Coolibah Commentary

Issue 205, May 2022

The upcoming federal election arguably presents Australian voters with the biggest single decision they will make this decade, affecting almost all parts of their lives. Will they opt for a change, as the opinion polls suggest they may, or will they choose more of the same in the form of the Morrison Coalition government? Will they be so bemused by the choices on offer that we end up with a hung parliament, one where the ALP or the Coalition are dependent to govern on an even larger ragbag of independents and/or minor parties than in the past one? (There was a cross-bench of seven in the 2019-22 House of Representatives.)  It appears the ambition of promoters of independent candidates is “minority government with a quality crossbench.”  Where this outcome could take energy policies for the rest of the ‘Twenties is a big question with many implications. While the fall-out from the election may reinforce energy policies in their present form, it could also launch the east coast grid in particular on a path in to not-especially-well-understood territory – and it could impact on the future of gas supply in eastern Australia. (Confer Germany or Britain in particular and Europe in general after a dozen years over there of what is turning out to be decidedly dodgy decision-making.)  Given the many pressures on our local community at this time — affecting health, social welfare and financial security among others — is it likely that the community can be persuaded, as green activists are promoting, that the “key ask” of this election is to meet Australia’s electricity demand with clean energy by 2030? Probably not, but it is possible that the bottom-line poll outcome (who holds sufficient numbers in parliament to fashion government) will be decided in a handful of seats by a relative handful of voters. Can the decision voters collectively reach put an end to what Labor’s energy spokesman describes as “20 years of stop-start and policy denial and inaction” for the suppliers and consumers of gas and electricity? Short of the opinion polls being directionally right and the ALP straightforwardly winning government, the permutations for the outcome on 21 May are more than two — as are the possible directions for energy supply and costs in the rest of the decade. Fasten seatbelts for what could be a bumpy landing.

Quotes

“An infusion of progressive populists into the House of Representatives might sound exciting but the outcome will be a more fractured polity and a further decline in the capacity of parliament to legislate challenging national interest policy” – The Australian newspaper’s Paul Kelly.

“As far as political debate goes, this federal election seems to be less about climate change than any in the past 15 years. Unlike in 2010, 2013 and 2016 – when governments were elected and leaders deposed over climate policy – this time there’s no brutal contest over the issue” – University of Melbourne research fellow Peter Christoff in The Conversation.

“In the first leaders debate of the election campaign Prime Minister Scott Morrison and Labor leader Anthony Albanese did not mention climate change once” – report in the Sydney Morning Herald.

“Electricity prices have been a very touchy subject during the lead-up to past federal elections – and this one is turning out to be no different” – Solar Quotes website.

“The affordability of the energy transition has come to the fore in the second week of the election campaign and it’s a critical issue” -- the Australian Financial Review.

“A blueprint for a future optimal grid by AEMO found reaching the bipartisan goal of next-zero emissions by 2050 will require a nine-fold increase in large-scale renewable energy, a five-fold rise in rooftop solar and a trebling in firming support (as well as) more than 10,000 kilometres of new transmission infrastructure” – The Guardian newspaper.

“The furious debate between the Coalition and Labor is about the scale and speed of the construction of renewable projects which are the core of the ALP policy to deliver lower wholesale prices – but which the government says will in fact increase the overall electricity bill” – Ticky Fullerton, editor-at-large, The Australian Business Review.

“People should stop trying to make out that spending billions will mean prices will go down or taxpayers won’t pay” – Frontier Economics’ Danny Price commenting on the row on the hustings over Labor’s power policies.

“Both major parties are guilty of basing policy decisions on scenarios from economic models rather than just using the modelling as an indicative guide” – Tony Wood, energy program director, Grattan Institute.

“Wholesale power prices will stay high for years as the NEM rolls through a bumpy transition” – AGL Energy in a newspaper interview.

“Our polity is in a seriously decayed condition” – The Mandarin newsletter.

It’s back

Despite claims that, for the first time in almost a quarter century, a federal election can occur without a large brawl over carbon issues, by week three they were intruding in to the campaign.

The Australian Petroleum Production & Exploration Association is calling for “absolute clarity” on Labor policy as the Prime Minister accuses the ALP of pursuing “a sneaky carbon tax.”

The Minerals Council of Australia has also urged the ALP to “clarify” the specifics of new requirements it will impose on the country’s 215 largest emitters and to guarantee miners they will have adequate time for a “smooth transition.”

“What is the time frame they are talking about? Is it 2030 or 2050? How will traded-exposed industries be dealt with?” asks MCA chief executive Tania Constable, adding “our members are meeting a plan of net zero by 2050.”

