Now we're cooking (ourselves) with gas
by Ebony Bennett
[Originally Published in The Canberra Times, 19 September 2020]
Gas didn't even make AEMO's top five list of potential sources of dispatchable power - but the Coalition is looking to divert taxpayer funds earmarked for clean energy into LNG projects. Picture: Shutterstock
Just months after Australia endured its worst climate-fuelled bushfire season on record, the Morrison government is about to starve renewable energy of investment while showering the gas industry with taxpayer-funded subsidies. Not only is it a poor investment decision, it's a strategy that will drive up electricity costs and emissions without many jobs to show for it.
Worse still - there are better, cleaner, cheaper, and more jobs-intensive options available to the government.
The success of Australia's renewable energy industry is remarkable. It has triumphed despite the Coalition government's best efforts to kill it and every other hurdle placed in front of it.
Australia's Clean Energy Finance Corporation (CEFC) and the Australian Renewable Energy Agency (ARENA) were carefully designed to fit into existing institutions and markets to accelerate innovation in clean energy in Australia. ARENA makes grants that "provide a pathway to commercialisation for many new technologies and businesses that would otherwise struggle to get off the ground or be potentially lost to overseas markets", and since 2012 has supported 543 projects with $1.58 billion in grant funding, unlocking a total investment of almost $6.48 billion in Australia's renewable energy industry.
In fact, ARENA is so successful that the Coalition government associated itself with its triumphs no less than 149 times between Sept 18, 2013, and July 30, 2019, according to analysis of federal ministerial media releases. Since July 2014, 100 per cent of ministerial media releases issued have supported ARENA.
The CEFC has invested $6.03 billion and unlocked $27.3 billion in private capital since it began. For every $1 the CEFC invests it unlocks $2.30 in private investment. It has funded everything from the expansion of the Hornsdale Power Reserve (a.k.a. the Tesla big battery) to make it a grid-scale stand-alone battery, to community housing providers to help them develop highly energy-efficient homes for low-income families.
Any other government would take one look at the success of ARENA and the CEFC in creating investment and double their funding. Not the Morrison government.
Though he did manage to crash investment in renewables by 90 per cent in one year, Tony Abbott failed to get the numbers to abolish the CEFC and ARENA - he was stopped by Labor, the Greens and the crossbench including the Palmer United Party, Senator Jacqui Lambie and Ricky Muir.
But the Minister for Energy and Emissions Reduction, Angus Taylor, may succeed where Abbott failed, by sabotaging Australia's only clean energy investment architecture. Taking a sneakier approach, instead of trying to abolish the agencies, Taylor seems to have decided to pollute them by adulterating the clean energy mandates of the CEFC and ARENA to support fossil fuels and cut funding available for renewables.
It's a bold strategy to take a profit-making investor of renewable energy projects and turn it into a potentially loss-making underwriter of fossil fuel projects during Australia's first recession in 30 years. Foolish, but bold.
The proposed amendments pave the way for dud taxpayer investments in gas-burning power generation that the private sector won't touch, and taxpayers will be stuck with a bad investment that will keep polluting for 30 years. Gas prices have gone up on the east coast over the past 10 years and, if the government goes ahead with its plans to build a 1000MW gas plant we don't need, every year for the next 30 years it's going to require more expensive and polluting gas to run it. In contrast, once a large-scale solar plant or wind farm is built, sunshine and wind are completely free and will never run out. You can't get cheaper than free.
The reality is, there is no gas shortage and no need to build a massive new gas-burning power station subsidised by taxpayers. The Australia Institute's National Energy Emissions Audit, by energy analyst Hugh Saddler, found Australia's existing combined-cycle gas plants ran at just 30 per cent capacity across the past 18 months - these are the supposedly "baseload" plants in the national electricity grid. And it was just two months ago that the Australian Energy Market Operator (AEMO) released its roadmap detailing "what an optimal National Electricity Market would look like to 2040 if it was designed with a focus on security, reliability and the lowest cost for consumers".
The trouble for the Morrison government is gas didn't even make AEMO's top five list of potential sources of dispatchable power. Instead, AEMO nominated pumped hydro plants, big battery storage (like the CEFC is investing in), household-scale batteries and virtual power plants with demand-response - which is where energy users reduce their consumption at moments of peak demand in return for cash (similar to the concept of off-peak hot water). Who needs to build big, new, expensive and polluting gas-burning power plants, when it's much cheaper and quicker to create a virtual one that runs on the energy we save?
AEMO described further investment in gas as "less likely" while gas prices remain high. And gas prices are likely to remain high. How do we know? Because gas production tripled in Australia over the past 10 years and gas prices have gone up right alongside it. When the world price dropped, our domestic gas prices remained high. Even the ACCC can't explain why gas producers prefer to sell LNG overseas at a price lower than they could get in the domestic market.
Plus, gas companies already mined all of the cheapest-to-extract gas - and sold it overseas for higher prices. Now, Australia is left with gas that's harder and more expensive to extract, and that's before you throw in the billions of dollars it will cost to build new gas pipelines and gas hubs we don't need.
The government likes to protest that it's technology-neutral and doesn't like "picking winners" - and fair enough, those are solid principles. Unfortunately for Australians, it has instead picked a loser. On every measure the Morrison government says it cares about - cheaper energy prices, reducing emissions, and creating jobs - there are vastly superior options available than gas.
Trying to build an expensive, polluting gas plant to reduce emissions and electricity prices is about as effective as trying to create clean air by farting in an elevator. It stinks.
- Ebony Bennett is deputy director at think tank The Australia Institute - @ebony_bennett.