Time to step on the gas on all forms of energy

Australia’s energy market operator insists that everything is calm in the control room of the national grid. AEMO chief executive Daniel Westerman told The Australian’s Energy Nation summit on Wednesday that from the control rooms it was clear that the transition to decarbonisation was “happening at pace and there was no turning back”.

But there is a big caveat at the heart of Mr Westerman’s confidence. That is that all of the wind, solar, storage and transmission line projects that have been announced by companies and government must be “delivered on time and in full”. This is a point glossed over by federal politicians but not missed by industry. It was highlighted by Shell’s country chairman and executive vice-president, Cecile Wake.

The executives managing the nation’s coal-fired fleet are openly saying we must be more pragmatic about the need for a “plan B”. This is long overdue. With hydrogen now out of the picture, there is a keen focus on the take-up of household solar and batteries to supply the grid. This has been ignited by the introduction of new federal and state subsidies. But, as Mr Westerman explained, the issues for AEMO increasingly are about the services needed for grid stability that are currently supplied by big baseload generators. And, for perspective, Delta Group chief executive Richard Wrightson made the point that his company’s coal stockpiles contained more stored energy than all of the batteries in Australia combined.

As The Australian government promoted its new emissions reduction target of 62 to 70 per cent cuts to national emissions below 2005 levels to the UN, Donald Trump made it clear the world’s second biggest greenhouse gas emissions nation, the US, was in no mind to transition. The President said the decarbonisation push was “bankrupt, fake and a con job”.

“They (renewables) don’t work. They’re too expensive, they’re not strong enough to fire up the plants that you need to make your country great,” Mr Trump said. “You’re supposed to make money with energy, not lose money. If you lose money, the governments have to subsidise.”

Australia’s Climate Change Authority chairman, Matt Kean, said Mr Trump’s comments were “nothing new”. Mr Kean said Australians “accepted the science of climate change just like they accepted the science of gravity”.

But how much are they prepared to pay?

This is the point made by deputy opposition leader Ted O’Brien, who accused the federal government of deceiving the Australian people with the modelling released last week alongside Labor’s 2035 emissions target. He said the government had failed to provide an estimate of the cost of the transition plan. The Net Zero Australia report by the University of Melbourne, University of Queensland and Princeton University’s Andlinger Centre for Energy experts says capital flows to the energy sector will have to more than double from about $800bn under business as usual to more than $1.6 trillion across the next 25 years.

The more immediate issue is to increase the supply of gas to back up a renewables-heavy grid. This was a common and welcome theme at the Energy Nation summit. South Australian Premier Peter Malinauskas said more gas was crucial to supporting his state’s renewables-heavy grid. “Batteries alone are not going to be able to firm the grid to the extent that is necessary,” Mr Malinauskas said. He nominated the long-stalled Santos Narrabri gas project as being crucial. This was supported by NSW Premier Chris Minns, who made the obvious point that the public would not tolerate an electricity system they could not afford or rely on.

The challenge for government is to work with the gas industry to deliver. The warning from the gas industry is that sovereign risk is a growing concern.

There is a need for greater regulatory certainty. A big part of that is to be confident that the rules of investment will not change once a decision has been made. The industry says it supports the introduction of a gas reservation policy, but one that applies only to new projects, not existing ones, and includes reform of the regulatory processes that currently stifle exploration and development.

The big picture on energy is that to compete in an AI-driven world we will always need more and the cheaper the better. Policymakers must put aside their ideological bias. The change already is happening with gas and it must be extended to include all forms of low-emissions energy. In a changing world the nation must play to its strengths and always have a plan B.