At issue is a Labor move seemingly to force Australia’s largest industrial emitters to reduce their carbon footprint more steeply in pursuit of net-zero abatement goals.

The Energy Users Association says there are some fears among its members about the cost of compliance with the ALP approach – but the Business Council has responded that the proposals could be the “right approach” to incentivise emissions cuts.

Meanwhile the Greens are putting themselves forward as “the only party with a plan to phase out coal exports” as well as promoting a moratorium on new petroleum developments. The Greens’ manifesto includes a ban on the use of gas in new housing developments.

Apres Eraring

The retirement of the 2,800 megawatt Eraring power station without adequate replacement investments could lead to a supply reduction in the east coast electricity market overall as well as particularly in New South Wales, according to the Australian Energy Market Operator.

Discussing the operator’s latest update of its “statement of opportunities” report with media, AEMO senior executive Merryn York has said “reliability gaps” of between 330 and 770 megawatts in NSW, Victoria and Queensland needed to be filled for the second half of the decade after Eraring shuts. She said commitment to currently anticipated generation and transmission projects are “crucial” to meeting reliability needs in NSW by 2025-26.

AEMO declares that the volume of new renewable projects in planning and development stages in eastern Australia “should be sufficient” to maintain NEM power supplies despite accelerated closure of coal plants.

Global-Roam CEO Paul McArdle comments that the operator’s updates need to juggle more rapid declines in one form of generation (coal) with different forms of new capacity with each new project subject to its own timing risks.

However the Clean Energy Council, which recently declared Australia’s “renewable energy boom is fading as investors lose confidence because of a lack of meaningful policies,” is currently asserting the AEMO report illustrates that “timely investment in transmission, renewable generation and storage will fill the gap” left by the closure of Eraring and other coal plants providing governments are “proactive.”

Loy Yang woes

A second significant failure in three years at one of the units of Loy Yang A power station in Victoria’s Latrobe Valley has left a shadow over the State’s winter power supply. The plant provides 30 per cent of the State’s electricity.

Owners AGL Energy say it may be early May before the extent of the problem is established. The 530 MW unit’s previous problem in May 2019 saw it shut down for seven months. This time AGL has offered “preliminary advice” to AEMO that the closure may extend until August.

Commenting on the outage, Grattan Institute’s energy program director, Tony Wood, said: “I’m not a supporter of the idea that these things (aging brown coal plants) are falling apart and need to be closed faster.”

Critical & concerning

“Can we successfully engineer Australia’s future electric energy system?”

The question is posed by Jeff Allen, former CEO of Endeavour Energy network business and current national president of the Electric Energy Society of Australia. In an April EESA commentary he expresses concern that the industry workforce is “in decline and may not be keeping up with the rapid and extremely complex changes occurring in the sector.”

The problems he identifies include “universities are currently producing less engineers than the sector needs.” The skills supply, he adds, is “both critical and concerning.”

Allen says Infrastructure Australia is forecasting an unprecedented wave of public infrastructure projects over the next five years “for which we do not have the skills.”

‘Massive’

The federal ALP is promising in the election campaign that, in government, it will pursue “massive” investment to drive the NEM to 82 per cent renewable energy by 2030 – and to “lower power prices for households.”

In a TV interview, Labor energy spokesman Chris Bowen said there is “a need to bring on new renewables and to massively increase storage so we can store renewable energy during the day and use it in the evening.”

He added: “We also need a massive upgrade in transmission to get renewable energy from where it’s created in the regions to where it is consumed.”

Call for support

The Clean Energy Investor Group, whose members have outlayed $24 billion on “transition” generation, and the Australian Industry Group are supporting a proposal that federal and State governments fully fund more than $12 billion of capex needed for new transmission lines on the east coast this decade.

The “blueprint” has been drawn up by consultants Nexa Advisory, which argues that governments can subsequently privatize the assets to benefit the NEM.

The report also argues that the clean energy industry is “frustrated” by funding barriers and the present regulatory investment test, which it says was designed for grid enhancement rather than “a major rebuild of the system.”

Stephanie Bashir, CEO of Nexa Advisory, says the equivalent of a quarter of the existing east coast grid needs to be built in less than 10 years. “Construction of the existing grid took 50 years. We are way behind before we even get started (on the new developments).”

She argues that inadequate new transmission “poses a risk to the stability of the grid as fossil fuel power stations shut down.”

Kicked in to touch

The prorogation of the House of Representatives for the federal election brought with it a shock for some energy stakeholders who had invested time and involvement in the standing committee inquiry in to the need for dispatchable energy generation and the potential for energy storage and capability.

The inquiry, chaired by Liberal MP Ted O’Brien, was launched in March last year and held six public hearings before being declared “lapsed” at the dissolution of the House.

