Issue 234 October 2024
What now? With speculation flying about when the next federal election will be held, and to what extent energy issues will be a critical aspect of the poll, the past quarter has seen both electricity and gas topics much to the fore in political jawboning (and therefore media coverage) – and the quarter now beginning no doubt will be just as busy. Meanwhile, behind the scenes, political sides will be making much use of focus groups to shape their understanding of voter attitudes and pre-poll messaging needs. As well, we have the next UN climate change conference – at Baku in mid-November – throwing its shadow across the local debate plus the Queensland State election on the last Saturday of this month, with the outcome having numerous federal implications, not least for the national energy policies row. It’s going to be a bumpy ride.
“The intense political pressure to win the renewables/climate debate is now creating great danger to Australia’s long-term energy costs” – commentator Robert Gottliebsen.
“The target of reducing emissions by 43 per cent by 2030 is simply not achievable and politicians claiming it can be done are lying or ignoring the facts” – Gottliebsen.
“Who will bear the costs of this transition? My energy policy might cost a lot but their’s will cost more and mine is more reliable” – Coalition leader Peter Dutton addressing the Committee for the Economic Development of Australia.
“Clean nuclear energy is reliable. It will underpin renewables. It will get the cost of electricity down” – Dutton.
“Where will this gas come from to power generators for electricity? What policies will deliver the new gas plants needed? How much will new gas infrastructure cost? How much will the gas itself cost?” – Climate & Energy Minister Chris Bowen, posing questions for the Coalition.
“It takes a supernatural political talent to keep a straight face while asking questions that you couldn’t possibly answer. Bowen’s slam-dunk moment can be summed up as ‘You can’t make your plan add up because I know mine doesn’t’ – columnist Chris Uhlmann in The Australian newspaper.
“Without abundant, cheap gas the so-called renewable grid cannot function. Gas is not the backup for Labor’s electricity plan, it’s the backbone” – Uhlmann.
"Allowing the south-east of Australia to be facing gas shortfalls, a problem building for more than a decade, is an extraordinary failure of public policy by both sides of politics” – Tony Wood, Grattan Institute.
“The airspace over nuclear power is still dominated by vague, unsubstantiated comparisons and dodgy calculations based on exaggerated assumptions. And that goes for the Albanese government’s refusal to acknowledge some hard truths about the pace and costs of the energy transition” – Angela Macdonald-Smith, the Australian Financial Review.
“The realisation that net zero 2050 is impossible to achieve with renewable energy sources alone has triggered a seismic shift in nuclear sentiment in the past 12 months among policymakers and corporations. The nuclear reawakening has been stimulated by the arrival of energy-gobbling artificial intelligence and the growth of data storage” – Nick Cater, Menzies Research Centre senior fellow.
Australian Energy Producers is warning that future gas shortfalls in the eastern States, and especially Victoria, are “almost inevitable.”
Chief executive Samantha McCulloch says a decision by global exploration company TGS to quit searching for new gas in Victoria’s Otway Basin is a major blow for the State’s energy security and "will compound looming gas shortfalls in eastern Australia."
She adds: “Victoria is facing gas supply shortfalls from 2027 and already came close to running out of gas during peak periods this winter.”
Since 2010, production from offshore gas wells in Victoria has fallen by 70 per cent.
McCulloch, pointing to the latest report on gas supply issues by the Australian Competition & Consumer Commission, endorses a study by leading analysts EnergyQuest that thwarting new gas investment, a key policy plank of the Greens, who are vying for a role in government if a hung federal parliament emerges at the next election, will trigger "major economic disruption" on both coasts of Australia, "leading to a high risk of blackouts, manufacturers closing and inevitably higher energy prices in a decade.”
The ACCC’s latest report says the gas supply surplus in the east coast market is forecast to be between 12 and 27 petajoules in the first three months of 2025, down from the predicted surplus of 26 to 35 petajoules estimated in June.
In its latest quarterly report published in September, EnergyQuest writes: "The east coast is rapidly losing not just annual gas supply but also peak capacity, especially with decreasing Longford production (which dropped 18.2 per cent in the quarter). We have already seen peak supply shortfalls in 2022 and then again for the 2024 winter period just passed. Shortfalls are happening already. We conclude that time has run out, and only a few options are available which will make an impact."
In a message to AEP members on the association website, McCulloch says that, regardless of whether there is an early federal election or one on schedule in May next year, "energy policy will be a key battleground.” She adds: "It’s unlikely Australians will want to vote for higher energy prices, the risk of blackouts, increased emissions and the loss of tens of thousands of jobs as the nation’s mining and manufacturing grinds to a halt within the next decade."
She promises that AEP will “double down” on its efforts to highlight the important role of gas in Australians' everyday lives.
Meanwhile federal Resources Minister Madeleine King, granting two relatively small gas production licences to Beach Energy in Victoria’s offshore Otway basin, opines that “as Australia makes the transition to renewable energy, we need to ensure stable supply to the market."
