Australia is a country blessed with abundant resources of energy. For many years, we’ve found ways to create jobs and wealth from those resources, by using them at home to power industry and households at globally low prices or selling them to countries that lack their own resources. Through the twentieth century, Australia built new towns, regions and industries on the back of our fossil fuel resources. Businesses and households enjoyed some of the cheapest energy in the developed world, keeping our power bills low and underpinning well-paid, secure jobs in the energy sector itself, as well as in energy-intensive industry.
The twenty-first century will be the clean energy century. If we play our cards right, we can enjoy an even greater comparative advantage than we had during the last century through our abundant fossil fuel resources. These transitions obviously play out over many years, but things began to shift markedly around the turn of the new century. Rooftop solar panels were still a rarity but began to take off, climbing from a few thousand households in 2000 to more than 2 million today. The first renewable energy target was legislated in 2002, helping to establish the beginnings of a local wind-power industry. And the last new coal-fired power stations in Australia (almost certainly forever) were commissioned in the early 2000s, marking a high point for coal power as a share of our electricity market.
In the broader resources space, Australia became a huge exporter of coal and gas, driving massive investment in those export operations. That linkage to global commodity markets and the privatisation of many state-owned electricity assets led to large price increases in coal and gas supplies to domestic electricity generators, which flowed through to power bills. Power price increases were also driven by substantial overinvestment in electricity networks (the poles and wires). Separately, the new century marked the beginning of a substantial widening of our deficit in oil supplies as production in Bass Strait started to drop off while demand in the economy continued to grow. Australia has started the new century with its cost advantage in fossil energy slipping away, and a growing level of fuel insecurity in oil and its products.
Fortunately, we not only have some of the world’s largest reserves of coal, gas and uranium, which powered the last century; we also have perhaps the best renewable energy resources, certainly in the developed world and among our other major competitors, which will power this century. Our solar radiation is among the world’s best and our wind resource, through the south of Australia in particular, is excellent. Obviously we have vast space to accommodate solar and wind developments, and enormous interest from business in stumping up the money to fund those developments. What we have lacked—especially since 2014, when Tony Abbott tore down most of our clean energy architecture—is a reliable policy framework to support the wholesale transformation to clean energy.
Australia has seen some of the most virulent attacks on clean energy anywhere in the world. Conservative elements in the media and politics continue to deny the imperatives driving this transformation—whether it’s the need to tackle climate change by reducing emissions from the burning of fossil fuels, or simply the economic benefits of clean energy. Research demonstrates clearly that the Australian people understand and accept both of those imperatives.
The most compelling argument in favour of a transition to clean energy is that the reality of climate change means we simply cannot continue to burn fossil fuels. While coal, oil and gas remain a large part of our economy today, the entire world, including Australia, needs to shift to cleaner forms of energy if we are to have any chance of holding global warming to something between 1.5 and 2 degrees Celsius higher than pre-industrial times. Even those levels of warming will impose enormous damage on our natural environment, society and economy, and we are tracking well beyond those thresholds.
Even putting aside the climate imperative, a wholesale investment in renewable energy is unarguably the best economic path for Australia. As it happens, most of our large coal and gas generators are already operating beyond their design life, or soon will be. Many of the old coal generators, in particular, are struggling to operate effectively in the hotter temperatures that are more common today, and to ramp up and down as modern market conditions require. As a result, many of them experience regular breakdowns during summer and may well struggle to last to their notional fifty-year-old retirement age. Even without the need to reduce emissions, Australia is at a point in the economic cycle where we need to plan a substantial round of investment in electricity generation to replace the generators built several decades ago. There is simply no question that the cheapest—let alone the cleanest—way to replace those old generators is by building renewable energy infrastructure.
