Renewable energy mess is out in the open

The high risks inherent in the Albanese government’s rush to install an electricity grid powered predominantly by renewable energy are out in the open with the release of submissions to the Australian Energy Market Operator’s 20-year blueprint. The picture is one of industry looking for someone else to blame if prices continue to rise and the lights go out when coal-fired generators exit the system without the backup of gas. A draft of the integrated system plan spells out what can still go wrong. It says market and policy settings are not yet ready for the rate of change, uncertainty is risking timely investment, and the full benefits of consumer energy resources such as rooftop solar and batteries may not be realised. Biggest of all are the challenges posed by gaining social licence for the scale of development required and developing the necessary skilled workforce and supply chains.

Industry concerns cannot be overshadowed by a draft decision by the Australian Energy Regulator this week to recommend small cuts to electricity prices following two years of double-digit increases. The extent of concerns was reflected in warnings that gas-fired generators might have to run on diesel through to 2026 during ­periods of high demand because of the lack of gas on the east coast. Even the trade union movement has taken the challenge to government that unrestrained lawfare by activists is costing jobs and risking the nation’s economic future. Divisions within the energy industry reflect a measure of self-interest but, taken as a whole, they show that trust in government to deliver the infrastructure needed in a timely fashion is being lost.

The Centre for Independent Studies has put it down to “circular logic” on the part of politicians and policymakers. “Since coal plants are not considered a long-term option because of emissions targets, and nuclear energy is off the table because of federal legislation, the (integrated system plan) has effectively omitted the modelling of the only credible alternatives to renewables, storage and gas that could be used as a baseline for comparison,” the CIS says in its submission to the AEMO. On the one hand, the integrated system plan is used to inform policymakers of the alleged least-cost option for building transmission for the grid. On the other hand, its analysis factors in the decisions of those same policymakers in determining the least-cost option. The CIS says ministers therefore can point to the integrated system plan as justification for why their priority projects and economic incentives are the least-cost option for the grid – despite the fact the integrated system plan does not test those policy decisions in any way but, rather, takes them as a given.

Energy major AGL warns that more attention must be paid to the lack of social licence for major projects. It says the potential impact of delays to new renewable projects is not considered and experience suggests that delays for new transmission projects can be significantly longer than the two years modelled. With the Clean Energy Council confirming that financial commitments to major new projects have stalled, government must take seriously the warnings being delivered through the AEMO process.

The considered view being put by industry is that the government’s timetable for renewable energy deployment will not be met but the phasing out of coal-fired generation has been set. More attention must be paid to developing new supplies of gas and the infrastructure to use it to back up a renewables-heavy grid that is falling behind schedule. Warnings about circular decision-making put an unflattering light on the repeated claims that renewables are the cheapest option. This is an easy claim to make if the full costs are not considered and alternatives are left out of the picture altogether.