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Byron Shire
June 18, 2021

Australia’s energy transition hostage to Marshall law

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By Giles Parkinson, www.reneweconomy.com.au

The consequences of South Australia’s election result last Saturday will be felt far beyond the state’s borders.

It was barely minutes after the SA Liberals – led by Steven Marshall – were declared winners that the federal Coalition began crowing that this was good news for Malcolm Turnbull’s signature policy, the National Energy Guarantee.

Senator Simon Birmingham said so almost immediately on ABC News 24, and the level of expectation that Marshall should serve as a vassal of the federal Coalition’s policy objectives was repeated by Turnbull, energy minister Josh Frydenberg and finance minister Matthias Cormann.

It seems unlikely that the NEG, or even Marshall, could do much to slow down the pace of the transition in South Australia, for reasons I will explain below.

But it’s pretty clear to all that the NEG – which won’t get through unless Marshall ignores South Australia’s own economic interest and toes the Canberra line – will be able to bring the transition in the rest of the country to a crashing halt.

The latest analysis from Reputex suggests that the NEG would be worse than doing nothing when it comes to emissions, were it not for the state-based targets in Victoria and Queensland that Turnbull and Frydenberg are also trying to stop.

This is not the first analysis to point to this conclusion, there is this too from Gordon Weiss from Energetics; but the Reputex assessment is perhaps the most strident.

It follows more than 100 submissions to the Energy Security Board’s ‘consultation paper’ that confirmed that most retailers, network owners, renewable energy companies, software providers and storage developers have the same dim view of the policy proposal.

They say that the NEG will do nothing on both emissions and reliability, will likely bring investment in renewables and storage to a halt, and threatens to further reduce competition and push up prices, for the benefit of no one but the big fossil fuel generators.

(And may I express my exasperation that none of these points were put to Cormann in his interview about the NEG on Radio National breakfast on Monday morning).

The loss of Labor’s Jay Weatherill as premier deprives Australia of the one state or federal leader who actually showed leadership and vision on climate and clean energy.

Weatherill’s role has been critical, because what South Australia has achieved – and is going to achieve as yet more big wind and solar plants are built, and yet more big batteries join the Tesla big battery – has given confidence to other states, territories and communities to follow.

It has also given others – such as the Australian Energy Market Operator – the incentive and drive to clean up their act, and embrace the renewable energy transition rather than fight against it.

South Australia has proved that it works. And new innovation such as the Tesla big battery has attracted interest from around the world.

Weatherill had pitched the election as a referendum on renewables. This was a ploy to make renewables, which enjoy enormous popularity in the state, front and centre of voters, rather than the ‘it’s time for a change mantra’, and issues such as tax, jobs and aged care scandals.

In the end, it is hard to argue that this was a vote against renewables because Labor actually improved its vote by 1.5 per cent on a two-party preferred basis, extraordinary for a political party seeking a fifth consecutive term.

The Liberals primary vote actually fell more than 7 per cent, but, because of a significant redistribution of seats, Labor needed a 3 per cent gain – and to win three extra seats – to win. It was beyond them.

As Weatherill himself noted in his eloquent concession speech on Saturday night, the handicapper had finally caught up with him.

Weatherill, however, leaves the state with a 50 per cent share in wind and solar, and enough projects under construction, or in the process of obtaining finance, to take it to 75 per cent renewables and half way to his 25 per cent storage target much earlier than even he planned.

This is the bitter irony. Frydenberg issued a press release hoping that Marshall would see sense and drop the targets. But it’s likely the target will be reached by 2021, given what’s under construction, or about to be. These include:

These are going ahead with or without Marshall. It’s hard to imagine how he would dare to tell Sanjeev Gupta, the new owner of the Whyalla steelworks, to do otherwise given the commitment to green energy was fundamental to his plans to revive a derelict business and save thousands of jobs.