Even just one decade ago, solar and wind power were considerably more expensive than their traditional competitors. As a result, governments across the world, in 173 different countries, introduced policies to subsidise those technologies in their early years while their costs came down to a level that would see them able to compete without subsidies in a properly functioning market. In Australia, the Renewable Energy Target (RET) played that role, as did state-based feed-in tariffs for rooftop solar installations. Before the end of the last decade, however, solar and wind power were able to compete with and beat fossil fuel generation on price. And still solar and wind costs continue to plummet—by as much as 13 per cent for solar and 7 per cent for wind every year, according to Lazard’s analysis.
An obvious difference with solar and wind power is that they only generate intermittently. This is pointed out by opponents of renewable energy as if the rest of us don’t fully understand the vagaries of sunshine and wind. As renewables exceed a certain share of the market, their intermittency requires more attention. That time has come in Australia.
Fortunately, there is a suite of options to help us deliver renewable energy around the clock. The oldest of those technologies is pumped hydro-energy storage (PHES). There are already plans to expand the existing large PHES operations in the Snowy Mountains and Tasmania. As well, up to 22,000 smaller sites with PHES potential have been identified by the Australian National University. Newer battery technology will also play a role in improving the dispatchability of renewables and in delivering some of the ancillary services, like frequency control, that were traditionally delivered by the big coal and gas generators.
The largest lithium battery in the world by a considerable margin was installed a few years ago in South Australia. At the time, then-federal treasurer Scott Morrison dismissed it with a comparison to the Big Banana in Coffs Harbour. More serious analysts have recognised its huge contribution to energy reliability and affordability in South Australia and beyond. Inspired by that success, a raft of similar projects are now underway at other locations, with Victoria looking to take the ‘largest battery’ title from South Australia. Like photovoltaic (PV) solar energy, the costs of lithium battery technology continue to plummet, with transformational ramifications in vehicle technology as well as the electricity sector.
Already, electricity retailers are offering contracts for dispatchable power, available around the clock, that bundle renewable energy with one or more of those forms of storage at lower prices than the fossil fuel equivalents. In 2018, Snowy Hydro undertook a substantial tender of dispatchable, or ‘firm’, renewable power at less than $70 per MW/h—substantially lower than the National Electricity Market’s spot price for power through 2019. That price will come down substantially.
Australia has better renewable energy resources than any of our major competitors. As a result, the unit cost of electricity in a clean energy world will be substantially cheaper in Australia than in China, the United States, Europe or India. The combination of the quality and scale of Australia’s renewable energy resource will deliver a competitive advantage much greater than the advantage we enjoy in fossil fuels. Most countries have fossil fuel resources, and those that don’t have been able to buy them from suppliers like Australia at a price not greatly different to the price we pay for our own resources. Indeed, at various times in recent years natural gas customers in Australia have complained that Australian gas is cheaper to buy overseas than it is in our own backyard.
Most obviously, this opportunity presents the best possible pathway to renewing our own ageing electricity system, with zero emissions and far cheaper power prices than we would see if Australia chose to build new fossil fuel or nuclear power stations. The renewal of our electricity sector will create tens of thousands of new jobs. Independent modelling of Labor’s commitment at the 2019 election to 50 per cent renewable energy by 2030 found that the policy would see 70,000 additional jobs throughout the decade.
The global transport industry is also charting a path out of fossil fuels that will see passenger vehicles in particular powered by electricity stored in lithium batteries or hydrogen-powered fuel cells. That will require Australia to expand its electricitygenerating capacity and displace our dependence on (largely imported) petrol and diesel. Even with the electrification of transport and other sectors of the economy, we will still have enormous additional capacity to produce cheap, clean energy.
Australia’s surplus renewable energy will be able to be exported to the rest of the world. Renewable energy can be used to electrolyse water, separating the hydrogen from the oxygen atoms, and produce clean (or ‘green’) hydrogen. Hydrogen can also be derived from natural gas and coal, but both processes release greenhouse gases. The global hydrogen industry is expected to grow dramatically in coming years—the International Energy Agency predicts it will be worth around $240 billion by 2022—and Australia is recognised as a key supplier. Leading customers, such as Japan, are also indicating that they expect hydrogen supplies to be zero emissions, which means that any supplies derived from natural gas or coal would require carbon capture and storage technologies at a scale and price that will compete with the rapidly falling costs of electrolysers that produce green hydrogen. Few commentators expect that to happen.
