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Coalition must face energy issue as substance not style

The federal opposition can take its time deciding how to proceed on a net-zero by 2050 emissions target but must acknowledge that this is an issue of substance not political style. Coalition energy and emissions reduction spokesman Dan Tehan has opened the way for vigorous internal debate over net zero, the Paris Agreement and the future role for coal, gas, carbon capture and storage, and nuclear energy. He says the bottom line is securing an energy transition that can reduce emissions to deal with climate change in a way that does not burden individuals, households and small business.

You can add big business and heavy industry to the list. Today, the nation’s net-zero and energy transition can be summed up by the fact that aluminium smelters are lining up for billions of dollars from the government to stay open because they can’t afford the high price of power. At the same time, artificial intelligence data centres – the big electricity consumers of tomorrow – are demanding clear answers on where the secure supplies of electricity for tomorrow will be coming from.

Aluminium has been an anchor tenant for the current crop of baseload coal generators that are being pushed out of existence to make way for renewables. Rio Tinto announced in November 2024 that its ambitions to switch the Tomago smelter to predominantly clean power later this decade were not achievable. Dithering by state governments in NSW and Victoria on gas exploration and production has helped bring the issue to a head.

A federal government producer credit, which gives aluminium smelters a power rebate for each tonne of metal produced using less greenhouse gas emissions electricity, is only as good as the renewable industry’s capacity to supply. And new tariffs for exports to the United States make things more difficult still.

As business columnist Robert Gottliebsen explained on Monday, Rio Tinto has done everyone a favour by telling the truth about the aluminium industry’s current predicament. As well as the Tomago smelter in Newcastle, Rio is also the part-owner of the Boyne Island aluminium smelter near Gladstone in Queensland and the Bell Bay smelter in Tasmania. Alcoa owns the Portland smelter. All face the same issues.

Solving the dilemma of affordable supplies of always-on electricity for industry is critical. As energy analyst Saul Kavonic wrote on Monday, an uncertain power future puts us at risk of losing our data centre edge – and, with it, our future technology agenda. “More investment in reliable energy supply is needed to deliver data centre growth, which could increase our energy demand by 5 per cent by 2030,” Mr Kavonic wrote. “Our future in artificial intelligence and the digital economy relies on us maintaining our world-leading data centre infrastructure, which is also essential for our national security.” But insufficient investment in our energy grid is holding back our data centre build-out, and Labor’s bold technology and industry agenda with it.

The global trend is clear. Google has signed a deal with Kairos Power to use small nuclear reactors to power its AI data centres, with the first reactor due to be on line this decade and several more on line by 2035. Its rival, Microsoft, has signed a $1.6bn deal with Constellation Energy to reopen part of the Three Mile Island nuclear reactor in Pennsylvania to power its AI data centres.

Given the election result and deep divisions in the Coalition on net zero and the Paris Agreement, Mr Tehan is entitled to be in no rush. As the pathway continues to tighten, the economic consequences of proceeding with high emissions reduction targets with no credible plan will become ever more apparent.

Read related topics:Climate Change

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Original URL: https://www.theaustralian.com.au/commentary/editorials/coalition-must-face-energy-issue-as-substance-not-style/news-story/0336fbedd7b9e02be128fd1609dcde35