The response to the Labor energy policy unveiled on Thursday was entirely predictable. “Pink batts”, shouted the Coalition government. “Woah, slow down,” said the business lobby and incumbents. “Not fast enough,” said green groups and the Greens themselves.
Given those reactions, it would seem that Labor’s insistence of a 50 per cent renewable energy target, and the $15 billion in new funds, a battery storage incentive scheme and other measures might have successfully pitched themselves into the middle green, to awkwardly borrow a golfing term, of this devilish debate. And that is exactly where they would like to be.
The Coalition and the incumbent interests may rant and rail about what they describe as the “reckless” and “wrecking ball” nature of the Labor targets, and what energy minister Angus Taylor now labels as “pink batt-eries”, but technology and economics are not on their side.
As was revealed earlier this week by BloombergNEF, the hosts to Labor’s policy launch, unsubsidised wind and solar are now substantially cheaper than coal, even with the added cost of storage that makes these “intermittent” sources fully “dispatchable”.
Earlier on Tuesday, we reported on the latest LCOE (levellised cost of energy) analysis by BNEF which found that wind and solar were now cheaper than coal in every major economy bar Japan. And in markets like India, they were half the price of coal.
Now we can also report on BNEF’s price estimates for Australia, and it reinforces the view expressed by any number of large utilities, including the government-owned Snowy Hydro, that wind and solar are killing coal and gas on cost, and that the Coalition is barking up the wrong tree trying to shovel new investments in coal into the grid.
The graph above, provided by BNEF, is self explanatory. The LCOE of wind and solar – at $US37/MWh and $US40/MWh respectively ($A50-54/MWh) – beat the cheapest coal by a country mile. They are also ahead of “baseload” gas on bulk energy, and when added with storage beat peaking gas.
Australia, as senior BNEF analyst Seb Henbest points out, provides some of the cheapest solar in the world, ranking behind only India and Chile on the LCOE for tracking, second on non tracking solar PV, and well below the global benchmark.
And after a 13 per cent fall in global solar costs just in the last six months, Henbest says we can expect a further 46 per cent drop in the LCOE of tracking solar PV, and a 32 per cent fall in the cost of onshore wind by 2030. That puts solar at around $US20/MWh and wind as $US26/MWh. And battery storage costs will also come down.
“There is now no doubt that wind and solar PV will replace coal and gas as the backbone of future electricity systems all around the world,” Henbest says.
“They are cheaper, less polluting and, paired with batteries, increasingly flexible. This offers an opportunity for government to lower emissions and energy bills – surely something both sides of politics should be able to agree on.”
But both sides of politics do not agree on this. The Coalition government, and the incumbent coal lobby, refuse to accept the data, and seek to protect their views, business models and donations by locking themselves into the old paradigm of “base-load” and “24/7 power”.
They fail to accept that if you have dirt-cheap bulk energy such as wind and solar, then the path to a cheaper, cleaner and more reliable power system is then to fill in the gaps with the most efficient technology, and that requires dispatchability and flexibility.
The challenge is to meet demand peaks, the answer is not having too much fossil fuel generation that can’t be switched off in the middle of the night when you don’t need it.
Most of the big utilities and market operators around the world understand that. Baseload is not the only refuge of the intransigent. So too is the denial of climate science, and its half-brother, the demonisation of any proposed action on climate for fear of wrecking the economy.
Reputex, the offshoot of S&P, says it is clear that having more renewables will result in lower prices. It predicts wholesale electricity prices oscillating around $60/ MWh through to 2030, rather than above $80/MWh as seen under the low investment scenario under the 26 per cent reduction target of the current government.
The Australia Institute points out that, on its modelling, having 53 per cent renewable energy capacity by 2030 would create up to 59,000 direct jobs across the country.
And many are now pointing to the huge opportunities for Australia in manufacturing and exports of green fuels. It is impossible for Australia to return to “cheap” fuels with a system based around coal, but it can be done with wind and solar.
This is the basis for Sanjeev Gupta’s plan to install up to 10GW of solar to “solarise” the Australian economy and encourage more manufacturing. Others, like CWP Renewables, are targeting massive projects in the Pilbara to provide cheap green energy for local demand, more manufacturing, exports to south east Asia or “green fuels” to north Asia.
The north Asia markets, in particular, are desperate for these “green” fuels to power their economies. Australia is the country best placed to provide that, with its rich wind and solar resources delivering “green hydrogen”.
And on this point, Labor is quite right when it says that the answer to lower prices, lower emissions and greater reliability is renewables. It is also the answer to economic growth and opportunities for new industry.
Which takes us back to the first question about whether the transition outlined by Labor is fast enough. In terms of climate, as outlined by the IPCC and again this week by the WMO, clearly not. But this is the current state of politics.
By the time Labor gets into power and starts to implement its policies, it will be even more obvious that the transition can and should be quicker, and there will be no reason to resist.
And what did the Coalition offer us? Well, remember how they dismissed the Tesla big battery as nothing more special than the big banana? Or as the Kardashian of the energy world? Now it’s comparing household storage to pink batts.
“Australians remember the last time Labor wanted to install things in their homes. Under Bill Shorten he’d repeat Kevin Rudd’s pink batts disaster with his pink batt-eries plan,” Taylor said in a statement on Friday, while raising a new scare campaign about “carbon Tax 2.0”, in reference to the industry-specific trading schemes that even industry is now calling for.
“Labor’s reckless 45 percent emissions reduction target and 50 per cent Renewable Energy Target targets strike at the heart of middle Australia,” Taylor said.
Note: Some readers may wonder about the difference between recent auction bids – such as the sub $20/MWh bids in Mexico and the Middle East – and the LCOE cited here.
Henbest says they are different for a number of reasons:
Giles Parkinson is founder and editor of RenewEconomy.com.au, and is also the founder of OneStepOffTheGrid.com.au and founder/editor of www.TheDriven.io. Giles has been a journalist for 35 years and is a former business and deputy editor of the Australian Financial Review.