Denial and confusion live on, as energy hopes turn to states and AEMO | RenewEconomy

Denial and confusion live on, as energy hopes turn to states and AEMO

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Coalition’s surprise win means focus turns to the states, the corporate sector and the Australian Energy Market Operator. Where does its blue-print for the future take us now?

AAP Image/Lukas Coch
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At the Sydney Theatre Company’s performance of Cat on a Hat Tin Roof on Saturday night, the cast members sensed the change of mood almost immediately after the interval, when the audience at the Roslyn Packer Theatre had the opportunity to buy a drink and check their mobiles for election updates.

“It was as though the energy had been sucked right out of the room,” one cast member told me the next day.

That same sense of emptiness – like a deflated balloon – was experienced across the country, at least for the one half of the population that didn’t want the Coalition to retain power, and for those in the energy and the electric vehicle sectors who had assumed that they would finally have a government happy to shift policies to embrace the 21st century.

Just as live theatre feeds on the response and involvement of an audience, so too an industry feeds off the policies and messaging from the incumbent government. And for the energy industry and renewables in particular, there is now a sense of emptiness.

For the past six years, climate denial, the obsession with coal and the protection of vested interests have combined to deliberately create confusion and uncertainty. After the 2013 and 2016 federal polls that Labor also lost, the industry felt they could rely on policies that had been put into place by the last Labor government – the renewable energy target, the CEFC and ARENA, even if the carbon price did get taken down.

That was how it turned out, and it resulted in an unparalleled $25 billion investment boom. In 2019, with a re-elected Morrison government, there is  no policy back-stop. The renewable energy target is effectively met, and while the mechanism stays in place for another 10 years, as designed, there is no further investment signal, in price or in purpose.

The Coalition simply has no coherent energy policy. Its focus will quickly turn to a grab-bag of talking points and various “mega” projects such as Adani, the Snowy 2.0 pumped hydro scheme and Tasmania’s “battery of the nation” project.

And given the huge surge in support for pro-coal LNP candidates in north Queensland, particularly George Christensen and Michelle Landry, then the push for a new coal generator in the region, subsidised and indemnified by the government, will be immense.

Clive Palmer, and whoever may have helped fund his extraordinary media campaign that possibly tipped the scales against Labor, will want a return on their investment. Palmer, of course, has an interest in the Galilee Basin which approval for Adani may unlock.

So, too, will leading Liberal party donor Trevor St Baker, who has his hand out for a government-subsidised upgrade and extension of his Vales Point coal generator in NSW. This will come through the government’s Underwriting New Generation Investment (UNGI) mechanism, which is likely to be tailored (or Taylored) to suit the outcomes the government want.

Any hope of the Coalition’s ability to suddenly get sensible about energy and climate policy will be restricted by the power of its back-bench and the limits of its own ideology. Labor and the Greens should be able to thwart some legislative disasters, but they will not be able to create anything positive from the opposition benches.

Money will continue to be funnelled into the Climate Solutions Funds, and Australia will resume its role as a handbrake on international progress in climate talks. And this, in an important year when countries are being called upon to lift their targets to help meet the growing concern about climate change.

For the renewable energy industry, and the transition that many say is not just inevitable, but key to the country’s future prosperity, that leaves just four sources of hope: the states, the Australian Energy Market Operator, the corporate sector, and the superior economics of renewables and storage technologies.

Victoria and Queensland are key to this, as they have clear and articulated 50 per cent renewable energy targets by 2030. Victoria is not likely to back down, but it needs to resolve many of its network issues before it can actually meet that target. That will require investment and the adoption of AEMO’s Integrated System Plan.

Queensland is a concern. The new solar installation rules enacted by the state government are considered a farce and will almost certainly bring new investment to a screeching halt. On top of this, its own programs – such as the Renew400 auction process for new wind, solar and storage – have not advanced in nearly two years.

The state government last week blamed the federal Coalition for this, but the Coalition will be in power for the next three years, and Labor barely reached 27 per cent of first preferences in the “sunshine state”. The fear is that the state government will continue to stall, particularly with an election 17 months away. “I don’t expect them to be brave,” said one frustrated developer on Monday.

