Australia’s big business energy fantasy: Let’s frack like it’s America

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Some of Australia’s biggest manufacturers have turned to wind and solar to lower energy costs, but the lobby groups just wants to frack, just like in America.

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UK billionaire Sanjeev Gupta gets it, and has signed a 15-year solar off-take deal to help power his newly acquired Laverton steel works in Victoria. He will build 1GW of solar and storage to power his Whyalla steel works too.

Queensland zinc refiner Sun Metals gets it, and is about to commission a 126MW solar farm that will lower its electricity costs and underpin a $300 million expansion, and more jobs.

Vegetable grower Nectar Farms gets it, and has combined with Neoen for a $550 million project that will include 200MW wind farm, a 20MMW/30MWh battery system to power the country’s biggest greenhouse.

But some people don’t get it, and chair of Manufacturing Australia, James Fazzino, is one of them. He wants Australia to effectively “frack like the Americans”. He sees it as the only avenue to cheap energy.

In a speech delivered to the Australian Energy Week conference in Melbourne on Wednesday, Fazzino said the nation’s high wholesale energy prices were hurting the local manufacturing industry, and forcing many businesses to take their operations offshore.

(Nectar Farms was one of those companies to consider moving its plans offshore, before it was presented with the cheaper renewables option and electrification of the heating process.).

“Seizing an energy advantage has helped the US to become what I’d argue is the most attractive place to invest in manufacturing anywhere in the world, and it’s not surprising that Australia’s best manufacturers are getting in on that action,” Fazzino said.

“Where we want to be is equal to the US: $35/MWh for electricity and three bucks for gas. …The brutal fact is, that’s what perfect looks like.

“I can assure you that (in manufacturing) the way (to get) prices down is by being really innovative and commercial.

“In the US, if you look at the companies that actually drove US gas costs down, they were the wild-catters, right? They adopted technology which we’ve refused to do in Australia. The fact that we still talk about fracking is bizarre. You know, cos it’s proved you can do that safely.

Fazzino seems to have missed the bit about fracking in Australia, and that even if it was widely allowed, would not be anywhere near as cheap in the US. And it seems he’s missed the alternatives.

As Ivor Frischknecht, the CEO of the Australian Renewable Energy Agency, noted in a question to Fazzino, looking to the US as the ideal for energy prices, and for how to get to that ideal, could be wrongheaded.

“The reason we had very low energy prices for quite a while in Australia is that the state governments over-invested in generation, and then you turn that over to a market place and markets do what they do,” Frischknecht said.

“And in fact, that’s the situation in many of the cheapest US states,” he added: “the cheap gas has come in, the coal is still there, they’re over-supplied with generation, so prices are quite low.”

Meanwhile, in Australia, “whether it’s renewables plus firming, or new gas, new coal; they all come in kind of in the $60-$90/MWh range,” Frischknecht added.

“I think that’ll go down over time, just as renewables get cheaper and we figure out how to really harness them, and batteries get cheaper as well.

“But if you are stuck in this $60-$90/MWh zone, do we have a viable business in that range or do we need to look at some sort of long-term subsidy, because it’s in the long-term greater good to subsidise energy prices?”

Speaking earlier on a conference panel, Frischknecht made his own comparison to the gas industry, noting that one of the key barriers still holding back the shift to renewables was the fact that some of the commercial aspects weren’t “very mature” yet.

“Off-take agreements are still quite expensive,” he said.

“If you look at the oil and gas industry and how that’s evolved over decades, you started out by insisting on an off-take agreement before you drill a well.

“Now, of course, you drill a well at risk, and then you have confidence that you will be able to sell the oil or gas that comes out (on the market).

“We haven’t had that sort of evolution, that drives development quite as much, or the cost of capital down quite as much.”

Why? Perhaps because Australian manufacturers are still stuck on the idea of cheap gas, and still under the impressiong that renewables cannot deliver what manufacturing needs in terms of energy supply.

“Does manufacturing need to do more to sign contracts, to make long-term agreements, so that there is certainty there for the industry?” asked Plenary chair Elysse Morgan from ABC TV’s The Business.

