Report to fuel Coalition row over clean energy

A new row threatens to derail a clean energy target as the resources industry warns against claims of lower bills.

Australia's chief scientist Alan Finkel. Picture: Mathew Farrell

A new row threatens to derail the case for a clean energy target as the resources industry warns against claims of lower household electricity bills from the controversial reform, escalating a fight over demands for federal intervention to support coal power.

The new analysis challenges the key promise of lower bills under the sweeping overhaul of the $11.7 billion sector, ringing the alarm on “inconsistent” and ­“selective” results in the plan for a new scheme to favour renewable power.

Malcolm Turnbull faces calls from Coalition MPs to rule out any scheme that hurts coal power and drives up consumer prices, as federal parliament heads towards a stalemate, with Labor and the Greens rejecting a clean energy target that includes coal.

The findings by leading economist Brian Fisher, a former head of the Australian Bureau of Agricultural and Resource Economics, warn that the modelling done for the government “does not seem plausible” and tends to underestimate the cost of renewable power.

That verdict is certain to fuel the Coalition’s internal dispute on whether to embrace the clean ­energy target urged by Chief Scientist Alan Finkel at a time when MPs, including former prime minister Tony ­Abbott, are agitating to scrap assistance for renewable generators.

“Key assumptions tend to increase the costs of investing in coal generation and lower the cost of renewable generation,” Dr Fisher says in the analysis for the Minerals Council of Australia.

“These assumptions skew the results towards more favourable cost and price outcomes for the clean energy target and the emissions intensity scheme scenarios relative to the business-as-usual scenario.”

Parliament resumes today with government MPs at odds over the best way to ease pressure on electricity prices. Queenslander George Christensen is advocating public ownership of a new coal-fired power station.

Energy Minister Josh Frydenberg argued yesterday that the market was “willing to look” at building a new coal-fired power station, noting this was conceivable under Dr Finkel’s report.

“When it comes to the Labor Party, they’re being highly irresponsible with their comments on coal because they fail to understand coal provides baseload dispatchable power and we rely on it heavily in order not just to bring the price down but also to keep the lights on,” he told Sky News.

Deputy Prime Minister Barnaby Joyce said the key difference with Labor was that the government was “not scared to say” the country would use coal-fired power if it was shown to deliver the reliable electricity needed.

While some critics warn the scheme would punish coal, the Finkel report assumes coal generators would provide 53 per cent of the nation’s electricity by 2030 under a clean energy target, compared with 57 per cent under ­business-as-usual.

Mr Frydenberg cautioned yesterday there was no “rush” to decide on the clean energy target and the “quickest thing” the government could do on energy bills was to act on the shortage of gas. The government is intervening on gas exports to boost domestic supply, expanding the Snowy Hydro scheme to build more energy storage, authorising the Australian Competition and Con­sumer Commission inquiry into retail power prices and encouraging state governments to end their moratoriums on domestic gas production.

The federal government is open to a coal-fired power station as Queensland Liberal National Party leader Tim Nicholls advocates the idea ahead of the state election.

While government MPs are nervous about a clean energy target, the concept has early support from the Business Council of Australia, Australian Industry Group, Australian Chamber of Commerce and Industry, Nat­ional Farmers Federation, the ACTU, the Energy Users Association of Australia and Energy Networks Australia. Some MPs are frustrated at the conflicting proposals by Coalition backbenchers at a time major industry groups support the Finkel report.

The Finkel report relies on modelling by consulting firm Jacobs to forecast that coal power would make up 24 per cent of the grid by 2050 under a clean energy target. That would fall to 19 per cent under business-as-usual, because of investor uncertainty without a new scheme.

The Fisher analysis warns that the assumptions do not paint a reliable picture of the future for coal-fired power. “Important assump­tions (in the Jacobs modelling) tend to increase the costs of dispatchable coal generation and underestimate the cost of renewable generation”, ruling out new coal generation investment on cost grounds, Dr Fisher writes.

His advice questions “business as usual” scenarios in the Jacobs modelling, which is an essential part of the claim that household power prices could be 10 per cent lower under a clean energy target compared unchanged policy.