Labor pledges $15 billion in new renewable, network funds

Labor has unveiled its energy policy – a key battleground for the next election – that includes a series of reverse auctions to support its 50 per cent renewable energy target for 2030, an extra $10 billion for the Clean Energy Finance Corporation, and $5 billion for a new “Energy Modernisation Fund.”

The policy, which also includes a $200 million battery storage rebate scheme, and an offer to implement the National Energy Guarantee if the Coalition can remove Tony Abbott’s control of its energy politics, was presented by leader Bill Shorten in a landmark speech in Sydney on Thursday, and by climate spokesman and chief energy strategist Mark Butler.

The underlying theme of Labor’s position is that renewable energy and modern technologies are the key to delivering on the so-called “trilemma” of emissions reductions, lower prices and reliability – a position that is in direct contrast to the Coalition’s attachment to coal.

Labor’s choice of venue – the Sydney headquarters of BloombergNEF – was no coincidence. The global energy analyst company this week released a report that underlined how unsubsidised wind and solar were beating coal in just about every economy, and that wind and solar paired with storage was beating all fossil fuels on the cost of “dispatchable” generation.

“The answer lies in renewables,” Butler told RenewEconomy. Australia, he noted, will have to replace much of its ageing coal generation over the next two decades, and the obvious choice on price, emissions and reliability was solar and wind, backed by storage technologies and grid modernisation.

Labor is holding out hope that a National Energy Guarantee – with a 45 per cent emissions reduction target by 2030, as opposed to the Coalition’s 26 per cent – can be agreed upon. But Shorten says it will not wait and allow the Coalition and the climate skeptics in parliament “to hold the nation hostage” over the issue.

So, as predicted by RenewEconomy on Monday, Labor will look to provide certainty for investors by holding a series of reverse auctions – as many states have done successfully – to bring new investment in wind and solar, also including storage.

The details of this are not yet clear. Butler says it will likely be managed by the CEFC, which with new funds could act as a counterparty to any contracts – in the form of contracts for difference or “collars”.

The plan will also align with the Australian Energy Market Operator’s Integrated System Plan, which Labor embraces. Again, it is a direct contrast with the Coalition’s current attempts to rush through a plan to underwrite 24/7 or “baseload” power, largely seen as an attempt to support new investment in coal and extending the life of coal generators.

AEMO’s ISP also forms the rationale for a new fund, the Energy Modernisation Fund, which will allocate $5 billion in the form of concessional loans and some equity investments, to support investments in the type of infrastructure identified by the ISP. This may include grid upgrades, extensions, or new technologies that can harness distributed energy technologies.

The new energy policy marks the apparent ditching by Labor – after more than 10 years – of a carbon price in the electricity industry. Butler says one is no longer needed, because of the cost falls in wind and solar.

But Labor is still looking at some form of carbon pricing in other industries, where the cost of emissions abatement is higher and may rely on a market mechanism; and where Australia faces its greatest challenge in meeting the economy-wide target of 26-28 per cent reduction in emissions by 2030, let alone Labor’s 45 per cent cut.

This idea for sector-specific carbon pricing includes manufacturing. Details will be released in its climate policy that will be released closer to the election, which is likely held by the end of May.

“We’ll be talking about those policies and there will be emissions trading type schemes, for example in manufacturing and the LNG sector, of the type that already the government at least has the framework in place for but just isn’t using properly,” Butler told ABC’s Radio National Breakfast program.

“So I’m in discussions with manufacturing, with the LNG sector, with the transport sector, about a range of policies that will be rolling out in coming weeks. But today the story is about energy. We’ve pulled energy out as a separate story because of the depth of the energy crisis that has emerged under this government.”

Labor says it will create a “Just Transition Authority” to manage the exit from coal and the planned closure of the country’s coal generators, and to help create new jobs and industries to replace them.

Labor is also proposing a renewed focus on energy efficiency – which has been frustratingly cast aside by successive governments, mostly due to the intense lobbying of the incumbent energy utilities that stand to lose most by reduced generation.

Butler says this will be carried through the COAG mechanism, and may encourage those states who do not already have “white certificate” scheme (a form of energy efficiency trading scheme) to adopt them. It will also look at residential standards and a $20 million fund to provide grants to new energy efficiency technologies.

Business will also be provided with accelerated depreciation for energy efficiency investments, including hardware such as new boilers and software, and Butler said Labor would look to put energy efficiency “at the centre” of energy policy (where it should have been for the last decade).

The Coalition, predictably, has characterised Labor’s 50 per cent renewable energy target as an “economy” wrecker, a comment dismissed as a “triumph of ideology” over reality.

But the reality is that it will not actually be that difficult to achieve – and will require significantly less investment than over the last two years – given that Australia will be close to 40 per cent renewables by 2020, thanks to the stunning growth in large-scale wind and solar under the current RET, growing corporate demand, and the continuing rush to rooftop solar by households and businesses.

AEMO’s ISP suggests Australia could get to 46 per cent based on current policies, including those implemented by the Victoria and Queensland Labor governments, and assuming that the coal closures in NSW will go ahead as mooted.

Environmental groups and activists suggest Labor could and should go much further than its 50 per cent renewable energy target, particularly after the recent conclusions of the IPCC report.

“A 45 per cent (emissions) reduction target is fundamentally out of step with the action we need to take to avoid the worst of climate change. It falls significantly short of what the IPCC science demands for a safe future,” said Get UP campaigns director Sam Regester.

Labor, however, is not prepared to go any further just now.

“We’ll be taking 50% to the election,” Butler told RenewEconomy.