Josh Frydenberg, the minister newly elevated to the combined energy and environment portfolio, says that renewable energy was not to blame for the recent energy “crisis” in South Australia, although he did deliver some mixed messages about how the government proposes to move forward.
Frydenberg delivered a series of interviews on Wednesday, the first since he was appointed to the new position in a reshuffle by the re-elected Turnbull government, and this included a “chat” with ABC personality Annabel Crabb at a dinner function at the Clean Energy Summit.
Asked about the recent electricity spikes in South Australia, Frydenberg said it was a “complex picture” that included a reduced capacity on the inter-connector, a cold snap that spiked demand, a big shift in gas prices, and the “intermittency issue about wind and solar.”
But he also noted that in 2008, as RenewEconomy has reported, the price of wholesale electricity in South Australia peaked above $5,000/MWh more than 50 times. That was before wind and solar were in that state, he said, and noted there had only been three such peaks so far this year.
“People have to understand that this volatility is not a new thing. It was back there in 2008 …. so to say that (this price spike) is the fault of renewables is not an accurate assessment,” Frydenberg said, to the applause of the audience of around 400 people.
This, however, was not how The Australian interpreted events, who attributed Frydenberg’s comments about the crises in South Australia and Tasmania as a “wake-up” call about the problems created by wind and solar.
Tasmania, it should be remembered, suffered the highest wholesale prices in Australia last financial year because its electricity supply was restricted by the loss of the Basslink cable and much of its hydro capacity due to drought. Most analysts say it was its lack of investment in wind and solar that forced it to rely heavily on expensive back-up gas and diesel.
Indeed, in interviews with The Australian and the ABC, Frydenberg did not refer to past price spikes. He described the recent spikes as “huge fluctuations” caused by the intermittency of wind and solar.
And in those other interviews, Frydenberg indicated that some of the key messages from the fossil fuel lobby had crept into his language, as it has done in the past when advocating for Australian coal.
“(Wind and solar) is intermittent supply, meaning that when, you know, the sun’s not shining and the wind’s not blowing, it’s not supplied,” he said in an interview on ABC’s Lateline. “So South Australia needs back up and that intermittent supply meant that there was greater need for back up and that back up that was expensive.”
Still, the reaction to Frydenberg’s appearance at the Clean Energy Summit was mostly positive. At least he wasn’t Chris Back, the Liberal back-bencher who, like so many others, is so implacably opposed to wind energy.
Frydenberg appeared well briefed, non-confrontational, and recognised the growing role of technologies such as wind, solar and battery storage whose costs had fallen quickly and would continue to do so. He also appeared to be listening, people said.
The role of coal, Frydenberg accepted, is declining, and the transition to clean energy is inevitable. But he was reluctant to put any time frames on the inevitable move to zero emissions technology, apart from saying that a shift to 100 per cent renewable energy was not going to happen overnight.
But while his comments were soothing for an industry just regaining its confidence after being battered and bruised by the first term of the Abbott-Turnbull government and the key policy decisions of Frydenberg’s good friend, the previous environment minister Greg Hunt, his next moves will be scrutinised intensely.
There is great concern about a push by the incumbent energy industry, such as the Energy Supply Council to force state governments to abandon their individual state targets, a move that will be strongly resisted by South Australia, Victoria, Queensland and the ACT.
Frydenberg says he is still getting his mind around the issue, but he was particularly concerned by Queensland’s push for 50 per cent renewables by 2030. “They only have 4.4 per cent now. That is a huge jump.”
Concern was also expressed about Frydenberg’s promise to manage the energy transition by maintaining cheap, reliable and available power.
That is no bad thing, but many suggest that the best way to manage the transition is to have a long-term goal, and right now the government does not even have a renewable energy policy that extends beyond 2020, or a climate change target that matches the science.
And while Frydenberg acknowledged that gas played a key role in the recent electricity prices, his response to this is to try to make more gas available, criticising the blanket bans on fracking in Victoria and NSW.
On the role of coal, Frydenberg said: “It’s our second largest export behind iron ore. We don’t talk just about thermal coal. We’ve also got coking coal and you don’t build a wind turbine or a solar panel without coking coal and other forms of natural resources.
“So, it’s a very complex picture, but we have an optimistic story to tell in Australia. The transition is under way. Renewables are a critical part of that. Technology is going to really see a step up, a step change in the uptake of renewables.
“Australians have a great record, whether it’s in solar PV, on their roofs or whether it’s in large-scale renewable systems, and we can help lead the world in emissions reduction technology.”
The clean energy industry and the fossil fuel industry will get a better picture of the direction that Frydenberg is heading at the council of energy ministers meeting he has called next month, where issues such as the gas supply, the case for new interconnectors and who should pay for them, and state-based targets will be on the agenda, as will proposed market changes that seek to manage the transition to renewables and the exit of coal-fired generation.
How those rules are framed will be critical to the future of coal and gas generators, as well as new technologies such as solar, and storage and new business models. Fossil fuel giants such as AGL Energy are pushing for a shift to “capacity” markets dubbed by the EU and the UN as yet another fossil fuel subsidy, and fighting rule changes that could encourage battery storage to take on some of the roles now provided by peaking gas generators.
Another key point of interest is on climate policy. The Coalition’s targets are geared to 2030 and no further. Environmental groups and analysts are hoping that the 2017 review promised by the Turnbull government will offer an opportunity for a big leap into long-term and biting emissions reduction policies. But some interpreted Frydenberg’s remarks to media on Wednesday as suggesting it could just be a box-ticking exercise.
The challenge for Frydenberg, however, is to set down that long-term vision. Without it, the energy market will have to make it up as it goes along. And it still not clear just how far Frydenberg wants, or will be able, to diverge from the Coalition’s hard-line policy to date.
But they are already not happy. News Ltd described his comments as a major policy reversal, and the Institute of Public Affairs were apoplectic about his comments on the decline of coal.
“The two most important features of an electricity network are affordability and reliability, and renewables have demonstrated that they can’t yet deliver either” said Brett Hogan, Director of Research at the IPA.
“Batteries and interconnectors are a band-aid solution to energy shortages. They don’t actually generate electricity – they only store or carry the power that someone still has to produce.”
The Minerals Council of Australia also joined in, echoing the IPA’s support of “low emission” coal fired generator and also suggesting nuclear power, a former favourite of Frydenberg’ that he now sees as low priority.
