Liberals’ coal energy policy is irrational and destructive

Scott Morrison with his lacquered lump of coal in 2017.

On February 9, 2017, then federal treasurer Scott Morrison appeared in parliament brandishing a lump of coal. Lacquered so as not to sully the ministerial fingers, the coal had reportedly been pressed on him by the extractive-industry peak group, the Minerals Council of Australia.

“This is coal — don’t be afraid, don’t be scared,” the future prime minister exclaimed, going on to accuse opposition politicians of “coalaphobia”.

Climate change, the implicit message ran, was nothing that anyone needed to worry about.

Flash forward to October 2017, to find then energy minister, now treasurer and deputy Liberal leader Josh Frydenberg in a scrum with energy industry bosses, drawing up the Coalition government’s National Energy Guarantee (NEG).

Bizarrely, considering its parentage, the NEG has just had a rough few weeks at the hands of federal Coalition MPs. Will Morrison now repair it, and set the parliament to legislating the measures it contains?

If he chooses to do so, he will need to stare down the significant bloc of Coalition MPs who, as a matter of quasi-principle, reject placing any limit whatever on the freedom of energy corporations to burn coal.

Still, the NEG remains the de facto framework for the government’s emissions reduction policy. In one form or another, it is quite likely to survive.

Indeed, why wouldn’t it?

The hugely influential Minerals Council has outspokenly supported the scheme. “It’s time for the Australian Government and the States to put aside their political differences on energy and support businesses, families, jobs and our future by backing the NEG,” the Council declared in a statement on August 13.

The most ideologically rigid faction of Australia’s wealthy elite despises the NEG, and seized on it as a lever with which to prise former prime minister Malcolm Turnbull from office.

But most capitalists, as practical-minded people wanting to extract profits unobstructed by environmental regulations, appear to appreciate what the plan can do for them.

The NEG, courtesy of the artful Josh, rests on a weasel formulation that gives the appearance of reining in coal use, but that allows the energy industry to burn coal through to 2030 with only incidental constraints.

The renewables industry, meanwhile, is to be thrown under the proverbial bus.


So what does the NEG involve, specifically?

There are two main elements. One is a reliability obligation. In contracting for energy supplies, electricity retailers and large customers will have to meet a set percentage of their forecast peak load from flexible and dispatchable sources. (Dispatchable sources are those that can be switched in quickly and with a high degree of reliability.)

The reliability problem that the NEG claims to solve, however, basically doesn’t exist.

In the energy industry, “reliability” is understood as meeting demand at least 99.998% of the time. The eastern Australian grid hasn’t fallen below that bar in the past nine years, and is not expected to do so in the coming summer.

Of the power blackouts that occur, almost all are due to problems with local poles and wires, which are outside the NEG framework. Only 0.24% of outages — corresponding to about 10 seconds per household per year — result from insufficient generation.

Meanwhile, the way to keep generation up to the mark is not to stay with coal.

The ageing clunkers of Australia’s coal-fired power industry are breaking down more and more often. In the year to mid-August they tripped out 72 times, dumping large amounts of load.

By contrast, South Australia’s Hornsdale “big battery” is showing that the combination of renewables with battery storage works brilliantly for guaranteeing supply.

Emissions requirement

The second main element in the NEG is its emissions requirement. The average carbon emissions that result from generating the electricity that retailers sell must be kept below a defined level, to be spelt out in federal legislation. Individual states can retain their own more stringent emissions targets, incorporated into the general NEG plan.

The whole scheme, its proponents insist, is “technology neutral”; the decision on whether to stick with fossil fuels or invest in renewables is left to the energy corporations. Whatever choice they make the emissions requirements will still have to be met.

In mid-August, Turnbull presented the NEG to the states and the Coalition party room as a straightforward, impartial mechanism that would allow Australia to meet the emissions reduction obligations it accepted under the Paris Agreement of 2015.

Because the NEG does not discriminate against fossil fuels, the then prime minister seems to have calculated, coal-minded malcontents in the party room would lack an excuse to give him trouble. Even the Labor Party leadership, fearful of being tagged as captive to “greenie radicals”, might go quiet on climate questions, reasoning that the NEG provided a framework that a new Labor government could some day adjust to its liking.

Turnbull appears to have hoped that with climate change neutered as a political issue, the government would be able to prepare for the 2019 elections confident that voters would not be distracted from its demonisation of asylum seekers and welfare recipients.

Those hopes, however, ended in fiasco.

Designed to confuse?

Turnbull and Frydenberg projected that for the decade following the introduction of the NEG in 2020, the emissions reduction target placed on the energy sector would be 26% compared to 2005 levels.

