Energy experts back government’s emissions reduction road map with conditions

Leading energy figures back the government’s plans but admit there is some way to go for a positive outcome.

“Gas will take a back step – when we look at the demand equations, that’s probably in the 30s and 40s … and we need to prepare for that,” says Andrew McConville. Picture: Ross Swanborough.

Leading figures in the energy industry have endorsed the government’s road map to emissions reduction, but say the government should not complicate the plan by threatening to directly intervene in the market by financing new gas plants.

Speaking at the Australian’s Future Australia Roundtable on Emissions Reductions Australian Petroleum Production and Exploration Association CEO Andrew McConville said the government’s road map was right to take an agnostic approach to energy sources.

“I think the elements of last week were obviously good news from where we sit in understanding the role of gas in the overall energy mix,” he said.

“What we’re wanting to push forward is this idea of being technology agnostic … particularly in terms of the absence of battery storage as well in many ways gas becomes your battery.

However, Mr McConville said the government should shy away from the prospect of actively intervening in the market – hinting at Scott Morrison’s proposal for a gas power plant in the Hunter Valley – and develop a plan for when battery technology becomes a more efficient way of providing baseload power than gas.

“Gas will take a back step – when we look at the demand equations, that’s probably in the 30s and 40s … and we need to prepare for that,” he said.

Grattan Institute energy program director Tony Wood said that there was a valid case for government intervention in the energy market to support the establishment of new technologies.

“There is a fundamentally valid role for governments in policy to support technologies that have the potential to reduce emissions into the future,” he said.

Mr Wood said he supported the road map in principle but said there needs to be actual policy underpinning the plan.

“Ultimately the big criticism will be is that this is a road map – it’s not a vehicle to get us there …. That’s why you are going to need at some point, the accommodation of carrots and sticks,” he said.

Clean Energy Council chief executive Kane Thornton said that as well as a policy underpinning, there needs to be more certainty surrounding an actual emissions reduction target and a higher focus on the part renewables will inevitably play in Australia’s future energy mix.

“It is a bit unclear how you have a road map without a bit of clarity on the target,” he said.

“The one area of substance that I struggled with a little bit was when we consider that at the end of the day we are trying to decarbonise the country at a certain pace.

“It’s quite clear renewable technologies are going to play a role in that … we would have liked to have seen more focus on the renewable suite.”

Future Energy Exports CRC CEO Eric May agreed that an emissions reduction target would be useful and said a market based mechanism would help apply the plan to reality.

“I don’t think it‘s feasible to go down that carbon tax pathway again … but perhaps in the effort of spurring investment we could have tax offsets or rebates,” he said.

“Carbon emissions are effectively a classic market failure …. that’s why the government has to come in and provide a mechanism for that cost to be passed on to the ultimate end users of the energy.”

Enpec Director Matthew Wood said that as the road map encourages the development of different types of energy like hydrogen, it would be important that the government accept when it eventuates that some ideas don’t work.

“It would be useful to be more candid when things aren’t working. Most technology and development fails,” he said.

“The intent of this is good, but we have to be more honest about when things aren’t working …. we should accept from the outset that nine out of ten of these ideas won’t get to market.”

The panellists generally agreed that the frailty of early stage risk of developing a new form of energy generation or storage was an appropriate time for government support.

But they were unanimous that “late-stage” government intervention in the area was deleterious to the market as a whole.

“The idea of the government weighing in and commissioning direct energy investment into the mature end of the market is entirely unhelpful and unproductive,” Mr Kane said.