Morrison energy plan’s focus is ‘stuff that works’

Charged by the urgency of the COVID-19 crisis and the recession it has caused, Scott Morrison has laid out a much-needed blueprint to safeguard the future of Australia’s energy market. It is a mixture of carrot and stick that will enrage renewable energy purists and force gas exporters to the table to guarantee supplies and lower prices for domestic energy consumers. The electricity industry has been given a short horizon to deliver on promises to invest in firm electricity generation to replace what is lost when the Liddell coal-fired power station closes in NSW’s Hunter Valley. If it doesn’t, the government will step in as an investor of last resort with a 1000-megawatt gas-fired plant to underpin intermittent supplies from renewables.

The government will commit to new investment in infrastructure to move electricity and gas around an increasingly renewables-dependent national energy market. For electricity this means accelerating all priority interconnectors including the Marinus Link between Tasmania and the mainland, and other projects that strengthen links between South Australia, Victoria, NSW and Queensland

For gas, the government will establish a gas hub at Wallumbilla in Queensland to deliver open competition in gas trading modelled on the Henry Hub system in the US. The reforms are designed to boost competition, challenge rent-seeking behaviour, promote jobs and empower consumers. In return, the federal government wants territory and state governments and industry to clear the way for more gas development. Oil refineries will be offered government support to bolster supply security at a time of rising geopolitical uncertainty.

The Morrison plan is portrayed as backward-looking by groups vested in a single-focus agenda of reducing carbon dioxide emissions from fossil fuels. But the Prime Minister says the plan will allow Australia to meet its international commitments while safeguarding living standards and jobs. His pitch to voters is pragmatic, wanting to do the right thing to safeguard lower prices and jobs with a minimum risk of unexpected shocks. “We don’t believe we’ve put Australia in a position where we have to choose between meeting standards and sensible targets and surrendering people’s job,” Mr Morrison says.

The political wedge for Labor is clear given the experience of the federal election last year, when the opposition, under then leader Bill Shorten, was unable to cost its promise of bigger ambition on climate change action.

There is an element of government attempting to pick winners in the plan, which prioritises gas and uses public investment to force results. It is also at odds with the govenment’s pledge to be technology neutral.

In reality, however, the energy market already has been badly distorted by past policies such as the Renewable Energy Target that forced renewables into the market. More than $30bn was invested in renewables in Australia between 2017 and the middle of this year, and a further 12.6 gigawatts of renewable capacity will have been added last year and this year.

Mr Morrison says the government supports the rollout of cheaper renewables that help Australia meet its emissions reduction targets and hold the promise of further declines in energy costs for consumers. But he says this can be true only if the foundations of grid stability are in place with firming capacity to back up intermittent wind and solar. “I’m interested in stuff that works,” Mr Morrison says.

On the government’s reckoning, every megawatt of dispatchable generation from coal, gas, pumped hydro and batteries can firm around 2MW of renewables. The calculations are that without firm supplies to replace what is lost with the closure of the Liddell plant, wholesale prices could rise by 30 per cent.

Mr Morrison has given industry until April to commit to investment in 1000MW of firm generation or the government will act. Energy market reform is a core issue for the government and has been worked through by Energy Minister Angus Taylor. The latest blueprint seeks to deliver on the government’s consistent message of energy security, lower prices for consumers and better outcomes on emissions.

The pandemic has enhanced the government’s sense of urgency and will sharpen the political contest given mixed signals on energy and emissions still being sent by the ALP.