wind, which have proven to be ‘commercially viable’ - which is the case with the low operating costs attached to harnessing the sun or wind to produce electricity, in comparison to burning coal or gas. This reflects the projection for renewables surging from 21% to 27% of Australia’s main grid in 2021 (Schneider Electric)
Rather, the focus is now on investment in ‘low-emission technologies’. These low-emission technologies have not necessarily been defined but include soil carbon sequestration (where carbon is removed from the atmosphere and stored in soil), carbon capture and storage, microgrids, and overall means to reduce energy consumption. Key initiatives from the government’s investment package include:
$67mn put towards supporting microgrid projects in regional and remote communities, to encourage the switch from diesel generators to cleaner technologies with greater affordability and reliability.
Piloting a Carbon Capture Use and Storage Development Fund at $50mn.
Supporting businesses in the agriculture, manufacturing, industrial and transport sectors to adopt technologies that increase productivity and reduce emissions through a new $95.4 million Technology Co-Investment Fund.
Helping businesses and regional communities take advantage of opportunities offered by hydrogen, electric, and bio-fuelled vehicles with a new $74.5 million Future Fuels Fund
The Government’s emissions reduction strategy is focused on technology, not taxes. This will reduce the cost of new and emerging technologies, rather than raising the costs of existing technologies or layering in new costs to consumers and businesses. Again, this will back jobs for now and into the future, cut costs for households and ensure there is sufficient infrastructure to have energy supply chains to support rising demand.
Of course, the counterargument that the government is still not doing enough or proceeding fast enough on climate change will always be levelled. For example, this policy can be said to be ‘backwards’ with its support for carbon capture and storage, which is an encouragement to fossil fuels.
Final Thoughts
With ARENA’s success in facilitating the rise of solar, wind, and hydro-electricity across the last decade, the government is investing in the future of ARENA to support the next generation of energy technologies. The energy minister, Angus Taylor, says Australia needs to ‘get the balance right’ for our energy mix to support the growth of emerging energy technologies but also relieve ourselves from the economic pressures of COVID-19. For these reasons, the government’s chief scientist, Alan Finkel, views gas as the ‘perfect complement to solar and wind’.
Taking away the criticisms towards carbon capture and storage as a functional technology itself, I believe its implementation embodies the government's developing energy policy with a clear succession plan – as we transition from coal to gas, and from gas to renewables. With this being a heavy criticism towards governments of the past, then, despite how people might feel about the government’s pragmatic approach, we should give some credit where it's due.
