Morrison government climate action plan hot on gas, cool on coal

A new wave of spending on energy projects to cut Australia's carbon emissions is on the way under a contentious federal government plan that sidelines coal but highlights gas as a key fuel for the future.

Vowing to build on more than $10 billion already spent on clean energy, the Morrison government will name electric vehicles, batteries, renewables and gas as some of the key technologies it will support.

Energy and Emissions Reduction Minister Angus Taylor.Credit: Alex Ellinghausen

The Technology Roadmap discussion paper raises expectations for substantial new funding in the October budget but embraces energy projects fiercely opposed by environmental groups, including gas-fired power plants as well as carbon capture and storage.

In findings that could divide the government's own ranks, the discussion paper offers no support for new "high efficiency" coal-fired power stations despite years of advocacy for the technology among Nationals and some Liberal MPs.

Energy Minister Angus Taylor will describe the plan as the "cornerstone" of the government's strategy for reducing emissions, releasing it on Thursday as the next step in the government's investment agenda.

"As we recover from the COVID-19 pandemic, we must continue to prioritise investment in technologies that improve productivity and support a resilient economy," Mr Taylor says in the paper.

"This will position Australia to overachieve on our 2030 Paris target in a decade's time – while maintaining a strong economy."

The new document is a discussion paper rather than a blueprint that lists concrete spending plans, asking instead for industry and community feedback by June 21 to prepare a major policy statement before the end of September.

The statement would set Australia's agenda for the next United Nations climate change summit, with no mention of any change to the government's existing target to reduce greenhouse gas emissions by 26 per cent by 2030.

But the discussion paper reveals the government's favoured technologies for future investment, starting with an emphasis on gas rather than coal.

It also acknowledges the shift to renewable energy – tipped to make up 50 per cent of electricity supply within a decade – and the need for transmission upgrades.

The paper says the medium-term will see an expansion of the domestic hydrogen industry, seen as a way to store and export clean energy, and in one of the most contentious elements of the paper, it names carbon capture and storage as a key technology for the long-term. Environmental groups see it as a way to encourage continued investment in coal and gas projects.

The government says it has invested more than $10 billion in more than 670 clean energy projects since the 2013 election, although this figure combines grants and loans.

The commitments to date include $2.5 billion from the Emissions Reduction Fund, $7.6 billion in loans from the Clean Energy Finance Corporation, $1.5 billion in grants from the Australian Renewable Energy Agency and $1 billion for the Grid Reliability Fund and other policies.

The technology roadmap calls for gas to be used as a transition fuel.Credit: Glenn Hunt

Under the "direct action" policy it has pursued since 2013, the government also promised $2 billion in the last budget for the Climate Solutions Fund, the successor to the ERF.

The paper casts doubt over the future of coal power in the electricity grid and highlights the case for growth in gas usage and production.

The paper said switching from coal to gas can provide "quick wins" that reduce global energy sector emissions by 10 per cent. Citing a recent CSIRO forecast, it said domestic gas usage would rise "at least 20 per cent by 2060" and gas production would climb at least 90 per cent in the same timeframe - driven largely by exports to fill Asia's growing demand for liquefied natural gas.

Angus Taylor said last month that the current low price of gas, caused by plummeting demand as a result of coronavirus travel restrictions, was a "big opportunity" to increase renewable energy.

"More gas means more capacity to absorb renewables [into the grid] because gas is flexible, dispatchable generation,” Mr Taylor said.

The paper echoed this view, noting that "gas is already playing an increasingly important role in South Australia to balance intermittent renewable electricity".

Hydroelectric power also has an "important role" as a backup battery to intermittent wind and solar power supplies, the paper said.

The Snowy 2.0 project in NSW and Tasmania's $4.5 billion plans for the Marinus Link can promote "the penetration of renewables by storing excess energy in high-altitude dams and flexibly generating electricity in periods of high demand", the paper said.

The Tasmanian government is seeking federal support to double its renewable energy production, store the surplus in hydro dams under the Battery of the Nation scheme and export power to the mainland via the 1500 megawatt Marinus Link interconnector under Bass Strait.

A feasibility study by the Tasmania government found Marinus would have to replace nearly half of the coal fired power generated in NSW and Victoria for it to be economically viable.

"The largest single influencing factor in the economic viability... is the trajectory of coal-fired generation retirement," the study said. "The benefits of Marinus Link are likely to be greater than costs when approximately 7000 megawatts of the national electricity market's present coal-fired capacity retires."

NSW produces about 8000MW of coal power, while Victoria produces about 4500MW.

The roadmap said Marinus "is an essential part of the future National Electricity Market".