Investment, technology to drive cleaner energy

In late 2017, Australia’s competition regulator, Rod Sims, described energy affordability as “Australia’s largest economic challenge”. It remains a major issue, despite progress on gas exploration and development and in renewable energy generation. Australian National University research shows the nation is on track, between 2018 and this year, to invest in wind and solar power three times faster per capita than Germany, four to five times faster than China, the EU, Japan and the US, and 10 times faster than the global average. That trend, however, is stuttering. On Wednesday, Perry Williams reported that congestion woes in the power grid threaten to hike electricity bills, according to numbers crunched by the Queensland government’s investment giant, QIC.

The fund, with clients including Australia’s largest superannuation funds controlling $730bn of retirement savings, noted the number of committed new energy projects has plummeted this financial year. The problem has arisen because of lack of transmission capacity to transfer renewable energy to the grid, especially from remote locations. The fall-off in renewables investment also threatens to derail Australia’s efforts to achieve deeper cuts to carbon emissions. According to the Clean Energy Regulator, 600MW of new generation from renewables has been committed in the current financial year so far and another 1500MW is forecast before July. Last financial year more than 3300MW was committed. To put the numbers in perspective, however, Australia requires at least 30,000MW of solar and wind power if it is to replace coal generation by 2040, and 47,000MW if more aggressive pollution cuts are required. The knock-on effect of the fall-off in new projects is likely to be higher power bills, creating further uncertainty among domestic and commercial users. For entrepreneurs the basic lesson, given current technology, is to situate viable projects within easier reach of the grid.

The problems will exacerbate the concerns of business leaders, which were revealed last month in The Weekend Australian’s annual survey of CEOs. John Durie, who surveyed 73 business leaders, found they were almost unanimous in demanding a clear energy policy as the priority for the country. “In more than two decades polling big business leaders, there has not been a single issue so clearly enunciated,” Durie wrote. The survey reflected the experiences many businesses have faced in getting an ­affordable energy supply. High energy costs — as Mr Sims, the Australian Competition & Consumer Commission’s chief executive, said two years ago — can result in plant ­closures, reduced investment and job losses,

The Morrison government’s plan to consider more than 100 new technologies with a view to doubling renewable energy in the grid within a decade and modernising high-­polluting industries will be vital. As reported this month, the plan will involve input from industry, the finance sector and researchers. Opportunities for short, medium and long-term investment will be identified in a range of technologies. These will cover carbon capture and storage, hydrogen, lithium production, biofuels, waste-to-energy technology and feed supplements to reduce methane emissions in farming.

In the wake of scathing criticism during the bushfire emergency, the Morrison government is challenging perceptions that it is falling short on energy policy and climate change. On Wednesday Energy Minister Angus Taylor said the key to ensuring power prices continued to fall and that renewable capacity increased was to cut the cost of storage, backup and grid upgrades. The government’s $1bn Grid Reliability Fund, he said, had joined with NSW to underwrite the Queensland-NSW Interconnector to unlock energy generated in Queensland.

In Davos at the World Economic Forum, Finance Minister Mathias Cormann argued perceptions that Australia was not taking climate change seriously were false: “There is a global demand for coal and if it’s not met by cleaner Australian coal it will be met by comparatively dirtier coal from other sources and the world environment will be worse off.”

Josh Frydenberg has dismissed an alarmist warning from the Bank of International Settlements that the Reserve Bank of Australia may have to purchase coalmines and fossil-fuel power stations to save the economy from the financial impact of climate change. As the Treasurer said, the BIS also advocated a balanced approach involving “not only emissions reduction but adaptation, mitigation and resilience measures put in place without compromising the strength of the economy”. Australia’s comparative advantages in fossil fuels such as coal and gas and in solar generation make the economy well positioned to transition to cleaner energy. But steady, incremental action, based on science, has more to offer than hot air.