Power prices to rise if Australia doesn’t stop talking and start delivering new renewables
Australia has ambitious energy transition goals, but former RBA deputy governor Guy Debelle warns urgent action is needed now or electricity prices will increase.
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Australia must accelerate the development of renewable energy generation projects or risk soaring electricity prices for households and businesses, the former deputy governor of the Reserve Bank has warned.
The nation is moving quickly to wean its $2 trillion economy from coal – which provides more than 60 per cent of the country’s electricity needs, and the Albanese government and states have concentrated efforts of ensuring policy provides sufficient investment incentives.
Guy Debelle, who left the RBA to join Fortescue Future Industries, said the federal Labor government has done well to establish a policy framework, but action is now needed.
“I think we have good policy building blocks in place, but we really need to get on with delivering,” Mr Debelle told the Clean Energy Summit in Sydney on Tuesday.
“Electricity demand is only going to increase … If supply doesn’t keep pace then there is only one outcome from an economic point of view and that is prices go up.”
Electricity demand is expected to rise as corporations electrify to meet net-zero commitments and a growing number of Australians embrace electric vehicles.
Australia has endured two consecutive years of increases to electricity bills of more than 20 per cent amid a global energy crunch that propelled coal and gas prices to record levels. The impact was exacerbated by the retirement of coal power stations, which have come under mounting economic and social pressure – though the impact has been mitigated by an increase in renewable energy generation.
Mr Debelle’s warning underscores growing concern about the speed of Australia’s energy transition, with a plethora of industry executives warning that the country is taking too long to develop renewable energy projects.
New renewable energy projects have been stalled primarily due to concerns about transmission.
Australia needs more than 10,000KM of new high-voltage power lines across the country’s east coast, but the development of the infrastructure has been slowed by community opposition.
States have increasingly upped financial compensation offers, but a pocket of resistance remains – stoking expectations that Australia will have to force compulsory acquisitions.
The federal government and state counterparts will be reluctant to implement such a step, but renewable energy developers will remain on the sidelines until they have security that electricity can be supplied to the grid.
Daniel Westerman, chief executive of the Australian Energy Market Operator, said the issue of social licence is one of the critical risks facing the country’s transition away from fossil fuels.
Mr Westerman said the transition will be lucrative to the broader country, but stressed managing it in an orderly fashion was momentous and difficult.
“Australia is on the cusp of a vast, new economic opportunity, the likes of which we haven’t seen for decades,” Mr Westerman said.
“[But it] requires our industry to redesign and rebuild the aeroplane while we’re flying it.”
Australia’s task is complicated further by rising global competition, led by the US.
US President Joe Biden secured Congressional support for his signature emissions reduction policy, known as the Inflation Reduction Act, which dangles significant sweeteners to renewable energy developers. As a result, a flood of capital has switched to the United States that may have otherwise gone to Australia.
Mr Debelle said the impact was, however, broader.
“It is not just capital, its expertise and people too. There are only so many people that know what they are doing in this space, and they are all heading to Texas and not coming here. That is where the opportunities are,” said Mr Debelle.
“That really concerns me. We aren’t going to wake up tomorrow as a green energy superpower.”
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