Tuesday, 18 July 2017

RenewEconomy/Giles Parkinson: Australia’s $10 billion renewable energy boom: But then what?

Australia’s $10 billion renewable energy boom: But then what?

By Giles Parkinson on 18 July 2017
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Australia’s clean energy industry warns that Australia’s current $10 billion splurge on large and small-scale renewable energy will not last unless the policy chasm that looms in 2020 is bridged.

Kane Thornton, the head of the Clean Energy Council, says its data shows there are some $8 billion of large-scale renewables under construction or committed in 2017, and a further $2 billion will be invested in rooftop solar by homes and businesses this calendar year.


“We are truly in the midst of an energy revolution,” Thornton said, pointing to the halving of generation costs of wind and solar in recent years and the “digitisation” of the energy sector.

But he said 2020 – when the current renewable energy target that is driving this growth, at least in large-scale generation – “loomed large”. The industry fears falling off another investment cliff, just as it did in 2013, after the Abbott government looked to scarp the renewable energy target.

He said it was “time to be practical, not political.”

Labor is seizing on the federal Coalition’s resistance to the proposed clean energy target to once again “wedge” Malcolm Turnbull, just as it did in 2009 when the current prime minister was leader of the Opposition, but was ousted because of his support for the CPRS proposed by the then Rudd government.

Turnbull and energy minister Josh Frydenberg should be expected to embrace a CET, but can’t because of the strength of the conservatives within the party. The Institute of Public Affairs this week said a survey it had conducted suggested more than half of Coalition MPs were climate skeptics.

But it seems that even economics are unable to win them over, and Labor is striking hard, with Opposition leader Bill Shorten on Tuesday declaring that his party was willing to meet “Malcolm in the sensible middle” and embrace all 50 of Alan Finkel’s recommendations, including the CET.

He proposed Frydenberg should sit down and negotiate a CET with Labor’s Mark Butler – in the same way that Penny Wong and Ian Macfarlane did on the CPRS nearly a decade ago – and bring an end to the so-called “climate wars;” a reference to Butler’s new book documenting the last 10 years of climate politics,

“Let’s get to work on a price on pollution now,” Shorten said in a speech to the Clean Energy Summit. “Let’s get the legislation into the parliament and through the parliament this year, so it’s not buried or derailed by an election campaign.”

bill shorten tweet - media release.

Shorten pointed to Turnbull’s embrace of a carbon price and an emissions trading scheme exactly two years ago (see Tweet above).

“That will require us to rise above politics-as-usual, all of us … to stare down vested interests and the familiar voices of those who profit from the status quo,” Shorten said. “I’m up for that challenge – even if that means making life a bit easier for Mr Turnbull.”

Greens leader Richard di Natale said his party would prefer an expanded renewable energy target rather than a CET, but would also keep an open mind on a CET, depending on the details. The critical issue, he said, was the level of the emission targets.

Di Natale used the story of a Japanese soldier kept on fighting 29 years after the end of World War II. “He was completely ignorant that the world around him had changed. Does that sound familiar?

“We know there is no future in coal ….. the gas industry is destroying itself through greed,” he added. The Liberal Party had chained itself to CCS “fantasies” and ultra super critical coal plants.

“No financier anywhere in the world will invest in those projects. Only our state and federal governments will put money in these god-awful projects.”

Di Natale’s estimate that clean energy – wind and solar – was clearly the cheapest form of new generation was supported by Don Harwin, the energy minister in the NSW Coalition government.

“Clean energy is the least cost new technology in NSW,” Harwin said, underlining the split within the Coalition that was highlighted in a remarkable speech on renewables, last month, that underlined how the Far Right had hijacked Australia’s energy policy.

On Tuesday, he reiterated that the proposed Snowy Hydro 2.0 pumped hydro scheme showed that what is old could be new, but could be a game changer, able to support 5GW of new renewables.

“We need to end the culture war – we need to let economics and engineering guide policy,” he said. “We need credible policy, it doesn’t need to be perfect. We can’t let the perfect be the enemy of the good.”

Harwin also dismissed the push by conservatives in the Coalition for the government to build a new coal-fired generator. “

“We don’t support government getting back into generation,” Harwin said, adding that it had to be up to the private sector to invest and take the risk.

Victoria energy minister Lily d’Ambrosio said the state Labor government had “some issues” with the Finkel Review, but was keen to get on with a CET because it would take time to implement.

“We can’t wait another six months, or another a year, or until next election,” she said. “We all know our energy system is being transformed. It is responsibility of governments to show leadership … but it will happen with or without national leadership.”

AGL CEO Andy Vesey agreed: “It takes time to deliver solutions. It doesn’t happen tomorrow. We don’t have a lot of time.”

And Vesey warned that Australia could miss out without policy certainty. “Capital is very nervous. It wants certainty or it will go somewhere else. You have to give capital security and you do that by giving it certainty.”

He also said that any CET needed to take climate targets seriously, otherwise the mechanism would be ineffective.

His comments were echoed by the head of GE Renewable Energy Jerome Pecresse, who said capital will flee to jurisdictions with clear policy.

But Pecresse also cited the US, where policy had changed but renewable investment continued because renewables were cost competitive, and state governments had their own targets.

Origin Energy CEO Frank Calabria said he had “not lost hope” on a CET being agreed, but noted that policy uncertainty had been missing for years. “Even without that policy, technology costs will continue to come down” but the transition would be more volatile if without clear policy.

Victoria, Queensland, South Australia and the ACT have vowed to “go it alone” on a CET – even the ACT which is the last place to need one (having committed to reach 100 per cent renewables by 2020) – and have asked the AEMC to work on how a state-based CET might work.

The federal Coalition has tried to fight this wedge with another wedge, seeking to embarrass the Queensland Labor government by asking the Australian Energy Regulator to investigate market gaming by the two big state-owned generators.

But Queensland is not alone on this charge. In fact, as networks, retailers and politicians have observed, the gaming is rampant right across the country, but Queensland has its pulled its pants down around its ankles because it instructed its generators to stop, and since then the state’s prices have fallen like a stone.

Frydenberg’s intervention has one advantage. It does highlight that the bulk of the price increases are the results market manipulation, and dealing with market rules, and giving the regulators more power, are essential to reducing prices.

The AER will undoubtedly say of the Queensland generators that it looks bad, smells bed and feels bad, but it is within the market rules. As South Australia’s government has been saying for a while, it’s proof that the market is broken.
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