Resisting the electricity transformation

by Dan Cass

Budget 2022-23 shows continued high resistance to the renewable energy transformation. Prime Minister Scott Morrison is unlikely to hold up a lump of coal in Parliament again. But the measures in this budget demonstrate that it is yet to embrace the potential of renewable energy or accept the climate imperative.

If Australian households were helped to replace gas appliances and internal combustion engine vehicles with solar, EVs and efficient electric appliances, they could be saving four to five thousand dollars a year by 2030. Unfortunately, the budget’s headline energy and emissions program will fund dual use regional infrastructure that will increase climate change by subsidizing coal exports and gas extraction and exports.

The only entirely positive measure is $148.6 million for 60 community microgrid projects. This continues a bipartisan commitment over many budgets to deploy solar and storage to Aboriginal and other regional and remote communities to reduce reliance on expensive, polluting diesel. This particular program was established in the 2020-21 budget, with $50 million over six years and it is not clear how much of the money in this year’s budget is new.

The budget includes a Climate Debt Statement, a remnant obsession of former Prime Minister Tony Abbott. This aggregates funding for the Clean Energy Finance Corporation (CEFC), the Australian Renewable Energy Agency (ARENA) and the Clean Energy Regulator (CER) to work out how much their expenditure contributes to total government debt. It shows a decline in spending from $2 billion in 2022-23 to $1.3 billion in 2025-26. If the government was serious about hitting zero by 2050, these figures would be increasing, not decreasing.

ARENA and the CEFC provide loans and grants over the long term in order to drive innovation in clean energy. Their funding is set in legislation to provide a budget fetter protecting them from yearly changes in the usual budgetary process.

In 2020 ARENA was facing a funding cliff after 2022. Only after pressure did the government agree to fund ARENA with a commitment of $1.43 billion out to 2032. ARENA’s grant expenditure will decline from $289 million in 2022-23 to $200 million in 2025-26. The Australia Institute has called for ARENA to receive $250 million per year over the decade to 2032.

The CEFC was established with $10 billion held in a special account. The government has attempted to change its remit to include fossil fuels and add an additional $1 billion to a new special account for “grid reliability” including the Underwriting New Generation Investments program. Unfortunately this policy means gas peakers, not battery storage. The amending legislation was never passed.

The main issue with the CEFC as it stands is that the government has not worked with the agency to develop a strategy to fully loan the $10 billion it has to invest. The budget shows that at 30 June 2022 its loans contracted total $2.96 billion. The CEFC’s Annual Report (p.165) shows that with other securities and assets it has about $5.6 billion invested. The CEFC has done an excellent job within the parameters of its legislation and government policy but the government has failed to keep pace with energy transformation opportunities and use the full $10 billion at its disposal. The CEFC should be investing in mass solar/storage/electrification of households, building the grid out for 100%+ renewable energy, and finance to support mass uptake of EVs.

If Australia is going to reach zero emissions by 2050 the budget would retire coal in the National Electricity Market and also use renewable energy and electrification to decarbonise minerals production and export outside the NEM in Western Australia and the Northern Territory.

Of the $1.3 billion for energy and emissions reductions measures in the budget $1 billion is for regional projects. This billion is a down payment on an Energy Security and Regional Development Plan that will be worth $7.1 billion over 11 years, largely outside the NEM. It appears that it will mostly support hydrogen, unspecified emission reduction for minerals and manufacturing and dual use infrastructure (ports and roads) that will also facilitate coal, iron ore and LNG export.

The document explaining how the $7.1 billion will be spent is appropriately titled “glossy regions”. To say it is light on detail would be an understatement. The glossy says it “could unlock more than $16.4 billion of private investment” in the NT alone. There are similarly vague plans for hubs in the Hunter region in NSW and the Pilbara region in WA.

The Pilbara plan for example is to spend $1.5 billion on a range of projects which do not add up to a clear story about zero emissions. It will subsidise low emissions manufacturing (vague), provide $100 million to underwrite investment to upgrade the grid (probably sensible but no business case presented), upgrade two ports to increase renewable energy exports (would also benefit iron ore and LNG), support low emissions metals and iron ore production (vague) and upgrade Tanami Road to support mining and tourism (not clean energy).

There is nothing new in this budget for transforming the NEM and helping reduce the cost of electricity. There are no new funds for building renewable energy zones and the transmission required to carry cheap and clean energy to consumers. Angus Taylor, the Minister for Energy and Emissions Reduction, is meant to be overseeing the “Post 2025” redesign of the NEM but there is nothing new in the budget to implement it. A credible redesign would allow coal to retire safely. It would encourage institutional investors to invest in renewable energy and storage, and households to invest in solar, batteries, EVs and efficient appliances.

Minister Taylor has said “We are also prioritising work on a new fit-for-purpose market design, including a capacity mechanism”. What the Minister intends unfortunately looks like being a hidden subsidy for coal.

The government continues to hold back the offshore wind industry and has only recently released a regulatory framework for the sector.

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