She adds: “We need to keep downward pressure on prices, shore up energy security and keep the lights on as we move to net zero. As the Future Gas Strategy makes clear, while gas will be needed in smaller quantities over time, ensuring adequate supply now is crucial to lowering prices and ensuring gas can play its key role in supporting the transition to net zero.”
The Coalition’s resources spokeswoman, Susan McDonald, has retorted: “The government’s decision to approve the offshore production licences is a panicked move designed to dilute the impact of the ACCC gas report.”
As well, in a move seen in the State media as seeking to soften the Victorian government’s hardline public stance on gas amid looming supply shortages, Premier Jacinta Allan has announced proposed new legislation to pave the way for a large storage project in waters off Gippsland's Ninety Mile Beach at a cost of $500 million.
The Energy Users’ Association, representing major business consumers, has welcomed the move and comments that "pragmatic and realistic responses to ensure consumers’ needs are met will be critical as well as ensuring that energy remains reliable and affordable for all.”
The Australian Industry Group CEO, Innes Willox, says: "The belated but clear signs that the federal and key State governments have recognised they need to reverse course to avert a debilitating major gas shortfall are welcome first steps to inject realism into our energy debate.”
Willox comments: “Newly found pragmatism needs to continue to trump ideology if we are to keep industry competitive during the energy transition. We are now playing catch up to secure our energy future after years of failing to properly recognise the need to keep local industry competitive.”
He adds that "three overlapping gas challenges demand urgent action” and declares: "Supply adequacy is threatened as soon as 2027, with expected supply declining much faster than expected demand.
“Shortfalls should not be possible but are. They can be avoided but might not be. If shortfalls ensue they will mean serious disruption either to Australia’s trade relationships or to industry and power systems in the depths of winter.
“Some mix of supply increase and demand transition is needed to maintain balance. Gas prices are much lower than during the crisis of 2022, but much higher than before it."
A report published in September provides fresh warnings about the problems presented for the national energy transition by a range of looming skills shortages that can create the risks of delays, higher project costs and greater cost of capital to reflect increased risk.
To address the challenges, the report calls for governments to implement policies for smoother development of renewable energy projects over time and for the energy sector to attract a more diverse workforce, including more women and Indigenous Australians.
Produced by the Institute for Sustainable Futures at the University of Technology Sydney, the study points to significant job growth needed to sustain the transition — employment in the electricity sector must double by 2030, an increase of 33,000 people, the bulk of them in wind, solar and storage developments — while highlighting the strains this will inflict on the labour market. It underlines that occupations primarily needed in construction are very volatile, with demand for electrical engineers rising three-fold by 2029, then dropping below current levels in the late 2030s.
Noting that the renewable energy sector currently invests very little in skills development and training, the report says "the demand for a range of skilled workers, including electricians, mechanical trades, and engineers will increase significantly, potentially causing project delays.”
It says: “The construction-heavy nature of renewable energy projects will see a highly variable workforce with a risk of boom-bust cycles. This reduces national, regional and local opportunities as it becomes much harder to train and retain a stable workforce. Many renewable energy projects are located in remote areas, which will be competing for labour with infrastructure projects in big cities.”
And the report points out that the workforce needed to deliver the energy transition is even larger than identified in the study because there is also a large requirement for "behind the meter” activities such as servicing energy efficiency and electrification demands. These, it says, are "poorly researched but potentially contributing hundreds of thousands of additional jobs by 2030,” adding that “understanding more about this workforce is critical considering its overlap with occupations already identified as in short supply such as electricians and engineers”.
Reacting to the study, the Clean Energy Council lobby group declares it "underscores an urgent need for comprehensive reform to secure the workforce needed to support the transition”.
This report comes on the heels of a global study late last year by the Boston Consulting Group warning governments that by 2030 there will be an international shortage of seven million skilled workers needed for the climate and energy projects such as installing solar panels, heat pumps, electric car charging stations, and wind farms. BCG noted then that “when it comes to climate protection, there is a lot of talk about infrastructure, financing, technology and innovation but the fact that skilled workers are also needed for implementation has not been given enough thought."
With the federal election looming, opinion polls are highlighting that energy prices are still one of the top four issues riling voters.
As demonstrated most recently by a Newspoll survey, housing costs are top of the discontent ladder (40 per cent) followed by grocery bills (25 per cent) and energy bills (18 per cent) — with insurance costs at 11 per cent.
For respondents in the 50-64-year-old bracket, Newspoll records energy bills accounted for 25 per cent of discontent with 32 per cent nominating housing costs and 22 per cent saying grocery bills.
Meanwhile, the Finder website comments that “there is good reason energy is one of our most stressful expenses,” reporting its latest survey finds that the average Australian household spends $1,296 annually on electricity bills and $795 on gas bills.
It says this research shows that a quarter of people surveyed (27 per cent) rank energy bills among their top three stressful expenses. "Only groceries (38 per cent), rent or mortgage (41 per cent) and petrol (20 per cent) cause households more stress than energy."
The website’s consumer sentiment tracker declares: "Energy prices have steeply outpaced inflation since the mid-2000s.”
