Labor’s embrace of an emissions intensity scheme (EIS) and its decision to dump any specific renewable energy targets will almost certainly mean a significant jump in the amount of gas generation in Australia, and very little new wind and solar.
That, at least, is the assessment by the designers of the scheme that Labor now wants to embrace.
Modelling by the scheme’s designer, Danny Price of Frontier Economics, shows the brutal reality of an EIS as he envisions it for renewables such as wind and solar.
It shows that even if Labor introduced a 50 per cent emissions reduction target for 2030, using the EIS as its principal mechanism would simply result in a boom in new gas-fired generation, and presumably more coal seam gas, and little in the way of new wind and solar plants.
The modelling could not be any clearer, although the graph above could be. (It breaks the options into four scenarios, business as usual on the left, an EIS, a RET and then regulatory action).
Basically, it tells us that an EIS for a 50 per cent cut in emissions will deliver little wind energy (5,000MW over 10 years), no solar, and 17,000MW of gas-fired generation, or at least two new very large gas plants a year.
To meet the 50 per cent emissions cut with a specific renewable energy target, the Frontier modelling tells us, would result in 30,000MW of new wind capacity and 26,000MW of new solar capacity.
And what would this look like in terms of output or generation share by 2030? Again, with a very bad graph from the Frontier modelling report, under the EIS, gas would account for more than 50 per cent of all generation, and renewables little changed from business as usual.
Now, it is true that Frontier has got some ridiculous assumptions about the cost of wind and solar, but this goes mostly to the costs of such a scheme, rather than the mix.
And it seems that Labor has missed a major opportunity there. It has defended the EIS on the basis that – according to the Frontier modelling – the cost of the scheme is $15 billion cheaper than business as usual.
But that very same report found, dialling in some more reasonable estimates of the costs of wind and solar, that a specific 50 per cent renewable energy target achieves the same savings of $15 billion.
And even those “reasonable” costs of wind and solar are still right out of the ballpark, because it assumes a higher cost of wind and solar in 2030 than exists now. Indeed, a 50 per cent renewables target, on all the evidence, would offer significantly higher savings than an EIS.
Why Labor did not prosecute that argument is a mystery. Perhaps it was derailed by the attack on Bill Shorten by prime minister Malcolm Turnbull, and perhaps even the lump of coal brought in by Treasurer Scott Morrison.
Yet, Labor was still there on Friday promoting the EIS, not a RET as the cheapest option. “We’ve obviously also got mechanisms in place such as an emissions intensity scheme, that we want to see the government get on board with, that their own Chief Scientist says is the cheapest, most efficient way to reduce emissions,” said Senator Murray Watt.
Well, not quite. The chief scientist merely noted the AEMC claims, he did not endorse them.
Either way, experts say that if Labor does want to deliver anywhere near a level of 50 per cent renewables by 2030, which Watt claims is still the goal, it will need something more than an EIS – most likely a reverse auction scheme of the type used successfully by the ACT, and proposed by Labor governments in Victoria and Queensland.
The Clean Energy Council, meanwhile, has lamented the ongoing “policy circus”. CEO Kane Thornton said an EIS would help cause the closure of some coal generators, but it was unclear whether an EIS alone would be sufficient to deliver ongoing strong investment in new renewable generation beyond 2020, when the current RET ends.
“Additional policy support for renewable energy may still be required to achieve Labor’s strong commitment to 50 per cent renewable energy by 2030.”
Bruce Mountain, from Carbon Market Economics, said it was clear that the best option would be an auction system, which had also proved successful in many countries around the world, including Dubai, Abu Dhabi, Saudi Arabia, India, Brazil, Argentina, China, Finland, Indonesia South Africa, Poland and the US.
Not only does it provide low costs, it also provides certainty, because contracts are locked in, he said.
“The mechanism does not rely on political continuity – when governments that are sympathetic to promoting renewables are holding the levers, they can get things done, regardless of what the other side say,” Mountain says.
“There is little doubt in my mind that this is the most suitable approach for implementation at both state and federal levels in Australia.”
He also said there was no evidence that an EIS has operated anywhere in the world. “To the contrary, it has been consistently rejected …. and it has been accepted in Australia far too uncritically.
“Insufficient regard has been paid to the problem that political will is needed to set an intensity target at a level that is going to make a difference in substituting high emission generation for low emission alternatives. As things stand we can have no confidence that such political will exists.”
RenewEconomy sought to clarify with Labor spokesman Mark Butler’s office about the nature of the party’s policy. Was 50 per cent still an aspiration or a target? Was it just the idea of an extended RET that was dumped? Would other mechanisms be introduced to supplement an EIS in the light of the Frontier modelling.
We were told a response was on its way, but no formal, on the record reply reached us before publication. We did learn though that Labor thinks that an EIS can be calibrated to achieve more renewables, and were reminded about the yawning chasm between its climate polices and the Coalition’s.
That is understood. But as Labor knows, it needs to find that fine line between good policy and public acceptance. This week has not been a step forward.
