The AFR View
The scale and complexity of the task requires all hands on deck, rather than ruling out any feasible transition pathway on political grounds.
The mix of energy regulators, producers and users appearing on day one of The Australian Financial Review Energy and Climate Summit confirmed our reporting that Australia’s stuttering transition has fallen well behind the target of 82 per cent renewables by 2030, which underpins the 43 per cent emissions reduction climate goal.
Decarbonising Australia’s fossil-fuelled electricity grid is proving slower and more costly than previously advertised, with reliability risks increasing as the exits of coal-fired power plants run ahead of cleaner and reliable replacement generation.
Boral boss Vik Bansal says it can make better economic sense to stop production when power prices climb too high. Dion Georgopoulos
A combination of factors – from supply-side pandemic disruptions, Snowy Hydro 2.0 engineering mishaps and skilled labour shortages, to planning approval bottlenecks and social licence delays holding up new transmission projects – is making the transition to clean, reliable and affordable power harder and more expensive to achieve in the real world.
The Summit call by the Australian Energy Market Operator’s CEO Daniel Westerman for investors to utilise government subsidies to help financially challenged renewable projects clear investment hurdles underlines that Australia’s energy system continues to be driven by second-best policy options without a clear market signal such as a revenue-neutral carbon price.
The Summit theme of “crunch time for the transition”, and the loss of Australia’s low-cost energy advantage once derived from burning cheap and abundant coal, were both underlined by Boral CEO Vik Bansal, who revealed that across its 300 manufacturing sites the cement and building materials giant is regularly telling workers among its 5500-strong blue-collar workforce to stand down for 30 minutes at a time during periods of peak electricity prices.
That shows how far off amid the uncertainties of the transition is Australia’s future as a clean energy superpower. It also shows that talking about government support for advanced manufacturing and moving up the global supply chain in areas such as batteries, electrical vehicles and critical minerals processing risks putting the cart before the horse.
Australia’s opportunity to revive manufacturing as part of becoming a wind, solar and hydrogen export powerhouse is a laudable and bold ambition.
That would equal the shift that transformed a country dependent in the 1950s on exporting wool and other agricultural products to Britain into a wealthy G20 economy that exploited its comparative advantage in iron ore, coal and gas-based export industries to integrate with Asia and help power the industrialisation of Japan, South Korea and China.
But it all depends on first getting our cheap energy advantage back. And the pressing first challenge is to ensure the lights stay on at home.
The scale and complexity of the task requires all hands on deck, rather than ruling out any feasible transition pathway on political grounds.
This should start with reversing the Labor state governments’ ban on including lower-emissions gas-fired peaking plants in the National Electricity Market’s back-up mechanism, at a time when Victoria’s secret deal with energy companies is using taxpayer dollars to keep open plants running on dirty brown coal.
Encouraging investment in gas peaking should help underpin, not replace, more investment in zero-carbon renewables. A technology-neutral approach to the transition means getting on with constructing new solar and wind farms across this wide brown land and along windswept coastlines, and building the 10,000 kilometres of high-voltage cables that the Summit heard are required to connect a dispersed grid.
It means developing big battery storage and pumped-hydro firming power, while also using gas and carbon and capture storage to produce “blue” hydrogen on the journey to eventually using 100 per cent renewable energy to produce “green” hydrogen.
And the regulation of the NEM needs to be modernised by retrofitting it to allow two-way flow back into the grid from millions of household solar rooftops, as Australian Energy Market Commission chairwoman Anna Collyer says.
There was debate about nuclear energy at the Summit. While pushing hydrogen, Mark Hutchinson, CEO of Fortescue Energy declared that nuclear power was not needed as part of the transition. But Peter Coleman, chairman of wind farm developer DIRECT Infrastructure and lithium producer Allkem, says Australian should keep the zero-emissions nuclear option open as there is no one-size-fits-all technology solution for what is essentially a technical or engineering challenge.
If the politically outdated ban on nuclear power was lifted, Westinghouse Electric Company senior vice president Rita Baranwal reckons Australia’s carbon challenge could be supported by small nuclear reactors by the mid to late 2030s.
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