Speed of Australia’s energy transition hostage to Marshall law

March 23, 2018
Tesla's world's biggest battery is in South Australia.

The consequences of South Australia’s election result on March 17 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 Prime Minister Malcolm Turnbull’s signature policy, the National Energy Guarantee (NEG).

Senator Simon Birmingham said so almost immediately on ABC News 24, and the 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 to renewable energy in South Australia. But it is clear to all that the NEG, which will not get through unless Marshall ignores SA’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, 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 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.

Leadership and vision

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 (AEMO) — the incentive and drive to clean up their act and embrace the renewable energy transition rather than fight against it.

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

Weatherill had pitched the election as a referendum on renewables. This was a ploy to put renewables, which enjoy enormous popularity in the state, front and centre to 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% 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%, but, because of a significant redistribution of seats, Labor needed a 3% 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% share in wind and solar, and enough projects under construction, or in the process of obtaining finance, to take it to 75% renewables and half way to his 25% storage target much earlier than even he planned.

New renewable energy projects

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

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

It is not recognised by many that Weatherill never actually had a state-based renewable energy target. The 50% by 2025 target was only announced after the ACT had signed contracts for the massive 315MW wind farm near Jamestown.

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

The revised 75% 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% 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.

Marshall’s plans

Of course, it would not be impossible for Marshall 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 need 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 either 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, 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.

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 is no new competition.

Interconnector to NSW

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 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 South Australia in the hands of a small oligopoly of generators and retailers who have been ripping money out of consumer and business wallets ever since.

It is ironic for another reason too. It is not entirely clear how a new link to NSW would benefit 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. Are Turnbull and Frydenberg and the right wing of the federal party OK with this?

It is going to be fascinating to watch how Marshall and his new energy minister Dan van Holst Pellekaan 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 do not 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.

[This article first appeared at RenewEconomy]

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