This puts the focus on AEMO, and its efforts to advance its Integrated System Plan, a blueprint for what it judges to be the inevitable transition to cleaner, smarter and cheaper technologies in the country’s electricity grids. Its role will be crucial.

Already, it has modelled scenarios that analyse how the grid can absorb a major shift to renewables within 10 years. It has been urged to go even quicker – to include a “step change”scenario at the urging, of all sources, the incumbent energy industry. It was to release that information last week, but held back, possibly assuming a Labor win and more accepting environment.

But these are messages – like AEMO’s warning that coal is on the way out – that the Coalition government does not want to hear. It’s an invidious position for AEMO to find itself in, looking at how to embrace the future when the government is firmly fixed on the past.

The fear is that the conservative power-brokers who still dominate much of Australia’s energy institutions, including the rule-maker and the  regulator, will look to profit from the moment. There is a culture war in energy of fierce proportions going on behind the scenes. Delay and obfuscations are powerful tools to prevent change.

In the absence of a price signal from the RET, and uncertainty about how quickly Victoria is able to move, or how quickly Queensland wants to move, that leaves the corporate sector as the most likely supporters of new investment in wind, solar and storage.

It’s a complex market, however, made more complicated by the numerous barriers and road-blocks that are emerging because of the slow response to the established institution and regulators to the changing grid – think connection issues, marginal loss factors, archaic rules that lie in the way of new business models and technologies, and the lack of overall planning.

That takes us back to the economics. One of the key promises the Coalition made in the election was to lower the wholesale price of electricity to $70/MWh by 2021. The wind and solar coming into the market now – despite the Coalition’s efforts to stop it – could deliver that outcome, but not with the confusion and distortions in the market created by the government itself.

The economic assessments – from the CSIRO, the networks, from AEMO and private analysis – tells us quite clearly that the cheapest option is wind, solar and storage. This is also the clear message from the government’s own utility, Snowy Hydro, when it conducted its recent tender.

But given that the Coalition, and the controlling stakeholders in the media, fight against this reality, then the fear is that subsidised coal will be the chosen route. The price might be managed down, but the taxpayer and environmental bill will continue to pile up.

The big pumped hydro schemes in the Snowy and Tasmania, as the modelling makes abundantly clear, will only serve to support coal and actually increase emissions unless it is accompanied by a major switch to the wind and solar technologies that the current energy minister, Angus Taylor, abhors.

So, what might change, and when? It might not just be another three years in the wilderness for Labor. It could be longer. Trump, Brexit, Bolsonaro and Morrison are in power because they exploit cheap and populist fear campaigns. Lies are their currency, and in Australia and other countries, the Murdoch media is their banker.

In the lead-up to last Saturday’s election, it was clear that nearly everyone who wanted a Labor government to be elected had expressed fears that somehow Shorten would stuff it up. And he did.

For five years it has been apparent to anyone that has seen Shorten or TV or listened to him on the radio that he was basically unelectable and – however strong the team around him – when it came to the ballot box people wouldn’t be able to vote for him, despite the confusion and chaos and disgraceful performance of the Coalition government.

The angriest opponents of 21st century technology – Barnaby Joyce, George Christensen and Peter Dutton – enjoyed big lifts in their votes. The architects of the current policy vacuum – Greg Hunt, Josh Frydenberg and Angus Taylor – emerged unscathed. Tony Abbott lost his seat, but he won’t shut up. Zali Steggall will be heard but ignored if Morrison has an absolute majority.

Now the blame will shift to the policy suite, and already there is talk of “recapturing” the middle ground. Joel Fitzgibbon, the Labor MP for Hunter and agriculture spokesman, said on radio on Monday that Australians are conservative, and they don’t like to change too quickly. He was hit by a 20% swing and is still at risk of being beaten by a One Nation candidate.

I don’t remember Australians fighting the uptake of mobile phones and the internet, so it’s not clear why they should want to stop the transition to a renewables-dominated grid, with all the health and environmental benefits that would bring, let alone the bill reductions. But that’s the power of scare campaigns.

Related reading: Electric car industry in Australia now faces 12 month wait for policy

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