Politics of renewables have been won, now for hard bit

Climate Change and Energy Minister Chris Bowen has been quick to claim vindication from the federal election result for his determination to push on with a renewable energy-focused transition of the nation’s electricity grid. On the politics, Mr Bowen is entitled to feel a sense of relief. So, too, is the renewable-energy industry, which has clear air to plan its investments without the uncertainty and potential of competition from government-owned nuclear power. Whatever the Coalition now decides to do with its nuclear policy, the issue realistically has moved beyond the time frame for the rollout of renewables that makes the business case for nuclear, if ever there was one, more difficult in the short to medium term.

Although Mr Bowen rightly can claim to have won the politics in renewables’ favour, he is still left with the realities of physics and engineering as well as the enormous task of turning complex and untested plans into realities. The Snowy 2.0 pumped-hydro project is still years behind schedule and six times over budget. The economics of floating offshore wind, the sort planned for NSW, are still best compared with those of nuclear power. Mr Bowen may claim deep community support for deployment of renewables but this does not mean there won’t be obstacles along the way.

Continued support will depend on the Albanese government continuing to shield electricity consumers from the cost of the transition. Mr Bowen says energy bill relief in the immediate term is in place while government and industry deliver lasting structural reform. “Australians understand this is more than a three-year fix, and we’ll keep working to deliver the modern grid Australians deserve,” he says.

In fact, the challenge will become more acute as the federal government revises its 2035 greenhouse gas emissions target as it continues to bid to hold a meeting of the UN Framework Convention on Climate Change conference of parties in co-operation with Pacific Island nations in 2026. For business, this means the net is being squeezed as the reality of what decarbonisation means becomes more apparent across all industry sectors, not just power.

There is a growing list of companies that have watered down their net-zero commitments as the US takes a different path under Donald Trump. The Australian election result did not stop Andrew Forrest’s Fortescue this week laying off about 90 staff working on its hydrogen projects, spread across its Queensland electrolyser facility and a hydrogen unit in Western Australia.

The positive news is that natural gas increasingly is being recognised as an essential part of Mr Bowen’s favoured modern grid. This is true from the hyper-partisan Clean Energy Council to the energy authorities planning the transition. The CEC now says: “Australia’s power system can be comfortably powered with a high share of renewable energy, paired with energy storage technologies and back-up gas-fired power generation.” Mr Bowen has taken to emphasising the role of gas as well.

The federal government and the energy industry must use the certainty of the election result to lock in future gas supplies as a national priority. And regulators must quickly respond to an industry consensus that a detailed road map is urgently required for how the transition will work as coal-fired generators exit the market. The fragility of the grid was emphasised by Australian Energy Market Operator chief executive Daniel Westerman, who said that in 2024, AEMO had to intervene in the market 1800 times to direct gas, hydro and coal-fired generators to synchronise to the grid to provide critical system stability. This was up from six manual interventions to maintain a secure grid in 2016 and 321 interventions in 2020. Away from the partisan hype that batteries will be sufficient backup for grid stability, AEMO says 22 large synchronous machines will be needed to keep the grid stable and secure. Even still, Mr Westerman said “flexible gas-powered generation will remain the ultimate backstop in a high-renewable power system”.

These are all big investments that will be needed to provide services that traditionally have been part of the coal-fired generation bundle. Analysis of the British network has found about three-quarters of the increase in household electricity bills since 2015 have come from renewable energy subsidies, carbon taxes, grid balancing, capacity market payments and grid strengthening. Australia’s energy transition is still very much a work in progress. Having won the politics over nuclear, Mr Bowen must get real on gas and get on with the job.