Published in the Australian Financial Review, 12 April 2018
The electricity grid that supplies power to Australia's populated east coast is one of the biggest machines on earth. It is troubling that in 2018 its future risks being determined by the vagaries of political ideology.
Apparently we have to save the coal-fired power industry- by building new coal-fired power stations. Which is curious because the Australian Energy Council effectively represents this industry, and as far as we can see no one here has issued an SOS.
Coal-fired electricity generators have been the backbone of Australia's electricity supply for the past century. We still derive around 75 per cent of our power from them. Our members own them and run them.
They will continue to supply electricity well into the 21st century. As a result of our dependence on coal, Australia has one of the highest greenhouse emissions intensive electricity systems on the planet Building new high-emissions plant with a life of 50 years is risky. Building it in an economy that needs to cut its emissions more significantly is even riskier.
The real question is, what are we saving coal-fired generation from? There is no legal barrier to any private or public entity building a new coal-fired generator in Australia. For all the big talk of the need to build new coal, no one has stepped forward with a genuine plan to build.
New coal does face considerable practical and financial barriers: banks and businesses are unwilling to take on the potentially considerable risks faced by running new high emissions generation in an already high emissions economy.
Building new coal is painted as a panacea for high electricity prices. Except it will take around seven years from conception to enter the market Its planning and construction will need to survive multiple political cycles and possible changes of government It is the type of long-life, large-scale asset best delivered with bipartisan support.
New coal is now more expensive per megawatt hour than new wind and new solar, even after renewables have been "firmed" with technologies such as peaking gas-fired plant. These technologies have advantages of much lower carbon risk, are more modular and have shorter asset lives, which further reduces investment risk.
In the meantime, forward wholesale electricity prices are already falling, and predicted by the Australian Energy Market Commission to provide imminent price relief to customers. This is the result of a wave of more than 4000MW of new renewable generation entering the market over the next two years.
This is no longer just compliance with the federal Renewable Energy Target Renewables are the new normal. Aggregating the suite of recent electricity market modelling, we can get some idea of what is likely to get built through to 2030: around 71 per cent of new investment will be in wind and solar, with the rest made up of firming technologies including gas peakers, pumped hydro (assuming Snowy 2.0 proceeds) and battery storage.
The purpose of the government's proposed National Energy Guarantee is to enable more than $23 billion worth of new investment to occur by providing adequate certainty to investors, meeting emissions targets and ensuring reliability is maintained. It will allow investors to determine the best technology to address these challenges.
Critics of the NEG who claim it is not sufficiently ambitious in reducing emissions also risk putting their own ideology before reality. Low emissions generation is the default Simply by enabling investment and ensuring reliability, the NEG will drive significant emissions reductions.
Presumably the underlying rationale for this relentless political baton twirling is that energy policy is a vote changer. Recent elections do not support this. South Australia has been the "ground zero" of energy policy debate in Australia. The state experienced six major blackouts between late 2015 and early 2017, including a major state-wide blackout. It has historically higher electricity prices and the highest share of intermittent renewable generation of a major grid in the world.
Energy policy was a hot-button issue in the lead-up to the March 17 state poll, with new energy policy announcements made throughout the campaign. It was even described as a referendum on renewables.
Yet despite this, when the dust had settled, the two-party preferred vote had barely shifted. In the Batman by-election on the same day, the Greens campaigned hard on their opposition to the proposed Adani coal mine in Queensland. Labor won with an increased majority.
For all the escalating debate on energy policy, maybe voters want what they have always wanted: for it to be reliable and affordable. An indispensable but mostly invisible service in the background of their busy lives, without bill shock, repeated blackouts and with a sense of confidence that the anxieties posed by climate change are being responsibly and expeditiously managed.
Maybe, like businesses and civil society, they still don't see energy as a partisan issue. Maybe it's only a handful of politicians and commentators who cling to energy policy as some ideological struggle or vote changer.
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