“The answer is unquestionably yes,” said Fazzino, pointing out that his former company had “basically underwritten” the development of major gas pipelines in Australia’s Northern Territory through 15-year gas contracts.

“I think the role manufacturers have to play is to say, actually… we need to partner with the power industry and sign long-term contracts,” he said.

But he added, “manufacturers require power 24/7 and, frankly, there’s little interest in having power that’s available three hours a day when you can have it 24/7.

“We shouldn’t be a first-mover, we should be a fast follower.

“I don’t believe we should be on the bleeding edge, I think that’s really expensive, and given the (rate of) technology change, it’s likely we’ll back the wrong horses.”

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18 Comments
  1. Simon Chance 5 months ago

    Aman who has studied fracking and methane emmissions for decades is Professor Anthony Ingrafea from Cornell University in the USA.
    Who is Professor Anthony Ingraffea?

    Who is Professor Anthony Ingraffea?

    He is an American Professor of Geological Engineering at Cornell University with decades of experience in the oil and gas industries.He first came to prominence in Australia when he was asked about the NSW governments legislation regarding the integrity of CSG well cement casings back in 2014
    https://www.bing.com/videos/search?q=The+integrity+of+unconventional+gas+well+casings+%2f+Professor+Anthony+Ingraffea&view=detail&mid=753744992F1935123CAA753744992F1935123CAA&FORM=VIRE

    The professor’s latest work has sounded a warning that the leakage of Methane from Fracked gas wells world wide is sufficient to bring the Planet to 2 degrees celsius above preindustrial levels in the next 10 – 15 years .
    This is decades sooner than was assumed in the IPCC estimates, and makes it certain that we will not keep global temps to 1.5 degrees C as many have hoped.

    https://www.nakedcapitalism.com/2018/04/world-may-hit-2-degrees-warming-10-15-years-thanks-fracking-says-cornell-scientist.html

    Unsurprisingly this has NOT been widely reported in the

  2. Joe 5 months ago

    This Faazi dude from Manufacturing Australia is a worry. Does he not see what manufacturers here have been doing, installing their own RE to lower their power costs. First mover vs fast-follower, me thinks that the Fazzi is a bit fracked in the head.

  3. Tim Forcey 5 months ago

    WHAT THE FRACK IS GOING ON?

    Here is a link to my presentation from earlier this week entitled “What the frack is going on?”

    http://bze.org.au/bze-discussion-group_may-2018_what-the-frack-is-going-on/

  4. david_fta 5 months ago

    So, James Fazzino reckons “the fact that we still talk about fracking is bizarre. You know, cos it’s proved you can do that safely.”

    Err, no, Mr Fazzino, it’s not proved that you can frack safely at all. Thanks to the USA, hazards are becoming better known.

    In October 2015, we read “Fracking industry wells associated with premature birth” –
    (https://www.sciencedaily.com/releases/2015/10/151008110550.htm), in Dec 2017 it is revealed that “Hydraulic fracturing negatively impacts infant health, study finds” (https://www.sciencedaily.com/releases/2017/12/171213143703.htm) and then this very month we learn that “Study links fracking chemicals to immune imbalance” (https://www.sciencedaily.com/releases/2018/05/180501085545.htm).

    • neroden 5 months ago

      Fracking was banned outright in New York State after reviews of the scientific literature by the Commissioner of Health.

      While it may be theoretically possible to frack safely, it has been proven that the actual fracking companies never ever do so. This is because they are all scam artists — fracking is totally unprofitable. Only fly-by-night scam artists do fracking, and fly-by-night scam artists never do *anything* safely.

      • david_fta 5 months ago

        So if Australia fracks like New York State, James Fazzino will be happy, and Australia won’t poison itself. Win-win!

  5. Robin_Harrison 5 months ago

    Any community threatened by frackers should check out how they were dealt with at Bentley.

