When Angus Taylor was first appointed energy minister after the dethroning of former prime minister Malcolm Turnbull last August, he really only had one policy remit – to cut prices.
So much so that the man who gave him the post, the newly appointed PM Scott Morrison, dubbed him the minister for lowering electricity prices. Despite Taylor declaring a few days later in his first ministerial speech that wholesale prices had turned the corner, it hasn’t worked out that way.
Taylor has now been granted a double-barrel portfolio of responsibilities, newly re-minted as the Minister for Energy and Emissions Reduction, bringing together the combined tasks of a clean energy transition with emissions reductions that were separated after the removal of Turnbull. Let’s hope he has better luck with the new portfolio than he did with the first.
Far from lowering wholesale electricity prices, they were at a record high in the March quarter. In two of the five states that make up the National Electricity Market, South Australia and Victoria, they were at record levels. Worse, in all five states “baseload” or everyday prices were at their highest or second highest on record.
Part of this may be blamed on the extraordinary heat-waves that many of Taylor’s Coalition colleagues deny are a result of climate change, and because of the huge jumps in the cost of “everyday” baseload coal, the coal that those same people insist is still the cheapest form of generation.
The evidence before the very eyes of Taylor and his colleagues shows that this is clearly not the case. Snowy Hydro earlier this year said it could provide “firm renewables” at a cost of less than $70/MWh. Infigen Energy, whose boss Ross Rolfe knows Taylor well, announced last week that it could source “firm” wind and solar (backed by a barely used gas generator), for as little as $55/MWh.
That’s the price that most black coal generators now need just to break even on the cost of the coal they burn, not including the upfront capital expenditure needed to build and maintain the plant as it ages.
Taylor still wants AGL to re-think the closure of Liddell, the ageing clunker in the Hunter Valley. AGL has already told him the cost of extending that coal plant’s life: more than $100/MWh. It only remains an option in the Coalition’s minds because of blind ideology.
All the major utilities say pretty much the same thing – that if you want to lower prices and lower emissions, then the obvious solution is a mixture of wind, solar and storage, be it batteries or pumped hydro, or both. The CSIRO and the Australian Energy Market Operator have come to a similar conclusion, as has every other independent analyst.
Taylor has announced a price target of $70/MWh for the average wholesale price in 2021. But this is where the energy market had already expected to be at the time of his appointment.
In fact, the market was betting on a lower price thanks to the amounts of wind and solar being brought into the market from the renewable energy target that Taylor had vowed to stop.
But the futures price has jumped since then because of the confusion and uncertainty the Morrison government has created, and the barely restricted ability of the big players to achieve what Taylor calls “strategic bidding” or gaming – essentially lining their pockets while they can.
Now that the Renewable Energy Target has been met, and will be exceeded once the current pipeline of more than 5,000MW of wind and solar is competed, there is nothing left other than state targets and corporate demand.
As the Clean Energy Council has pointed out, wind and solar do not need more subsidies – most of the new plants have been built with an implicit subsidy of zero, or in some cases a “negative subsidy”, as Morgan Stanley has pointed out – but the continued deployment of wind and solar does need a plan.
Happily, there are people putting one together. AEMO is updating its Integrated System Plan, possibly with a “step change” scenario that assumes a rapid exit of coal and a higher share of renewables, that will show grow the grid can cope.
The Energy Security Board is getting busy, helping to push the slow-moving AEMC along with critical rule changes, and even embarking on a plan to re-write the National Electricity Rules, hopefully one that incorporates environment and reflects, rather than defies, the pace of technology change.
As for Taylor, it is not clear yet how he will move forward with his twin portfolio goals of energy and emissions reductions.
His only signature initiative to date – the UNGI (underwriting new generation investment scheme) designed to provide “24/7” power – essentially seeks a 20th century solution for a 21st century problem.
The UNGI elicited a dozen short-listed ideas when its rushed process came to a shuddering halt as the government entered the care-taker period. Crucially, there was not a new coal-fired generator among them, just a refit and extension of the Vales Point power station half owned by Liberal Party donor and loud renewables critic Trevor St Baker.
The rest were made up of gas projects that few had even heard of, and a series of pumped hydro project associated with large-scale renewables, most notably the Sanjeev Gupta proposal for a pumped hydro scheme in a former iron ore mine that, coupled with the Cultana solar farm near Whyalla, will provide cheap green power to the Whyalla Steelworks.
Gupta remains a keen supporter of UNGI, for obvious reasons. But the scheme has barely been defined, and will have to be carefully crafted to fit the desired outcome, whatever that might be.
But Taylor’s emissions reduction remit extends beyond the electricity market to the wider economy. Any credible analyst will tell you the best opportunities lie in energy efficiency and electrification – be it in manufacturing, heating or in transport.
The Coalition has been living in denial on the latter, having promoted some dodgy modelling and outright lies in trying to demonise both Labor’s broader emissions reduction target and the 50 per cent target for electric vehicles as a share of new vehicle sales by 2030.
If Taylor is to get serious about emissions, he needs to admit there is actually a problem. Taylor was caught out on numerous occasions in the election campaign claiming that emissions were falling, when they are, in fact, rising. Even the government’s own data tells us that. The most notable time that this occurred was on the ABC Insiders program.
On EVs, Taylor launched the most extraordinary campaign against EVs, claiming they would treble journey times, and take five days to charge; yet the Coalition’s own modelling for emissions reduction assumes something similar in the uptake of EVs.
And, as a sign of how ridiculous the criticism of Labor’s target was, BHP now says that EVs could make up more than 50 per cent of global sales by 2030, and Toyota has been stunned by the consumer embrace of hybrids (which was part of Labor’s target). Since its launch of the hybrid version of the popular RAV4 SUV, they have been outselling the petrol version by a ratio of nearly two to one.
If Taylor wants to meet his two targets – lower electricity prices and emissions reductions – he will basically have no choice but to turn to the technologies that have bothered the Coalition and its backers in the Murdoch media and radio talk back for much of the last decade.
That means wind and solar, backed – when needed – by various forms of storage, and accompanied by an update of the archaic market rules that encourage these technologies, and a long-term rewrite to reflect the shift from coal and gas to renewables and storage, and from a lumbering, dirty grid to a smarter, cleaner and cheaper solution.
As for emissions, Taylor is probably best advised to quietly adopt the proposal from his opposite number, Mark Butler, whose clever modifications of the Coalition’s own Safeguard Mechanism and National Energy Guarantee that would encourage the country’s big polluters to invest in wind and solar to help offset their own emissions targets.
Then they could raise the bar, even if that does mean uttering the words climate change, notable for their absence in Morrison and Taylor’s media releases on Sunday.
