Extract from The Guardian
Is a cost-neutral shift to renewables too good to be true? Energy minister Mark Bailey is ready to take on anyone who says he can’t get to 50-50 without steep price rises
It seemed impossibly good news for the Queensland government in its push to transform Australia’s biggest carbon-polluting state into a renewable energy powerhouse in little more than a decade.
An expert advisory panel steeped in what the energy minister, Mark Bailey, described as “hard-nosed economic experience and extensive modelling” last month concluded the state could effectively have its cake and eat it in its pursuit of a greener energy sector.
Coal-fired Queensland, with just 7% of its power generation from renewables, could lift that to 50% by 2030 with little appreciable cost to electricity consumers.
The government, which owns two-thirds of electricity generation, could bear the burden of subsidising renewables. Those costs would range from $50m if the feds ponied up on climate policy, including carbon pricing, to $900m if the state went hard early (and alone).
The draft report by the panel, chaired by ex-Macquarie banker Colin Mugglestone, found the worst-case scenario for generators was the closure of a single coal-fired station.
An expert advisory panel steeped in what the energy minister, Mark Bailey, described as “hard-nosed economic experience and extensive modelling” last month concluded the state could effectively have its cake and eat it in its pursuit of a greener energy sector.
Coal-fired Queensland, with just 7% of its power generation from renewables, could lift that to 50% by 2030 with little appreciable cost to electricity consumers.
The government, which owns two-thirds of electricity generation, could bear the burden of subsidising renewables. Those costs would range from $50m if the feds ponied up on climate policy, including carbon pricing, to $900m if the state went hard early (and alone).
The draft report by the panel, chaired by ex-Macquarie banker Colin Mugglestone, found the worst-case scenario for generators was the closure of a single coal-fired station.
This was based on the observation that competition in the market from a new variety of power generators in solar and wind would put downward pressure on wholesale electricity prices. The caveat was that this pricing outcome was “not guaranteed” and could differ if more coal-fired power disappeared from the market.
The panel’s conclusions have since been attacked by the Grattan Institute, which branded the claim of no price impact on customers as an “economic illusion”.
The federal energy minister, Josh Frydenberg, has also sought to rain on Queensland’s parade by claiming the scheme would cost $27bn.
But Bailey stands by the draft report, arguing the credibility of its authors and its detailed modelling put Frydenberg’s “desktop departmental review” in the shade.
He says Frydenberg still hasn’t produced any details of where the $27bn figure came from – two months on – despite Bailey’s direct requests.
“If he had those genuine concerns you think he’d be sending in a big pile all the documents relevant to it … but I still haven’t received anything in my inbox,” Bailey tells Guardian Australia. “So I think this is a stunt and it’s got no authority or is regarded with any seriousness by the energy industry.”
Coal companies like Rio Tinto have called on Queensland to abandon its own renewables target to simply align with the commonwealth’s 2020 goal of 20%. But Bailey says it’s clear the state’s plan was “developed in the absence of federal policy” and with doubt that even the 2020 commonwealth target will be achieved.
He says the failure of the prime minister, Malcolm Turnbull, to put policy daylight between him and his predecessor, Tony Abbott, shows conservative politics in Australia will be dragged kicking and screaming towards energy sector reform.
Antipathy towards renewables and acting on climate change among the hard right of the Coalition stands in contrast to moves by “conservative parties in other parts of the world”, Bailey says. He cites Germany and California as advanced economies already boasting more than 30% renewable power.
“You go to Europe, this is not an issue,” he says. “It seems to be a particular LNP [Liberal National party] Australian thing but they seem extraordinarily intransigent on it and, while we see more and more extreme weather events occur, they are stopping us from dealing with some of those big issues around climate change.
“We have to get away from strong ideological positions both pro and anti [renewable energy] and drill down into what the evidence is.
“And this report nailed a range of key facts that are relevant to this debate and certainly one of them is by producing and creating more generators and more competition in the marketplace, then there’ll be some gains in terms of bringing the wholesale price down.”
The Grattan Institute in a submission to the Queensland renewable energy expert panel said the draft report seemed to have understated the “full costs of infrastructure to manage the intermittency of wind and solar”.
Renewables still cost more than existing coal and gas power but the cost of shifting to renewable could be balanced in the short term by state generators cutting their profits.
“[But] as the proportion of wind and solar increases, this balance will not be sustained and prices will rise in line with the underlying higher costs,” the Grattan Institute said.
Bailey stands by the assumption that “by getting more suppliers in the market, more competition, you see the wholesale price come under pressure to come down”.
“I’m not saying that, the independent panel full of energy specialists are saying that,” he says. “So you can have renewable energy and you can stabilise prices at the same time and that’s what’s happening to Queensland right now.”
Bailey touts the model of “a very private sector-orientated panel” examining the climate-driven power sector shift as one for other states to follow.
The power sector, with just under half of emissions, was the single largest source of carbon pollution in Queensland in 2014. The state as a whole made up 28% of national emissions with 146.7m tonnes.
Bailey says governments cannot “be serious about acting on climate change without dealing with emissions from the energy sector, full stop”.
“You’ve got Mr Frydenberg overseas saying nice things and signing Australia up to greenhouse targets, which is terrific, but then he comes back to Queensland and bags us for actually backing in that target and acting on climate change,” he says. “He speaks with forked tongue on this.”
A 14-year transition for the energy sector means an “average of a couple of per cent a year” of additional renewables generation capacity, Bailey says.
‘That’s very responsible, highly manageable,” he says. “Given the impact of climate change on our economies and communities right now, the most irresponsible thing to do is not do anything about it.
“People are not of the view that this move towards renewable energy shouldn’t happen, they support it, and they want to know governments are on the front foot and they’re managing it.”
The panel, which is due to release its final report by the end of 2016, has mapped out three scenarios for reaching the 50% renewables goal.
If the commonwealth prices carbon, the preference of energy companies such as Adani, that would drive Queensland to 41%, leaving the state to deliver an extra 1900 megawatts to hit its 50% target.
If the state is forced to go it alone it must choose between a steady increase in renewable generation – which would lead to greater cumulative emissions cuts but cost $900m – and a “ramp up” scenario closer to 2030 to take advantage of cheaper technology which would cost $500m. One of the factors in Queensland’s favour is the fact four of its “super critical” coal-fired generators were built since 2000, meaning the dirtiest plants to be closed first are interstate.
Bailey says the government will consider its tack once it has the final report.
Asked if any long-range plans may be vulnerable to being scuttled by future state LNP governments, Bailey maintains that “any party that is positive and has a plan to manage the transition to renewable energy, I think, will be marked up by the electorate”.
“Any political party that wants to stick their head in the 20th century sandpit and deny this issue and live in the past will get punished.”
Bailey acknowledges the political sensitivity of electricity prices, which will likely be the Achilles heel for any state government unable to make out its case that renewables will be “cost-neutral”.
Low-income households in particular are smarting after a 42% rise under the former state LNP government, Bailey says, adding this was a product of “network costs with very little progress on renewables”.
“Those largely anti-renewable-energy figures who try and say it’s a choice between [less] renewables or increased prices are simply wrong.”
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