  6. Adrian Ingleby 5 months ago

    Fracking isn’t safe. In America they exempted it from the Safe Drinking Water Act. They had to because the risks of contamination to groundwater would have prevented it from proceeding. The fracking chemicals used are toxic, they together with heavy metals and toxic compounds, salt and methane gas can and do migrate into the groundwater and aquifers. It is anticipated that 1 million tonnes of waste salt will be removed from the CSG “produced water” in Australia when the gas-fields are at their height. Fugitive methane [a greenhouse gas] migrates to the surface and into the atmosphere. Enormous quantities of water are used and extracted, dewatering and depressurising the groundwater system. Once a groundwater system is contaminated it is irreversible!

    The NSW government’s site on “Well monitoring” states:- “Wells, like any constructed asset, can deteriorate with age, operational and site specific conditions. This can lead to the well no longer being suitable for the intended use. Well monitoring and maintenance is required to preserve the well and its component parts in good order for the life of the well.”

    When a well is closed down and capped the fugitive emissions continue forever, who is going to monitor that? RE has proved that renewable energy sources can do the job perfectly and gives real life examples every day. RE also reported on a hydrogen electrolyser being used to extract hydrogen from water with the power required to do it coming from renewable energy sources.

    There is no need to frack gas; 70% of our gas is being sold overseas. Protect our land, water and air. Safe, clean renewables OR dirty, toxic greenhouse gas? It’s a no-brainer unless you’re a politician.

  7. The Duke 5 months ago

    Anyone considering fracking as a solution should view either Gasland or Gasland 2.
    Make up your own mind. But don’t listen to the Flat Earth, Climate Change deniers and prophets of doom like Alan Jones, Andrew Bolt and others with their own agenda. The water table and natural aquifers should NOT be poisoned and polluted by big business trying to make a quick buck at everybody’s expense.

  8. Pete 5 months ago

    The anti-frack movement is comparable to the anti-GMO movement and the anti-global warming movement. The majority of the relevant scientists hold one position and a loud protest movement and lesser number of scientists holds the other. Resolving these peculiar dynamics are a big challenge for scientists and regulators.

    • neroden 5 months ago

      True, the majority of scientists oppose fracking and a loud protest movement supports it.

  9. Ian 5 months ago

    What is James Fazzino’s understanding of manufacturing in Australia ? It’s not energy intensive, 24/7, high volume, low margin, mass producing, low tech industry. Far from it check out this report.

    https://industry.gov.au/Office-of-the-Chief-Economist

    Frackin’ won’t make any friggin’ difference to manufacturing.

  10. neroden 5 months ago

    Fracking has lost billions of dollars. Every single company focused on fracking has lost money. It’s been a constant bonfire of cash. The banks who made the loans are being forced to write them off.

    It’s simply not profitable. The continued fracking boom is one of the stupidest manias I’ve seen in the financial markets ever. It’s been continued by dumb money, by billion-dollar “investments” by idiots who never see a dollar back.

    The people running the fracking firms actually know that it’s money-losing at this point, so all the firms are run by scam artists whose plan is to take the money, frack a well, advertise its first-day output, sell it as fast as possible (without admitting that it runs out of oil in about a year), and flee to the Cayman Islands before they get caught. Their business model is *defrauding ExxonMobil* into buying worthless fracked wells for far more than their true value. Aubrey McClendon didn’t flee to the Cayman Islands fast enough and committed suicide when the truth came out.

    And I haven’t even mentioned the environmental disasters; but I think it’s pretty obvious that a bunch of scam artists are not going to even try to comply with environmental laws.

    • MaxG 5 months ago

      There is not one company that truly cares about the environment. At least I do not know of one.

      • Ian 4 months ago

        Maybe Tesla?

  11. Tim Forcey 5 months ago

    Desmogblog series on the economics and non-profitability of fracking in America.

    https://www.desmogblog.com/finances-fracking-shale-industry-drills-more-debt-profit

  12. Steve h 5 months ago

    Part of the energy, manufacturing and costs debate has to consider sources of energy and districts for manufacturing. We extract gas in the northern Territory and north Western Australia, add it to bauxite sourced from Gove and Weiper and then refine and cast it in Victoria. We get iron ore in North western Oz and apart from sending most of it overseas we barely add it to NSW coal to make steel and iron.
    It often just doesn’t make sense..

Comments are closed.