This was an essentially arbitrary figure, perhaps designed to be confused with the total emissions cut of 26–28% by 2030 across all sectors, which was accepted by Australia as its Paris Agreement target.

For various business interests outside the energy sector, the NEG reduction was insufficient, leaving an unfair burden on other emitters. Electricity generation currently accounts for about a third of Australia’s greenhouse emissions. But modelling suggested, that under the government’s target, the sector would deliver just 10 million of the 128 million tonnes of carbon dioxide abatement needed for Australia to meet its commitment.

“Cutting emissions from other sectors, such as agriculture, mining or manufacturing is far more expensive and is likely to be both politically and practically difficult,” industry analyst Jason Aravanis was quoted as saying.

Some of the bitterest responses came from renewable energy firms. In setting the 26% target, Turnbull and Frydenberg had steered so close to the interests of the coal-burners that the renewables industry would be left without incentives, and investment in it would collapse.

Under the Renewable Energy Target, which the NEG is to replace in 2020, the renewables industry in Australia has surged in recent years.

Taking account of projects already under construction or contracted, Simon Holmes à Court of the Melbourne University Climate and Energy College has calculated that Australia will enter the NEG period with the emissions from its energy industry 24% below 2005 levels. Over the years to 2030, this would be cut to 26% below, a reduction each year of just 0.2%.

That would spell the demise of the large-scale renewables industry. As Holmes à Court explained, the government’s own modelling, performed by the firm ACIL Allen, forecasts that under the NEG only 14 megawatts of large-scale wind and solar would be installed over nine years. Fourteen megawatts is the capacity of just four modern wind turbines.

After meeting their pathetic NEG target, the energy retailers could — and undoubtedly would — make up their supplies with coal-fired power, still the cheapest when sourced from existing plants.

As the former head of the Clean Energy Finance Corporation Oliver Yates remarked, the only thing the NEG does is to reassure coal companies that they do not have to reduce their pollution over the next 10 years.

Power costs

In the effort to promote the NEG, an important element has been the claim that it would bring cuts to household power bills.

According to a paper issued by government authorities in July, the average household connected to the eastern Australian grid would save around $550 per year over the 2020s relative to 2017–2018.

These claims, however, are dodgy to the point of fraud.

Most of the above savings, if they occur, will have nothing to do with the NEG. They will result from renewable capacity built on the basis of the current Renewable Energy Target and various state targets, and coming into operation by the early 2020s.

Other “savings” under the NEG are to result from cuts to what government sources describe as “green scheme subsidies”. That is, the NEG is aimed to make savings at the expense of measures designed to lower greenhouse emissions.

Of course, any talk of “savings” from the NEG, which is designed to spare coal-fired capacity from being replaced by renewables for as long as a decade, leaves out such costs from coal use as climate chaos and widespread health damage.

The genuine road to cost savings involves a swift phase-out of all fossil fuels.

Meanwhile, what would be the effect on costs if energy retailers had to set in train real, serious cuts to greenhouse emissions?

Modelling by the energy analyst firm RepuTex concludes that with a 45% reduction target, as favoured by the federal Labor Party, wholesale electricity prices would fall by a quarter to around $60 a megawatt hour in 2030. Under the NEG, prices would be just over $80.

The 45% target would drive more investment in cheap large-scale renewables. The resulting competitive pressure would force wholesale prices lower, leading to the closure of excess coal capacity.

The NEG’s 26% target would leave investment in renewables almost static. As coal-fired plants wore out and were shut down toward 2030, more of the need for flexible, dispatchable power would have to be met using relatively high-cost non-renewable gas.

The NEG, it emerges, is effectively a price protection scheme for industry incumbents, mainly generators of coal-fired power.

Political ruse

The NEG is a sophisticated political ruse, well able to dupe the uncritical and ill-informed. The Coalition coal heads need this weapon; a recent poll showed that 84% of Australians think the government should focus on renewable energy.

So why the paroxysms over the NEG in the past few weeks?

Various Coalition MPs appear to hold illusions in the so-called “clean coal” technologies spruiked by the coal industry. Clinging to these hopes, they reject even the NEG’s phony concessions to renewable energy.

The self-deception here is flagrant.

The cost of energy from wind and solar — together with storage — is now coming in below that for new, modern coal-fired plants. Meanwhile, coal produces carbon dioxide no matter how efficiently it is burned.

But for many Coalition MPs, spurning renewables and embracing coal was probably never a rational decision. We should look for its source in gut feeling, not analysis. For these people, rejecting climate science has become a matter of tribal solidarity.

Pressured on their irrationality, the coal-lovers are liable to respond with acts of self-destructive bloody mindedness — or with acts that promise to hoist the Liberals and Nationals onto the opposition benches.