Climate wars have cost us the chance to lead

14 March 2018

Written by Honorary Professor John Hewson, Crawford School of Public Policy, Energy Change Institute member, and a former Liberal opposition leader. This article originally appeared in the Canberra Times.

The climate wars between the major political parties have cost us a host of lost business and employment opportunities, even a global leadership role, and yet we drift on without an energy policy that might provide some relief to rising power costs and some strategy to meet our commitments to reduce emissions.

The government’s most recent policy, the National Electricity Guarantee (NEG), is the fourth most effective response, only being proposed after an emissions trading scheme, an emissions intensity scheme and Finkel’s clean energy target were sequentially rejected.

In this sense, the guarantee is the last, and only, game in town, but it is still likely to be exhaustively debated, mostly for not moving fast or far enough, with concern about the longer-term future of the renewables sector.

Even if it achieves all that it promises in terms of emissions reductions in the power sector, this will still see us fall short of our Paris targets for the whole economy, which were only about half what the Climate Change Authority said would be required for us to achieve, at worst, net zero emissions by 2050.

Apart from more realistic targets, there are two other significant imperatives when it comes to energy policy. First, emission reductions in the power sector are more cost effective than other alternatives, so we should be aiming to do more in the power sector.

Second, the government desperately needs to enunciate, and adopt policies to achieve, an “overarching” emissions reduction strategy, that encompasses transport, agriculture, mining and other industries and activities, as well as power. The latter only accounts for about 30 per cent of our total emissions.

For example, Australia is a long way behind Europe, the US, and many other countries, in terms of vehicle emissions standards, and we are yet to get any direction from government as to their attitude to electric vehicles, a push that is accelerating rapidly globally, and which will have significant budgetary and other financial consequences for our governments.

There is also an enormous opportunity for us in terms of soil carbon sequestration with schemes, developed carefully, that could see farmers able to access the cash benefits of creating carbon credits, as they change farming techniques and their use of fertilisers, and so on, to improve the carbon content of their soils.

One advantage of the National Energy Guarantee is the potential to depoliticise the issue, and the process, by putting its development and implementation in the hands of an independent Energy Security Board to be run by experts, rather than politicians.

While the concept and therefore the detail of the scheme are yet to be formally agreed by the states, statements by the ESB suggest that under government direction it would work to achieve annual emissions reduction objectives, to reduce power sector emissions consistent with our Paris commitment to reduce overall emissions by 26-28 per cent by 2030.

This process would ensure a gradual transition towards more renewable, dispatchable power (where output can be adjusted for demand), however the renewables sector is yet to focus on the inevitable consequences, and particularly the disruption, that will ensue from that move towards dispatchable power.

Although there has been something of a boom in proposed new wind and solar projects, most of these are not promising to deliver dispatchable power, which would require storage to ensure a consistent energy supply. Indeed, the rush is essentially to capitalise on the subsidies available under the Renewable Energy Target (RET), with “certificates” recently worth some 8 cents per kWh.

However, with the RET due to be met, probably before its expiry date in 2020, you can expect the value of these certificates to collapse, implying a significant writedown in the value of the projects themselves.

There is also an important question about the total capacity that will be required of wind and solar projects, if they have effective storage.

Virtually none of the recently announced wind and solar projects have storage, meaning they are not dispatchable and power is only produced when the sun is shining or wind is blowing - it is not available on demand.

If they were required to be dispatchable, as will be the case under the National Energy Guarantee, they may not need to be as big, as they will be able to store power to be released at morning or evening peak, for example.

That means capacity announced so far for all the renewables projects could be more than is required of the whole system, which would mean some solar and wind farms may never be commercially viable.

The main tragedy of the carbon wars has been the opportunities we have lost as a nation in not capitalising on our world-class natural assets in wind, sunshine and land, and our world-class and globally most cost effective technologies that can provide us with base load power and storage.

Not only could we have had cheaper and more reliable power, and significantly enhanced “jobs and growth”, with substantially lower carbon emissions, but we could have, should have, been a world leader in so many ways.