It adds: “Households in New South Wales are forking out the most on electricity, with an average quarterly spend of $419, followed by South Australia ($417). Western Australians have the cheapest energy bills at an average of $273. Between the generations, baby boomers are spending the least on electricity ($286), while millennials (Gen Y) are shelling out the most ($368).”
Finder also reports: "Gas bills are typically lower than electricity, costing the average household $213 per quarter ($850 per year). This is mostly because many households use a combination of gas and electricity. Nevertheless, the average household spend on gas has increased five per cent from 2022."
The Minns government in New South Wales has produced a plan – costing $290 million in new funding – to boost access to energy saving technologies such as solar and batteries that it says will reduce householder energy bills and ease cost of living pressures.
State Premier Chris Minns says the scheme will come on top of $435.4 million for annual energy bill rebates and debt relief, $200 million to support the rollout of public EV charging stations and $175 million to make energy savings upgrades in 24,000 social housing homes.
“There are many houses across the State that are too hot in summer, too cold in winter, and as a result, energy prices and costs for the household skyrocket,” he told media in mid-September. “Through this strategy, we are making it easier for households and small businesses to access the cost saving benefits of solar panels, batteries and heat pumps while they reduce their emissions.
“Having more energy saving technologies in homes and small businesses is the best way to help them reduce energy bills, reduce emissions and improve electricity grid reliability.”
Minns claims the move can save consumers who participate more than $1,000 a year. "That might be a heat pump, it might be solar access, it might be solar panels," he says.
The strategy will see new home energy ratings from 2025 so renters and buyers have more information on the cost of heating and cooling dwellings. The number of electrical safety inspectors will also be boosted to ensure the new technology is properly installed.
The program will be launched by the end of 2025.
Energy Consumers Australia’s CEO Brendan French has praised the approach. “We’re delighted to see a strategy that focusses on the cost- benefits and positive outcomes for consumers from the energy transition and aims to ensure that everyone can benefit and no one will be left behind,” French says.
Joe Hockey, a former Federal Treasurer and an Australian ambassador to the US, has told a National Press Club forum in Canberra that locally embracing nuclear energy is “inevitable.”
Hockey says the development of power-hungry data centres spurred by the growth in artificial intelligence will force Australia to reconsider its energy needs,
Hockey, who now runs a Washington-based advisory firm Bondi Partners, adds: “My view is small nuclear reactors are coming and we’re going to be buying. Whoever’s in government will be buying.”
Perhaps the one good thing to come out of the past year's shouting over nuclear power for use in Australia is that it is now inevitable the issue will be high on the topics helping to decide the next federal election.
Other matters will almost certainly strongly influence voters — see the notes elsewhere in this edition of the newsletter — but the nuclear question will be prominently debated after being a sideline topic for years and the election outcome will decide whether any action follows.
The political atmosphere re nuclear is different now from what it was even in May 2022.
As the Lowy Institute has pointed out, "Public opinion towards nuclear power in Australia has shifted over time. This year six in ten Australians (61 per cent) say they ‘somewhat’ or ‘strongly’ support the use of nuclear power to generate electricity, while a significant minority (37 per cent ‘somewhat’ or ‘strongly’ oppose it.
“Those who ‘strongly support’ nuclear power generation (27 per cent) outnumber those who ‘strongly oppose’ it (17 per cent). In contrast, more than a decade ago in 2011, in response to a related question, more than six in ten Australians (62 per cent) said they were either ‘strongly against’ or ‘somewhat against’ nuclear power plants being built as part of plans to cut greenhouse gas emissions.”
For me, the most important aspect of what has been thrown about this year is not where plants might be sited, what they might cost and when they might contribute to the generation mix and the power sector’s emissions reductions — which is where today’s media argy bargy focusses – but whether there is any sense to maintaining the ban on the technology in this country? (Which a tweet by William Shackel tells us is coming up for its 10,000-day anniversary soon.)
Personally, I feel that the really big step we can take forward relatively quickly at this point is to remove that legal impediment and let investors and regulators take responsibility for what technology goes where.
In this regard, it is notable that we are the only G20 member out of Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States and the European Union that bans by law the use of nuclear energy technology to generate electricity.
To use a word being thrown around a lot in the American presidential election just now, that’s weird.
So, for that matter, is the deeper green lobby declaring repeatedly that “nuclear power stations are not appropriate for Australia and never will be” or that nuclear’s consideration is a “futile distraction” from the “main game” of building masses of solar and wind generation plus rooftop solar.
Set that against the view from more rational green onlookers who are also knowledgeable about energy and say that developing hybrid systems where nuclear power supports renewable energy integration through load-following capabilities or by pairing them with advanced storage technologies to optimize the overall energy mix is a way for Australia to forge a path towards a sustainable, secure, and independent energy future.
So, on to the federal election and a lot more noisy nuclear debate in the weeks and months ahead.
PS: On the argy-bargy, I like a comment by Zoe Hilton of the Centre for Independent Studies in an op-ed in mid-September: "When it comes to the debate over nuclear energy, it’s worth double-checking the numbers and whether fear-mongering is being passed off as science.”
Keith Orchison
1 October 2024