Reality trips up energy transition

Wind Turbines at Capital Wind Farm, 30km northeast of Canberra. Picture: Getty Images

The unmistakeable lesson so far from the energy transition is that it is easier to shut things down than it is to build the things that are supposed to replace them.

The collapse of what was billed as Victoria’s most advanced offshore wind project is a case in point, as is the call being made on taxpayers to prop up a growing number of heavy-industry projects unable to cope with rising energy costs.

The latest is a $135m rescue bid for three base metal smelters in Tasmania and South Australia, including Australia’s only producer of manganese.

No wonder many in the business world are starting to cool on the speed of the transition to net zero as government seems determined to lift the pace. The withdrawal of Spanish offshore wind developer BlueFloat Energy must be a much-needed reality check for Victoria, which is rapidly losing the major components it needs to keep its electricity network operating when the low-cost, coal-fired electricity generation that has powered the state is forced from the market.

The list of stalled projects is growing and, increasingly, projects that are built are finding themselves unable to dispatch the electricity they generate into an overcrowded network.

A major transmission project to facilitate proposed renewable energy zones and provide a lifeline to NSW is over budget and has been delayed beyond the time that coal-fired generation is due to close.

The loss of BlueFloat leaves a big hole in plans for alternative generation and is confirmation for policymakers more broadly that the offshore wind industry is struggling worldwide. BlueFloat put the Victoria project up for sale but did not attract a bidder and now reportedly has decided to cut its losses. Victoria had made offshore wind a cornerstone of its energy transition strategy with ambitious targets to develop two gigawatts of offshore wind by 2032, scaling up to 9GW by 2040. These targets now look hopelessly unachievable.

The mounting difficulties are not confined to Victoria and have prompted Australia’s biggest business body to call on the Albanese government to scale back its ambitions. The Australian Chamber of Commerce and Industry has warned the government’s 2030 emissions reduction target of 43 per cent below 2005 levels was “slipping out of reach” and that a 65 to 75 per cent target for 2035 being canvassed by the Climate Change Authority would be “exceedingly challenging” for business and “entail significant adjustment costs across the economy”.

But don’t worry, the trade union movement and some economists are claiming a return to the carbon tax policies that put an end to the Gillard government is the answer. The ACTU has told the Productivity Commission that the Gillard government’s economy-wide carbon price was a success, declaring its implementation saw emissions fall, the economy grow and adversely affected Australians compensated. This is nonsense and completely out of touch with today’s reality. A rethink is sorely needed on how best to cut red tape and align the climate change response to what works in practice rather than what sounds good in theory.