Prime minister Malcolm Turnbull appears to have caved in to the fossil fuel lobby and the right wing of his Coalition after announcing that he would look at the need to replace coal-fired power stations with “continuous power sources” such as new coal, or gas.
The announcement, along with the repeal of the limited merits review for network owners, and moves to restrict exports to guarantee local gas supply, was made by Turnbull as he sought to deal with a mini-uprising from the right wing of his party following the release of the Finkel Review on energy security.
The mining lobby, led by the Minerals Council of Australia, has been pushing to replace the output of the closed Hazelwood power station with a “technology neutral” auction of “continuous power” – but the clear hope and assumption was the ability to build a new “clean coal” power station.
“It would be good if we had a state-of-the-art clean coal power station in Australia,” Turnbull told journalists at a media conference in Canberra on Tuesday.
He said that this did not necessarily mean the federal government would build it, although the question remains if an auction is held, who would be the counter party. He noted that Snowy Hydro plans to build 2GW of pumped hydro with storage, and Canberra is looking to take on full ownership.
Turnbull insisted any auction would be technology neutral, but when asked what technologies could provide “continuous” and “synchronous” power, he mentioned only “clean coal”, gas and hydro, although he noted that gas would be too expensive.
There was no mention of solar and wind with battery storage, or of other technologies.
“We are seeing a real change in the nature of the energy market … with more variable sources of energy, more distributed sources,” Turnbull said.
“We have seen big shocks already from the retirement of large synchronous generators, and we need to ensure we don’t get those shocks in the future.”
His comments were full of references to energy security and affordability. Only twice did he mention emissions reductions.
The announcement comes after a ruckus in the Coalition party room over the Finkel Review recommendations, specifically the “clean energy target” that would likely guarantee coal supplied one quarter of Australia’s generation, even as late as 2050.
Although the Finkel Review took no account for Australia’s commitment to reduce emissions to meet the “well below” 2°C Paris pledge, this was not good enough for the right wing, which is calling for new coal plants.
In effect, however, Turnbull is hand-balling the issue to the Australian Energy market Operator, who he has commissioned to identify the gaps and holes in the market for continuous power.
He noted that any new coal-fired power station would take years to build. Analysts such as ITK’s David Leitch have pointed out that an equivalent amount of output of wind and solar will be built over the next 18 months, and storage is also being brought online.
Energy minister Josh Frydenberg indicated that any decision on a CET (clean energy target) would be kicked down the road, but a proposal to require new wind and solar plants to be accompanied by battery storage would be put to COAG energy ministers next month.
The repeal of the limited merits review is expected to put a cap on consumer bills, given that network costs make up around half of all electricity costs.
The Coalition says the ability of networks to appeal against decisions by the Australian Energy Regulator had added $6.5 billion to consumer bills in recent years. The ability to appeal to courts would now be removed and he AER would get an extra $67 million in funding.
The Coalition is also introducing its gas policy to restrict exports to the extent that it will guarantee that enough gas is made available in the domestic market by LNG exporters. The move was flagged earlier this year in response to soaring gas prices.
Greens climate spokesman Adam Bandt welcome the decision on network spending, saying it was well overdue.
“The power companies have been fleecing consumers for years, gold-plating their networks and ignoring more cost-effective alternatives, like managing demand. Recent court decisions only reinforced the need for action,” Bandt said.
“The electricity grid is an essential service, not an opportunity for big companies to make big profits at the public’s expense, so we welcome government intervention and greater public control of our energy networks.
However, he was less keen on Turnbull’s new request for AEMO to newly assess the closure of coal fired power station.
“We need to close the equivalent of a Hazelwood a year to meet climate targets, which means a government regulated timetable or other mechanism to drive an orderly transition and timely new investment. We don’t need another review, we need a national plan for the energy transition.”