As well as exporting renewable energy stored in hydrogen on ships, Australia will have the capacity to export electricity to close neighbours in South-East Asia through undersea high-voltage cables. This will provide a market for the vast solar resources in northern Australia.
Perhaps most exciting, though, is the potential for us to deploy our sizeable competitive advantage in renewable energy towards becoming the investment destination of choice for energy-intensive manufacturing. Australia is not only rich in energy resources: we also have some of the best deposits of raw materials in the world, including the raw inputs for many of the global economy’s most important manufactured products. We are, for example, the largest exporter by far of the raw inputs for two of the most important metals in the global economy: iron ore for steel, and bauxite for aluminium. With vast reserves of the key raw inputs and world-beating energy prices, we should position ourselves as a more significant manufacturer of alumina, aluminium and steel than we are currently. Other energy-intensive products, especially using local raw inputs, could also be manufactured at scale here, creating huge numbers of new, well-paying jobs across Australia.
A stable, low-cost clean energy system in Australia will also deliver security to the existing operations in industries such as alumina refining, aluminium smelting and steelmaking, which have been threatened by the huge increases in electricity and gas prices over recent years. Big global suppliers and their customers are increasingly clear that they will prefer factories that run on low or zero emissions energy. That’s a particular challenge for operations built in Australia decades ago on the back of coal-fired electricity. Governments must support those companies’ transition to renewable energy at competitive prices.
Readers will rightly ask: well, why isn’t this happening? The answer no longer lies in economics or technology, or even in any lack of appetite on the part of investors to stump up the money to finance this exciting transformation in our economy. The answer lies in the toxic politics and media coverage surrounding Australia’s climate change policy; and the front line of those ‘climate wars’ is the clash between coal-fired power and renewable energy.
Strong policy support from the Rudd and Gillard governments saw a boom in renewable energy investment and jobs. Wind power tripled and the number of households with solar panels on their rooftops soared. The election of the Abbott Government saw large-scale investment collapse by almost 90 per cent, with one in three jobs in the sector lost. Things would have been even worse had Labor and minor parties not been able to prevent the abolition of the RET, the Clean Energy Finance Corporation (CEFC) and the Renewable Energy Agency (ARENA) in the Senate. Indeed, the preservation of the 2020 RET and strong policies from state Labor governments in Victoria and Queensland saw renewable energy investment surge again in 2017 and 2018.
However, investment and jobs were already in decline well before the COVID-19 pandemic struck. The Reserve Bank, Bloomberg New Energy Finance and the industry itself have all reported that renewables investment dropped by up to 60 per cent in 2019. The reasons for that collapse are clear. At every opportunity, the federal Liberal government—and particularly its energy minister, Angus Taylor—expresses its opposition to any further expansion of renewable energy. Instead, it has tried to find every excuse to prop up existing coal-fired generators that are ready to retire, or even to fund the construction of new coal generators that private investors won’t touch with a barge pole.
Having described it as ‘snake oil’ in the lead-up to the 2019 election campaign, the government has belatedly committed some existing funds to the emerging hydrogen industry, but it clearly favours hydrogen produced from natural gas or coal instead of electrolysed renewable energy. And it hasn’t lifted a finger to help energy-intensive operations in Australia chart a path to an affordable, clean energy future that will safeguard their investment and the many thousands of jobs they deliver.
The Labor Party is committed to working towards the transformation of the Australian economy to a clean energy economy that will position us as one of the world’s energy superpowers. But that transformation, and all of the benefits it will bring in new jobs, lower energy prices and a better climate, won’t happen without the active support of the Australian Government.