The inquiry attracted widespread interest among industry stakeholders and received 63 submissions.

In announcing the inquiry last year, O’Brien said its focus was “not just about how the power system works today but how it might work in the future – so we will assess the need for dispatchability and the potential for different types of technology.”

He added: “We’re at a turning point in how the NEM operates and how we respond will be a major determinant of our strength as a national well in to the future.”

A feature of the inquiry was a push by a number of nuclear power supporters to have the technology considered as part of the effort to replace an estimated 20,000 megawatts of retiring coal-fired generation, arguing that small modular reactors in particular could contribute to relatively low-cost future supply and energy security.

Offshore priority

Going in to the election, the Morrison government talked up offshore wind farm development, an area where it has been roundly criticized by green energy advocates in the past two years for procrastinating on legislation to enable projects to be pursued.

In early April, Tim Wilson, Assistant Industry Minister, announced that Bass Strait off Gippsland would be a priority for wind farm assessment.

“This area,” he said, “has comparatively favourable wind conditions, investor interest, support from the Victorian government and identified grid connection plans.”

Wilson added that the government “understands that a strong offshore energy sector can help provide clean and affordable power to households, businesses and industrial consumers.”

An offshore electricity industry, he said, “can create thousands of new jobs and drive the economic growth of regional and coastal communities.”

The Morrison government announcement follows one from the Andrews government in Victoria in March that it was setting a target of 9,000 megawatts of wind capacity for the State’s waters by 2040 and 2,000 MW for 2030. At current construction costs, the 2040 target is estimated to require an outlay of about $35 billion for annual power production of some 40 terawatt hours.

Last word

Sometimes federal election results are relatively easy to pick. Sometimes they are quite difficult.

My first in Australia was in 1972 and it was obvious even to a newcomer (I arrived here from South Africa at the end of 1970) that Gough Whitlam would trounce the Coalition under Billy McMahon. It’s time, said it all.

The landslide after the Dismissal in 1975 was not so easy to pick. I expected Fraser to win but not by a country mile — and ditto in 1978, but not by an even larger majority.

In 1980, Fraser had far too large a majority to defend to put his government at risk but Bill Hayden led the ALP well to recover ground from the 1975 and 1978 debacles.

The 1983 poll was not really a surprise, what with Hawke's coup in the ALP, with Hayden famously declaring a “drover’s dog” could win it for Labor, but the size of victory was — and it provided a base for the party to notch up five consecutive wins and 13 years in government.

By 1996 one sensed the community was ready for another change and a rejuvenated John Howard delivered a large win (a net 25 seats) that bulwarked further Coalition victories in three more polls.

Once again in 2007, the community was ready for a change — but I doubt it was ready for the shemozzle that followed and the Rudd-Gillard-Rudd governments provided a standing target for Tony Abbott to win government in another landslide.

The goings-on in the ensuing years in both major parties don’t need detailing here — but the narrowness of Turnbull’s win in 2016 was rather a surprise and Morrison’s 2019 victory notoriously shocked the pundits in the polling companies and the media, not to mention Bill Shorten.

So here we are in 2022 and am I mug enough to make a prediction — in writing what’s more?  No I’m not. No matter what the polls and the pundits are saying, as April draws to an end, this election’s outcome is still up in the air, although “time for a change” might be what’s uppermost in the mind of The Mob (cf Paul Keating) on 21 May.

One thing is clear to me: the future for energy supply, both electricity and gas, is decidedly murky for eastern Australia (and the Northern Territory) no matters who is governing next and therefore there are potentially numerous mines on the economic road for the rest of this decade, with the prospects for an orderly transition in the NEM especially unclear. 

This is true regardless of who wins government, and even more so if 2022 resembles 2010 and Labor has to govern from a minority position.

The campaign shouting match — a debate it is not — over electricity prices is not worthy of dissection, except to say the obvious: don’t believe the promises.

And the confusion that has inevitably been created in the community’s mind by this noise fest may play in to the poll outcome if it turns out, as The Australian newspaper has suggested, that cost-of-living issues, as demonstrated by some studies, are indeed top-of-mind for a large part of the electorate. One needs to remember in this regard that, on the evidence of voting in past elections, well over a million of those enrolled won’t turn up to vote or will spoil their ballot papers; that doesn’t stop them talking to opinion pollsters, of course.

The study cited by The Australian shows that 36 per cent of respondents believe Labor would be best to manage cost-of-living pressures, 33 per cent don’t support either side and 30 per cent favor the Coalition.

This said, as I write this commentary there are weeks to go in the campaign — and our world is currently so full of nasty surprises that there is still room for large swings in public sentiment.

Keith Orchison
27 April 2022

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