Green-left overreach risks power, investment, budgets
As we have warned several times in editorials across recent years: “The electorate should be under no illusions about the Greens’ intention to push Labor as far left as possible on climate change, regardless of the costs.” Anthony Albanese was quick off the mark on Monday to insist his government’s deal with the Greens to pass its safeguard mechanism would not force up power prices or create instability in the national electricity market. He gave the assurance after Labor struck a deal with the Greens to impose a hard cap targeting coal and gas projects, which the minority party claims will stop about 50 per cent of 116 new fossil fuel projects in the development pipeline. The Prime Minister and Climate Change and Energy Minister Chris Bowen made much of the fact Labor had “resisted and rejected” the Greens’ calls to ban new gas. Be that as it may, the Greens had a different story. “Coal and gas have taken a huge hit,” Greens leader Adam Bandt boasted. “The Greens have stopped many of the 116 new coal and gas projects in the pipeline from going ahead, pollution will actually go down, and we’ve derailed the Beetaloo and Barossa gas fields.” He was not wrong when he said coal and gas had taken “a huge hit”. At what cost?
Just two months after the Australian Competition & Consumer Commission warned the domestic gas market was facing a shortfall this year equivalent to about 5 per cent of annual consumption, Monday’s announcement raises serious questions for households and businesses. These relate to the likely impact on investment, especially in gas, as a vital transition fuel; how capable the renewables energy sector is of producing and storing sufficient power to carry the baseload when the sun doesn’t shine and the wind doesn’t blow; how detrimental the change will be on budget revenue federally and in states such as Queensland; and where Mr Albanese’s evidence is that the deal will not compromise supply or force up prices further. On such a fundamental economic issue, where is the cost-benefit analysis?
Incoming NSW premier Chris Minns faces a challenge fast-tracking the Santos Narrabri gas project, which has the capacity to supply half the gas needs of our most populous state. In his upcoming budget, Jim Chalmers also could face a substantial challenge relieving cost-of-living pressures amid inflation, soaring mortgage repayments as interest rates rise and rising power prices. Last week, the Australian Energy Market Operator forecast that electricity prices would soar by 20 per cent for a half-million customers in NSW, South Australia and Southeast Queensland. AEMO also forecast gas shortfalls starting this year and continuing until at least 2026 as offshore production plummeted. The Labor-Greens deal is likely to exacerbate that trend as it damages our international competitiveness.
Following news of the deal on the safeguard mechanism on Monday, industry players were blunt about the likely impact. The nation’s peak oil and gas lobby group warned the deal would “ultimately make climate change targets harder and more costly to meet” and put domestic gas supply at risk. Australian Petroleum Production & Exploration Association chief executive Samantha McCulloch – representing gas giants including Santos, Shell and Woodside – said: “We can’t let politics and ideology get in the way of sensible, evidence-based climate and energy policy.”
New gas supply was needed to support Australia’s climate change objectives, Ms McCulloch said. It was essential to avoid energy shortfalls and put downward pressure on prices. “Australia’s natural gas is critical to reaching net zero in Australia and the region, supporting the transition away from coal and providing reliable backup for renewables while powering Australian manufacturing,” she said. “New gas supply investment needs policy and regulatory certainty but, instead, the Labor-Greens deal creates additional barriers to investment, further diminishing the investment environment and adding to the growing list of regulatory challenges facing the sector.”
APPEA called on the government to take a lead on technologies such as carbon capture and storage, noting that Australian gas was needed to help our international partners decarbonise. “According to the federal government, our exports have the potential to lower emissions in LNG-importing countries by around 166 million tonnes of carbon dioxide annually, replacing other higher-emissions energy sources,” Ms McCulloch said.
The Australian Pipelines and Gas Association welcomed the certainty of the reformed safeguard mechanism, which will help Australia reach its emissions reduction targets faster. But it questioned whether the new restrictions on gas supply would increase costs for households and businesses. APGA chief executive Steve Davies said the deal would restrict much-needed gas supply further and increase the cost of living, which is already a serious problem for many Australians. “Just last week, AEMO warned about gas shortages and the vital role gas plays in reducing emissions and ensuring electricity reliability,” he said. “The market operator also noted the need for more investment in gas as Australia transitions to net zero.”
The impact of the deal will take years to work through the system. Polls show Australians want action on climate change; they also expect reliable, affordable power.