A lot of the time, politics feels incremental. But every now and again, a big thing happens suddenly. Chris Bowen made it clear this week the government intends to transform the fundamentals of Australia’s energy grid. Labor has been saying this for ages of course, but this week, words were matched by a concrete plan of action.
Bowen unveiled a radical expansion of a capacity scheme intended to reshape the national electricity market. Coal is coming out, renewables moving in and taxpayers will underwrite the transformation. This is the biggest strategic shift Australians have seen in this policy area for a decade or more.
Australia’s energy sector said praise be. Predictably, the shadow climate minister, Ted O’Brien, clutched his pearls and declared: “this risks locking Australia into a path from which there may be no return.” Well, yes. That is the point. The transition is on. Two choices, Ted. It can be orderly or chaotic.
Bowen moved this week because the sector needed a roadmap. Australia has wasted so much time indulging grubby partisan nihilism in climate and energy policy that our coal-fired power plants have almost died waiting for their fate to be decided. A number of coal plants are seriously clapped out and need to exit. That generation capacity needs to be replaced, preferably yesterday.
We need new kit – renewable generation and storage – to replace the capacity departing the system. But right at the time we need the new kit, investment in solar and wind developments slowed significantly. The Renewable Energy Target is in the process of winding down, and Joe Biden’s Inflation Reduction Act is like a giant magnet sucking in investment from around the world. Pension and superannuation funds are primed, flush and ready to rumble. Money is chasing favourable incentives and bankable long-term prospects in the US and the UK – wherever there is coherent strategy, policy stability and political will.
Australia re-entered the ranks of respectability when it comes to climate action after the federal election last May. But we are lagging in that global transformation race.
The Australian Energy Market Operator sounded a public warning about this in June. The Clean Energy Council warned in August local investment was a long way off the pace necessary for Australia to achieve an 82% renewable energy share in electricity by 2030. The problems were multi-dimensional. The council noted the investment climate was made more difficult by under-investment in transmission, grid connection challenges, inconsistent planning policies, constraints in supply chains and the workforce. Australia is in competition with global leaders that are all accelerating their demands for renewable energy.
Bowen’s response to those problems is the provision of incentives to drive and de-risk investment. Orderly sequencing to try to make sure the lights stay on as generation and storage assets enter and leave the system. The underwriting scheme is also intended to shield consumers from excessive price volatility.
The minister was frank this week about the ears-pinned-back global dynamics. “We’re all competing for capital, we’re all competing for materials, for the wires, for the submarine cables, for the solar panels,” Bowen said. “We need to provide as a stable and welcoming policy environment for investment as we can, and this capacity investment scheme is really a powerful way of doing that.”
Just how powerful remains to be seen and what happened this week is only the first step. Resolving the capacity mechanism problem allows the government to move on to the next phase of policymaking. A few weeks ago I revealed the government is looking to expand its $2bn Hydrogen Headstart program and potentially apply that same model to other industries, as part of a specific response to the challenges posed by Biden’s Inflation Reduction Act.
The transition to net zero will involve the most fundamental transformation of the Australian economy since Bob Hawke and Paul Keating’s structural reforms in the 1980s.
Getting the settings right is crucial, because policy drives the whole trajectory. Australia needs emissions reduction targets, schemes focused on reducing industrial emissions, an energy strategy, a transport strategy, sectoral plans for resources, agriculture and the built environment. But while policy and strategy is critical, it’s not the whole picture. The politics of the transition will be won and lost on the ground, in communities around Australia.
Polls indicate many people remain deeply concerned about the climate crisis. This anxiety has continued even when people are battling cost of living pressure, high borrowing costs and the like. But let’s be very clear about this: Australia’s climate wars are not over. Transforming the grid requires a national policy roadmap, and a social licence.
Before the last federal election, I travelled to communities in northern Tasmania that were hostile to large-scale windfarm developments. Last April I spoke to Alastair Houston in Stanley. He and his wife, Kerry – lovely people – were vocal opponents. “The windfarm is currently the biggest threat we feel to our paradise,” Houston told me. “It’s too close to the town. We are all for green energy, all of us are, but we feel we are being threatened by this huge development that doesn’t belong on a beautiful peninsula that is huge for tourism – 100,000 people are drawn here every year because of its beauty and unique history.”
That same “not here thanks” sentiment is bubbling away in the Hunter region of New South Wales, where more offshore windfarm developments are proposed.
The community engagement process sounds suboptimal. Locals say federal officials botched the initial round of consultations, which has furnished opportunity for One Nation and the Coalition to validate and broaden the base of an organic community backlash. It’s an ironclad law that good policymaking in Canberra doesn’t insulate governments from fumbling implementation on the ground.
In fairness to officials, effective persuasion is hard work at the moment. Everyone in politics reports that voters are irritable and hard to reach. Politically engaged Australians now consume information inside their own bubbles, where reality may or may not penetrate and everybody else avoids the news because the content is unrelentingly negative and the tone is tribal. Avoidance is rife.
Pamphlets advertising community consultation also tend to go in the bin with the junk mail because there is too much information in daily life and not enough time. What this tells us is there is a significant and complex communications and community consultation challenge to work through.
Given communities will be affected directly by new renewable generation developments and transmission infrastructure, transforming the power grid is not like kicking on an open door, particularly when the Coalition can’t wean itself off the deeply ingrained habit of polarising for political profit.
Some of the messaging from the Greens is also causing angst in places like the Hunter. The Greens are entirely correct to campaign for an end to all new coal and gas developments, because that’s what the climate science tells us should happen. But raising the stakes in that way does allow new renewables developments to be weaponised as the thin edge of that wedge, particularly in communities where people are still making a living selling coal to Japan. Sustained cost-of-living pressure tends to make people much more focused on their livelihoods.
Prevailing in the existential battle against runaway global heating is the most important challenge policymakers face.
Nations are about to gather for another round of international climate talks in the United Arab Emirates. The United Nations has already issued a scene setter – a stark warning that the world is on track for a “hellish” 3C of global heating.
If you understand the science, you know what needs to happen and you know it needs to happen very quickly. But the necessary change requires connecting science, politics and community life – zones often estranged from one another.
In the turbulent times in which we live, achieving those connections is much harder than it looks.
