Tuesday, 14 February 2017
Matters of Public Importance
Since Christmas the government has sought to pursue, as Senator McKim said, retail politics around energy. All it has revealed is just how terribly out of step the government is on questions of climate change and on questions of energy transformation.
The Liberal Party seems to think that this is a joke, with the Treasurer passing coal around in parliament the day before we experienced some of the most extreme weather conditions we have seen in the history of my state of New South Wales. It is more than a joke; it is in fact an insult. Their old coalition partners, the National Party, seem to think that climate change is fiction, and certainly their new coalition partners, One Nation—the new people they have got into bed with—seem to think it is fiction too. Senator Roberts takes every opportunity in this place to brandish his dossier of 'empirical evidence', which he claims, contrary to the views of scientists all around the world, proves that climate change does not exist. Just today we heard more remarks from the Minister for Resources and Northern Australia, Senator Canavan, whose unqualified support for coal in any form really betrays his absolute contempt for climate change as a serious issue that we need to address.
Apart from various right-wing commentators in our newspapers, nobody else actually agrees with them. The academic, the scientific, the not-for-profit and corporate sectors all agree that we need serious action on climate change. This month the BCA and the AIG, those radical socialist organisations, indicated in a joint statement that:
Australia needs a suite of durable post 2020 climate change policies integrated with broader energy policy and capable of delivering Australia's emissions reduction targets, at lowest possible cost, while maintaining competitiveness and growing Australia's future economy.
Sadly, there is absolutely no sign that a suite of policies of this kind is on the horizon under this government. It is to Australia's great detriment that this is so. Instead of addressing climate change in a sensible and pragmatic way, the government is using it as a proxy in its culture wars. The latest victim, of course, has been sensible energy policy.
I do not particularly want to talk any further about that today; I want to spend my time talking about energy policy and setting out some of the challenges we face. It is not just the transition that we need to make to cleaner sources of energy, it is the broader systemic changes we need to make to accommodate emerging technological developments and to radically change consumer preferences. We will need a massive investment in energy infrastructure in the next couple of decades. The existing plant—the plant that was built largely by the public sector, I should add—is coming to the end of its life cycle. In fact, Senator Canavan correctly observed this a little earlier when he was talking about the smelter at Gladstone.
Within a decade about half of Australia's coal-fuelled generation fleet will be over 40 years old, with some currently operating stations approaching 60 years of age. New South Wales faced blackouts on Friday for a range of reasons, but one of them was that two out of the four generators at one of its biggest power stations, Liddell, were out of commission. That is a power station that was built in the 1950s and refurbished in the 1970s. It is an indication of the challenges that come about when you are running a very old fleet.
The lesson we ought to draw from that is that in fact we are going to need to make investments in new energy infrastructure, and it really does not matter what technology it is, because they are going to be quite expensive and they will incur costs for consumers. We need to come to grips with that and start enabling the circumstances that will allow us to make those investments in ways that are economically efficient and allow us to meet our emissions reduction objectives. In that light, there is a reason that industry is not interested in investing in clean coal: that the numbers do not add up. AIG wrote in a blog:
…new-for-old replacement of our coal fleet does not look like a good solution for price, reliability or the environment. Electricity sector investors are unlikely to finance a new coal-fired power station in Australia again.
It is a pretty unqualified position. Oliver Yates, the CEO of the Clean Energy Finance Corporation said he would not invest in ultra-supercritical coal plants because it would not be a good use of taxpayer funds.
If clean coal was truly clean or truly effective, we would back it and, indeed, in government we did. We allocated significant resources when Labor was last in government to research carbon sequestration for coal fired generation. But the problem is that right now it is not cost-effective. A new ultra-supercritical coal station comes out, it is estimated by Bloomberg, somewhere between $134 and $203 per megawatt hour. That is significantly higher than the cost of new-build wind or the cost of new-build solar by a factor of almost two.
The problem of course for supercritical coal is that it only really reduces emissions by a fraction of what our existing coal plants emit. If you really want to get coal fired generation down to being a genuine low-emission technology, you have to use carbon sequestration. And once you do that, it is certainly not the cheapest form of energy; it is one of the most expensive. One estimate from Renew Economy suggests that CCS in total comes out at about $352 per megawatt hour—that is, about three times more expensive than wind or solar. I would suggest to you that that is one of the more conservative estimates of the cost of carbon sequestration that I have seen. By contrast, renewables are expected to be cheaper than conventional coal within years, even without taking into account the cost of CCS. Over the past seven years, the cost of wind has dropped over 50 per cent and solar PV costs have dropped by over 80 per cent.
Of course we are not just talking about our generation; we also talking about our transmission infrastructure. The great myth over the last decade was that it was renewables that caused price increases in the electricity sector when in fact it was the very great investment that we needed to make in network infrastructure that caused most of the cost increases for consumers. In fact, they accounted for 43 per cent of residential electricity prices in financial year 2015. What will be needed will be a much transformed transmission system that can cope with consumer preferences and with the technological developments which will see a much more diverse generation capability in our electricity system. In particular, we need to start looking at peak demand, the thing of course that drives the big investments in transmission. Our peaks used to be in winter. We used to turn the electricity on a lot when we wanted to warm up. With the advent of affordable air conditioning—affordable for some—we now see our peaks come about in summer. Very hot days—associated of course with climate change—mean that more and more people are turning their air conditioners on to keep cool. The growth in rooftop storage has seen a further change. There is a dip in energy use in the afternoon as people generate their own power and then a surge in use in the early evening.
Storage technology—batteries at the home, on a regional scale, on an industrial scale—will drive further changes. By 2020 the cost of some battery technologies are expected to fall by another 40 to 60 per cent. So we need to start to build an energy system that can accommodate all of these technologies that can cope with the high variability that we experience in our electricity demand. This is something that is simply not happening under this government because they lack the political will to deal with it seriously. They are interested only in playing political games with this issue, throwing red meat to the base of climate deniers in the coalition party room.
What is needed of course is policy certainty. Witness after witness at the Senate Select Committee into the Resilience of Electricity Infrastructure in a Warming World hearing on Friday reinforced this perspective. The Energy Council, which represents coal and gas, wrote:
We are already experiencing the consequences of energy policy paralysis for the past decade. It’s not pretty. The 'grid' as we know it is degrading in front of our eyes.
And joint statements in recent days have been made by industry and consumer groups including the Australian Aluminium Council, the ACF, the Australian Industry Group and the cement industry calling on the government to deliver certainty. They are saying that the status quo of policy uncertainty, lack of coordination, and unreformed markets is increasing costs, undermining investment and worsening reliability risks. They went on to say we need mature, considered debate.
We on this side are ready to have that debate. This is a complex problem and we need proper policy, not three-word slogans.