How to wake a sleeping giant? The burning question for energy-rich Australia

In other words, the mine is a “stranded asset”. This is Australia’s future if it remains dependent on carbon fuels. The country itself would become a failed asset, an investment dead end, a political pariah.

The other was the decision of one of the world’s seven oil supermajors, BP, formerly known as British Petroleum, to take the initiative to build a huge green hydrogen plant in the Pilbara region of Western Australia. . BP has announced that it has purchased 40% of the planned project, the Asian Renewable Energy Hub. It has the potential to be one of the largest renewable energy companies in the world. Pricing was not disclosed. But the estimated cost of building the complex is $36 billion ($51 billion).

Queensland Premier Annastacia Palaszczuk, NSW Premier Dominic Perrottet, Premier Anthony Albanese, Victoria Premier Daniel Andrews and WA Premier Mark McGowan after the first national cabinet meeting.Credit:Rhett Wyman

The plan is to install 1,700 wind turbines and 25 million solar panels to produce 1.6 million tonnes of green hydrogen per year from water. The hydrogen would be sold in Australia and exported.

The investment “reflects our belief that Australia has the potential to be a powerhouse in the global energy transition,” said Anja-Isabel Dotzenrath, head of low-carbon energy at BP.

This is Australia’s future as it joins the world’s biggest investment boom. Australia can become a superpower in the new energy world of renewables. But it can also become a global economic superpower by using its super cheap renewables to power manufacturing. This was the vision set out in Ross Garnaut’s 2019 book Superpower: Australia’s low-carbon opportunity.

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The Coalition under Tony Abbott sold Australia the fiction that renewable energy was dangerous. Because it operated politically in 2010 and 2013, the Coalition could never wean itself off the fairy tale that coal was the future.

Even when he tried. Remember when then-Energy Minister Josh Frydenberg painstakingly negotiated the National Energy Guarantee under the Turnbull administration? He managed to win support from the Liberal party hall for the policy.

Schott says Australia would not have suffered its electricity crisis this week if this policy had been in place. But this common-sense policy was instantly vandalized by Holocaust deniers and fabulists in the Liberal and National parties. By destroying the NEG, they destroyed Turnbull’s premiership.

Australia’s astonishing failure to modernize was not the result of partisan politics, says Malcolm Turnbull. “It was actually the result of fighting within the Coalition,” he says. “The federal energy problem was basically a consequence of liberals and right-wing nationals, backed by Murdoch’s media and the fossil fuel lobby, relentlessly opposing any action to reduce emissions.”

The advent of the Albanian government is an opportunity for Australia to step out of the museum of stranded assets and into the value-added world of a prosperous renewable energy future.

Kerry Schott is an energy authority.

Kerry Schott is an energy authority.Credit:oscar colman

But Albanese doesn’t have a moment to lose. He and his Minister for Climate Change and Energy, Chris Bowen, blame the Coalition for the chaos and cost of the energy crisis. And fair enough too. But if the blackout persists, Peter Dutton’s opposition will blame Albanese and its renewable energy plan.

Already, the Coalition is threatening to oppose the government’s updated emissions target – a 43% reduction to 2005 levels by 2030 – in parliament. And Albanese just formally committed Australia to that goal this week. The government says it can implement it anyway, using regulations. But the climate wars continue and the Coalition will take every opportunity to discredit renewable energies.

What to do?

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The first thing is for Bowen to settle the crisis in the short term. It must capitalize on the current drama to create the momentum – the “hot platform” – for change.

It started well. It brought together all the Ministers of State and together they agreed on several useful initiatives. As a national plan for a transition to an electricity grid based on renewable energies. It sounds so basic – and it is – yet the Coalition never got it right. They aim to produce a specific plan when they meet next month.

And the ministers ordered the AEMO and the Energy Security Council “to move forward in pace with the development of a capability mechanism”. A capacity mechanism?

“Think of it as an insurance policy” to provide immediate relief supplies, says Schott. “It pays to firm up the ability to be on standby.” It can be gasoline, battery or pumped hydro. The provider is paid to keep the capacity ready. So when a power shortage looms, extra capacity can be added immediately to the system to keep the lights on.

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The Coalition has also suggested this type of mechanism, but “it was not adopted under the last government because much of industry and a few states – NSW and the ACT – were concerned that the federal government would uses to keep coal in the system unnecessarily,” says Schott. “Angus Taylor was aware of the need, but just couldn’t get the cooperation of his fellow ministers and industry.”

Yet now the state and federal governments have agreed to create a capacity mechanism that does not include coal. Bowen said “he should support new technologies and by that I mean I support storage and renewables being central to a capacity mechanism.”

Another outcome of the meeting of state and federal energy ministers was to direct AEMO to begin storing gas for emergency use. Useful perhaps, but very limited.

There is another important short-term option: the trigger. The Federal Minister of Energy has an existing trigger to order more gas on the market. If Bowen presses this “supply trigger,” he can order gas producers to divert export gas to the domestic market. But the procedure to do so takes six months.

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Bowen has no intention of using it. Instead, he’s quietly exploring creating a slightly different trigger, a “price trigger.” If a price cap is exceeded, he could pull the trigger to order gas on the market. He could design it to work fast. Once he had the power, he might not even need to use it. The threat alone could have the effect of motivating gas companies to maintain domestic supply.

Voices have been raised calling for “gas reservation”, a rule obliging gas producers to reserve a fixed share of their production for the local market. In Western Australia, a 15% gas reserve worked well. The trick here is that Bowen could create one, but couldn’t apply it to existing gas supplies, only new ones. And it would be a slow and uncertain process with no effect for a long time. Rather, the “price trigger” for gas is “where the action is,” as one knowledgeable source put it.

At the same time, Bowen must put in place the longer-term solutions contained in Labour’s electoral policy. The “rewiring the nation” plan and the “Feed Australia” policy.

In the days and weeks to come, Schott assures “there is no need to panic because many coal generators will come back online, after having carried out their repairs, and that will take about a week”.

But Bowen and his counterparts in the state should take little reassurance. Australia, despite its rapidly growing renewable energy fleet, remains stuck in the transition, unable to extricate itself from the museum of stranded assets. And the Coalition will be happy to keep it there. The giant needs help. Urgently.

Cut through the noise of federal politics with news, opinion and expert analysis from Jacqueline Maley. Subscribers can sign up for our weekly Inside Politics newsletter here.

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