But wait, there’s more. Also coming, due to contracts signed with Labor’s Renewable Technology Fund, are:

And there are a heap of other projects in the pipeline, including new stages of the Bungala and Tailem Bend solar projects, plans by DP Energy for a massive wind, solar, storage park near Port Augusta, even Adani has a solar project in plans to advance.

It’s not recognised by many that Weatherill never actually had a state-based renewable energy target as such. The 50 per cent by 2025 target was only announced after the ACT had signed contracts with Neoen for the massive 315MW wind farm near Jamestown.

At that stage, it was virtually impossible for South Australia not to get to 50 per cent, and it did so seven years early. South Australia was exceptionally good at attracting investment from a federal scheme while the often Coalition-led states in the east tried to stop it.

The revised 75 per cent target is a similar assessment of all the projects now under construction and planned.

Weatherill has left the state with an almost unstoppable momentum. AEMO says 73 per cent renewables will likely happen by 2021, and raises no fears about reliability or security. And it will cut prices – we know that because the Tesla big battery has already done so, dramatically, in just three months.

Of course, it would not be impossible to imagine that Marshall would seek to throw a spanner in the works. He has already done so with Tesla’s planned virtual power plant – the world’s biggest.

In doing so, he has dumped a largely privately funded scheme to install solar and battery storage in the homes of those who needed it most, and replaced it with a government subsidy to install batteries in the homes of people who already had enough money to install solar.

This is breathtakingly cynical or breathtakingly stupid, or both. But it continues the Alice in Wonderland policy path of the Coalition at federal and state levels, where they manage to contradict nearly everything a free-market political party is supposed to stand for.

There is ample precedent for Marshall to continue his belligerence. Liberal and LNP and Coalition governments have vandalised climate, clean energy and energy efficiency schemes in Queensland, Victoria and federally in recent years. But it would be an extraordinary case of self-destruction.

Marshall would be better advised to say not much at all about those new projects just now. Hopefully some wise advice might be whispered in his ear about the advantages of increased competition that can be delivered with ‘dispatchable’ renewables.

And there can be no doubting that the biggest objection to the NEG is that it will reduce prices and competition. Even his state’s biggest network operator has raised this as its biggest fear.

Does Marshall really stand for lower bills? One of the attractions of the Tesla virtual power plant would be that it would usher in a new retail competitor in the market that needs it most. The NEG, as currently structured, would ensure there was no new competition.

It will be interesting to see what comes of his plan to subsidise a new link to NSW. Ironically, it was Rob Lucas, the man who will be Marshall’s state treasurer, who oversaw the privatisation of the state’s electricity industry when the Liberals were last in power.

As part of that deal, and in a bid to maximise the sale price, Lucas killed a plan for a new interconnector to NSW – a move that left the state in the hands of a small oligopoly of generators and retailers who have been ripping money out of consumer and business wallets ever since.

And it’s ironic for another reason too. It’s not entirely clear how a new link to NSW would be of benefit to the state given that NSW is even more dependent on imports from neighbouring states to support its ageing coal fleet.

Marshall, having argued that wind and solar have pushed prices up, is using the fact that wind and solar will push prices down ‘all across the nation’ as justification for the new interconnector.

Perhaps Marshall is looking to support Transgrid and AEMO in their pursuit of renewable energy hubs. Transgrid sees some 14GW of wind and solar in its south-west corner of NSW alone. (See table above and this story: Transgrid: 100% renewables is feasible and affordable.)

Are you sure Turnbull and Frydenberg, and the right wing of the federal party, are OK with this?

So, it’s going to be fascinating to watch how Marshall and his new energy minister, Dan van Holst Pellekaan (the complexity of his name means we may have to call him ‘Baseload Dan’ after reading many of his recent speeches) go about their task.

In the end, we suspect that – despite some crazy decisions like trying to kill the Tesla virtual power plant – the SA Liberals will embrace the momentum put in place by Weatherill’s team, and call it their own.

The remainder of the country would simply ask that they don’t stuff it up for the rest of us, because the NEG – unless dramatically revised – may be the biggest disaster inflicted on Australian energy policy yet.

 


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