Politicians must see bigger picture when debating power supplies

16 June 2017

It was hoped that the Finkel review of the national electricity market would provide the basis to negotiate an end to the "climate wars" - the short-term, opportunistic, political point scoring that has seriously and irresponsibly delayed a definitive and substantial response to the challenge of climate change, the most significant, economic, social, political and moral challenge of the first half of this century.

The importance of this challenge clearly transcends the importance of any of those that have attempted to distinguish themselves in this political game; their failure to seriously address the challenge simply thieves from the future of their children and their grandchildren.

Yet, as important as this is, the Finkel review unfortunately seems to have just raised these wars to an even higher level of concern and absurdity. Bill Shorten parades "bipartisanship", but means "wedge". Tony Abbott and his cohorts would claim to represent "coal interests", but mean "destabilisation of Turnbull".

The futility of the so-called "debate" is riddled with false claims of "ideology", opportunistic "denialism'', and exaggerated "concern" about rising power costs. There has been no concession, of course, that the outcome of the climate wars to date has been the dramatic increases in power costs, with more, perhaps much more, to come, until they move on from politics to genuine solutions, while simply leaving the climate challenge to drift.

There should be no doubt that Finkel has set out the essence of a deliverable transition. Certainly, the clean energy target (CET) is not the most direct economic (cost-effective) solution - that would come with a full-blown emissions trading scheme (ETS) - but one that is importantly "technology agnostic", while focusing on the need for "dispatchable power", and the prospect of falling electricity costs, consistent with meeting our Paris emissions reduction commitments.

However, to gain broad-based support, across the political spectrum, will require that the key players all give some ground - to take a genuine national, rather than their narrow vested interest, perspective.

First, they all must accept the target for emissions reductions of 26-28 per cent on 2005 levels by 2030. Second, they need to accept that "business as usual" will not achieve that target, and it will not offer any hope of falling electricity prices - indeed, it will guarantee the opposite, as without medium-term policy "certainty", businesses will not invest, to fill the gap to be left by closing coal-fired plants.

Third, they all need to accept that while more solar PV and wind farms may work to achieve lower emissions, such reductions are exaggerated as they both need back up when the sun is not shining and the wind is not blowing, causing "intermittency", essentially leaving the morning and evening demand to be met from elsewhere, either from coal-fired, or open cycle gas-fired, power, with offsetting higher emissions, at higher cost - hence Finkel's focus on "dispatchable power".

Fourth, then, accept that the CET provides an appropriate mechanism, essentially leaving the selection of technology solutions to the market.

Sure, there is a bias in favour of low emissions technologies, but both new wind and solar projects will cost more as they will now need to be dispatchable (including storage and/or back up), and coal would have to "clean up its act" combining with carbon capture and storage (CCS), or using "refined coal". So, the cost advantages of coal, that today doesn't "pay" the cost of emissions, and of wind and solar without storage or back-up, are accounted for - you'd have to admit that this is an effective attempt to level the playing field, with choice on the basis of net emissions.

While the clean energy target isn't obviously anti-coal, any new coal-fired power plants would have to significantly reduce the cost of CCS (I would estimate currently at least $US100/tonne), as well as demonstrate its efficiency. Equally, the development of grid-scale, cost-effective storage for solar and wind, too, still has a way to go. Declaring an interest, this is why I have been promoting solar thermal as the most likely, cost-effective, base-load, 24/7 dispatchable electricity, as well as, maybe, pumped hydro. The market can,and should, sort it out.

All this suggests that Abbott and his mates should live up to their "conservative" principles and accept the CET as a market-based solution in current circumstances. Indeed, one of the conundrums of the climate wars has been how the Liberal/conservatives have eschewed a market-determined carbon price, yet the non-market ALP has embraced it.

It suggests the Greens too must accept the weakness in their position on renewables, and accept the need for dispatchable power, as well as accept a clean energy target, while confirming their opposition to gas and coal.

Shorten must get real over bipartisanship, and argue support for the CET in the belief that no new coal projects will get off the ground, especially the ultra-supercritical variety, which may also not be able to burn most Australian coal because of fusion temperatures.

Yes, and Malcolm just needs to demonstrate the expected and essential leadership on this issue.

John Hewson is professor at the Crawford School, ANU, and a former leader of the Liberal Party.

This story was originally published in The Age.