Australia’s major energy players are split over pace of renewables transition

A major split is growing between some of Australia’s leading energy companies, between those who acknowledge the inevitability of large-scale cuts to emissions, and the rapid transition to a renewables-dominated grid, and those desperately trying to extract profits out of their ageing coal plants.

The rift, which has been growing for some time, was brought into the open last month following a statement from the Australian Energy Council, which represents the largest incumbent players in Australia’s energy market, endorsing a commitment reaching zero net emissions by 2050.

In issuing the statement, the Australian Energy Council joined a growing list of business groups, investors and governments in acknowledging that reaching zero net emissions by mid-century will be required to give the best chance of avoiding the worst impacts of climate change.

“Our members have long accepted the science of climate change and the need to decarbonise the economy. In that regard, we have consistently argued for well-designed, market-based, and stable national policy settings around which our members can invest,” Australian Energy Council’s chief executive Sarah McNamara said.

“But our efforts need to be broader, and a net zero emissions target across the economy we believe is the best way forward to deliver the Paris temperature goals at the lowest economic and social cost.”

But it quickly became clear that these may not be opinions shared by all members of the Australian Energy Council.

At least two Australian Energy Council members reacted viscerally to the statement, and both were pure-play coal power companies InterGen and Delta Electricity. They wrote to the AEC’s chief executive to express their dissatisfaction.

InterGen, which is owned by a Chinese-Czech consortium, operates the 920MW Callide C and the 850MW Millmerran coal fired generators in Queensland. InterGen managing director Brent Guthner argued that the zero emissions target risked antagonising the Morrison government.

“It is surely the remit of the AEC to work with rather than against government to enable sensible, achievable and successful technology decisions to be made about 2030 never mind 2050,” Guthner said.

“Officials are far from united in supporting a net-zero 2050 policy and certainly neither is Cabinet nor the Coalition Party Room. It is not happening.”

Delta Electricity, which operates the 1,320MW coal-fired Vales Point power station near Lake Macquarie in NSW and which has approached the Morrison government for taxpayer funds to keep the power station operating, straight up opposed a commitment to the zero emissions target.

“Delta Electricity does not endorse the zero emissions by 2050 target. Once you have a target, you have to have mechanisms to get there and with that comes cost,” Delta Electricity CEO Greg Everett said in comments reported by The Australian.

Given the list of organisations, businesses and state and local governments embracing the net zero emissions, it leaves a handful of pure-play fossil fuel companies, and the Morrison government, as the hold-out opposition.

On the other side are major energy companies that understand the need to reduce emissions is one being driven by an environmental imperative, as well as one being driven by the demands of customers.

A similar split emerged in the energy industry’s reaction to a proposal to delay the introduction of 5-minute settlements, a rule change deemed essential to send a price signal for new smart technologies such as battery storage and demand management, but which won’t favour existing coal plants.

Surprisingly, AGL and EnergyAustralia – who have experience operating big batteries in Australia – lined up in support of renewable, battery storage and software companies. On the other side, the main fossil fuel generators, including Delta, Origin, Alinta and Shell, among many others, supported a 12 month delay or called for an even longer wait – up to 24 months.

AGL Energy CEO Brett Redman revealed in a press briefing that the Australian Energy Council’s statement had been agreed to through a “consensus” process involving all of the council’s membership, but that the position was non-binding.

“The Australian Energy Council is a broad church and I recognise that there were a couple of members who at this point have a different point of view,” Redman said.

“That was a respectful process of the Australian Energy Council followed that took account of all members views, and published what was a consensus position for the membership without binding any member to it, and without saying it represents in detail the views of any individual member.”

“So I’m quite comfortable that what Australian Energy Council is doing is standing up for what we think is the right way forward and talking about what transition looks like and our role in it,” Redman added.

Redman denied that the recent launch of new product offerings from AGL that would allow customers to purchase carbon neutral energy products, was designed to pressure other members of the Australian Energy Council to embrace the zero emissions targets.

“This is about standing up for what we believe, and I’m looking to show leadership about how we’re going to operate going forward,” Redman said.

AGL, which ranks as Australia’s largest greenhouse gas emitter, has made clear that it understands the need to transition its energy portfolio away from one dominated by coal generators, to one that features more wind and solar projects, as well as zero emissions technologies.

The company recently tied the executive and management bonuses to achieving “carbon transition metrics”, including cuts to the company’s emissions.

“AGL is a leader in the business community by including carbon transition metrics in our remuneration structure because we understand that as Australia’s largest carbon emitter, our management team has a role to play in the transition and we want to hold ourselves accountable to this,” Redman said.

Other “Big Three” energy retailers have also made commitments to reducing emissions, including EnergyAustralia’s commitment to achieving carbon neutrality by 2050, and Origin Energy committing to set targets in line with the Paris Agreement.

With AGL, the “Big Three” retailers represent three of Australia’s top four largest carbon emitters, collectively responsible for around 15 per cent of Australia’s total emissions.

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