Energy lessons abound for a meddlesome government

The Albanese government is mishandling the transformation of the nation’s energy economy while hastening the demise of the goose that for decades has laid our golden eggs of prosperity. If this trend continues taxpayers will face a heavy burden and future governments some very heavy decisions indeed. Evidence now abounds that meeting Labor’s legislated emissions reduction target of 43 per cent from 2005 levels by 2030 is going to be more difficult and expensive than voters were led to believe. That evidence includes a collapse in actual investment in renewable energy projects to levels below what they were during the Morrison years. The fall is in inverse proportion to the urgency of the investment required.

Capital projects necessary to underpin large-scale renewable energy developments are proving to be late and over budget. This includes the ill-fated Snowy 2.0 pumped-hydro scheme, the proposed second interconnector to Tasmania and the thousands of kilometres of high-voltage transmission lines required to join it all up. Electricity users understandably are alarmed at the continuing rise in bills despite being told repeatedly that renewable energy is the cheapest option. Community anger is growing at the intrusion of industrial developments into rural and high-value environmental areas.

The latest news, as we reported on Monday, is that federal Environment Minister Tanya Plibersek has vetoed the linchpin of Victoria’s offshore wind strategy over “clearly unacceptable” risk to local wetlands. Victorian Premier Jacinta Allan’s green energy plan centres on a terminal at the Port of Hastings where wind turbines will be assembled and sent to an array of offshore energy farms. With the cost of those wind farms already under a cloud, there has been a pledge by federal Climate Change and Energy Minister Chris Bowen to guarantee their profitability. The whole scheme is now less likely because government finally has worked out that the environmental impact is impossible to justify. The Allan government has a target of 95 per cent renewable energy by 2035 – much of which was to be underpinned by offshore wind. Victoria’s plans were also key to the ­Albanese government reaching its target of 82 per cent renewables by 2030.

The only part of the plan that is on track is the rush to close down the fossil fuel assets that are supplying the states’, and the nation’s, power. Labor in Victoria has been quick to deny companies the opportunity to develop a new field of gas and is urging the speedy retirement of coal-fired generators that still supply most of the state’s power needs.

Another troubling side of the energy equation can be found in the drop-off in investment in new resources as gas reserves in Bass Strait, once our leading energy province, run dry. Coal, gas and iron ore projects make up Australia’s top three exports, which generated $344bn in export earnings in 2022-23 – more than half Australia’s total export earnings. But investment in new projects has stalled and Minerals Council of Australia chief executive Tania Constable said investment was going to other places including Canada, the US and Asia.

Part of this no doubt is because of supply-chain issues, inflation pressures and big subsidies being offered elsewhere. But the Albanese government has been at loggerheads with coal and gas producers, leading to claims that Australia is now a bigger sovereign risk than previously. The mining industry has accused Labor of going out of its way to “ensure the policy settings related to resources are anti-competitive”. This includes a super royalty on coal production in Queensland and restrictions imposed by the federal government under the cover of a troubled international energy market because of the war in Ukraine.

Federal Resources Minister Madeleine King has dismissed claims of increased sovereign risk as laughable. But the very real threat being posed to future investment is no laughing matter. There have been clear warnings from our closest trading partners and biggest resource investors, notably Japan, about Australia’s trustworthiness as a future supplier of energy on which they depend. Without corrective action it is possible they will seek to diversify their lines of supply. The fact is that big projects have long timelines, include big risks, and are difficult to turn around. These difficulties are being learned in real time by the Albanese government as it attempts to navigate a transition to a lower-emissions power sector and economy. The real lesson is for government to get its own house in order while doing everything possible to let the world know that Australia’s energy economy remains open for business.