‘Reality check’ needed for net zero, says former AGL boss and APA chair Michael Fraser

APA chair and former AGL boss Michael Fraser says a reality check is needed on energy, as Australia stumbles over its efforts to hit net zero targets by the end of the decade.

Gas pipeline operator APA’s chair and former AGL chief executive Michael Fraser.

Former AGL boss and power industry veteran Michael Fraser says Australia needs a reality check about meeting its net zero targets as the nation moves ever closer to a rolling energy crisis.

One of the country’s most experienced power executives, Mr Fraser told The Australian the race to take coal and gas out of the system meant the coming decade was likely to be marked by regular blackouts and surging prices, given the massive shortfall in efforts to switch the power grid to renewables.

“Nobody’s saying that we’re on schedule or ahead of schedule. We’re behind schedule,” said Mr Fraser, who ran Australia’s biggest power generator for eight years until 2015.

He cautioned of “a return to the 1970s” when state-backed power networks suffered from chronic blackouts. However, this time it would cause “political and economic upheaval”.

NSW and Victoria are targeting a full exit from coal by the early 2030s while the federal government has in place an 82 per cent renewables target by 2030. This would require tens of billions of dollars in investment of private and public funds to re-engineer Australia’s ageing energy grid.

And while Mr Fraser was confident that the entire energy industry was committed to getting to net zero “the point is we need to make sure that the lights stay on and energy remains affordable”.

“And if that doesn’t happen, then public support for the transition will be lost overnight,” he said.

“And that’s just going to create a whole other set of issues, making the transition even harder to deliver. We can’t just put our heads in the sand and pretend we’re sticking to the targets.

“Then you will get to a point where coal just has come out of the system, and we haven’t got the generation there to back it up. That’s when we get rolling blackouts and high energy prices, and that will have social and economic implications.”

Mr Fraser is still involved in the energy sector as chairman of gas pipeline operator APA Group. It holds its annual meeting in Sydney on Thursday.

There Mr Fraser will tell shareholders in his opening address that while he backs ambitious emissions reductions targets, the reality is that policy settings also need to ensure the lights stay on and energy is affordable.

He said there were several factors at play that were all working to delay Australia’s progress in moving to green energy.

These included the competition for skilled labour, critical minerals and equipment supply right around the world, because many other countries were competing for the same resources as Australia.

Inflationary pressures were significantly impacting project costs. He also took aim at the “glacial pace” of project approval processes among state and local governments, and this was slowing down efforts to build.

Added to this was the recent intervention in the energy market by governments, including Canberra’s coal and gas price caps that have rattled investment confidence

“What all this means is that we need to be realistic about the energy policies that will take us forward,” he said.

“The key thing we keep talking about: ‘When can we take coal out of the system?’. That’s not the question.

“The right question is: ‘How quickly can we build renewables and the firming generation needed to back it all up?’

“When we build it all out with the transmission needed, coal will just naturally drop out of the system.”

Following Mr Fraser’s exit from AGL eight years ago, the power major has since undergone a string of management upheavals and stoushes with government. There was even an attempt to split AGL’s generation and retail arms.

It was only the intervention of tech billionaire Mike Cannon-Brookes that forced it into a humiliating backdown, and now AGL is pushing ahead with an aggressive plan to switch off the last of its coal-fired generators by 2035.

At the same time, with the backing of Mr Cannon-Brookes, it is spending billions of dollars building out green power generation.

At APA, Mr Fraser is overseeing a shift into green power. In recent months, the gas pipeline operator took its first big step towards generation, with the $1.7bn acquisition of Alinta’s Pilbara-based energy assets which include two gas-fired generators.

APA plans to work with Pilbara customers BHP, Fortescue and Gina Rinehart’s Roy Hill to roll out solar, batteries and wind power across the region.

Gas emissions have come under intense scrutiny in recent years, and this too is threatening to hit APA’s massive transmission network in coming decades. Victoria has banned gas use for new homes from next year as part of its effort to cut the greenhouse emissions.

Mr Fraser believed gas would play a major role in the energy transition for decades to come and it would be essential for underpinning 90 per cent of Australian heavy industry.

With restrictions on bringing new onshore gas supplies to market in Victoria, APA is building its network so that more gas can move from gas-rich Queensland to the southern states which are now facing their own energy supply shortfalls.

Mr Fraser said governments need to accommodate gas to ensure there was adequate new supply and firming generation capacity “before it’s too late”.

“Now is the time for all levels of government to take out insurance in the form of policies that ensure the energy transition is as rapid as possible, without causing major disruptions socially and economically to the country,” he said.