Bottom line is driving the corporate shift to renewables

May 25, 2018


The Foreign Affairs, Defence and Trade References Senate Committee released a report on May 19 into the implications of climate change for Australia's national security, which warned that climate change poses a "current and existential national security risk" to Australia.

The report defined an existential threat as “one that threatens the premature extinction of Earth-originating intelligent life or the permanent and drastic destruction of its potential for desirable future development”.

Greens Defence spokesperson, Senator Peter Whish-Wilson said: “What this inquiry has brought home to me is that when people choose to engage with the climate science, without any partisan or ideological blinkers, they quickly understand the seriousness of the challenge and decide to act.

“We have seen that the Australian Defence Force is changing how it does things because it is taking climate change seriously, but we have a government that is doing nothing to reduce emissions to actually reduce the threat of climate change itself.”

The conclusions of the report are hardly new. Previous defence white papers and government committees have warned of the dangers posed by climate change. But they are an alarming reminder that climate change is already underway and are increasingly at odds with a government that is ideologically wedded to fossil-fuel power generation, and that seeks to downplay the role of renewables for future power generation to reduce emissions.

The government's 2017 Review of Climate Change Policies, released in December, continued its trend of downplaying Australia's role in contributing to climate change, arguing that "Australia is a relatively small contributor to global emissions" and is "on-track" to meet emissions targets — targets that are unlikely to make a difference to catastrophic climate change.

While the government has claimed to be "agnostic" or "technology neutral" regarding power generation, their actions have consistently shown otherwise.

The most recent example was the government intervening in the market by acting as a broker for the sale of the aging AGL Liddell coal-fired power plant to Alinta. The latest budget also shows that the government is not putting their money where their mouth is regarding climate change.

But even the Liddell proposal has recently been thrown into jeopardy. On May 21, AGL rejected the proposal by Alinta to buy Liddell for $250 million plus remediation costs. (see page 3 for more coverage).

In a statement to the ASX, AGL said: "The offer significantly undervalues future cash flows to AGL of operating the Liddell Power Station until 2022 and the repurposing of the site thereafter" and "reaffirmed its decision to close Liddell in December 2022". Keeping Liddell going well beyond its use-by-date was supposed to be a counter to the so called "intermittent" supply from renewable energy.

When Chief Scientist Alan Finkel released his findings on extending the lifespan of coal-fired power stations, which was generally supportive of the government's proposals, he estimated it would take $600–700 million to extend the life of a coal-fired power station for about 10 years. But there was also this caveat: "We're trying to balance three different outcomes: security, reliability and emissions. Yes, it makes one of those three things [emissions] more difficult but you get benefits on the other two." Finkel said.

Recent history shows that even those estimates may not be enough. In 2009, a plan to resuscitate the Muja AB coal-fired power plant in Western Australia, a similar age to the Liddell plant, was put in place. Originally budgeted to cost $150 million, which would come from the private sector, the project suffered time and cost blowouts, eventually costing $310 million, most of which came from the taxpayer. Even then, the plan ultimately failed and the plant was closed in 2016.

An article published in The Conversation, "The true cost of keeping the Liddell power plant open", concluded: "It is the worst of all worlds: a market-based system but with extensive and unpredictable intervention by governments that tend to undermine investor confidence."

This is taking place at a time when even big business, at least not those involved in coalmining or coal-fired power generation, are recognising the benefits of shifting to renewable energy. Renewables & Business: Cutting Prices & Pollution, a report the Climate Council of Australia released on May 14, said 47% of Australia's major businesses were already well underway in switching to renewables, with total business solar capacity more than doubling since 2016.

Before thinking that this was being driven by a sudden concern about climate change, the study revealed that ever-increasing power bills eating into profits was a major driver. The report said: "Rather than waiting for the price of electricity to fall, businesses are taking control of their energy use by installing renewable energy and generating their own electricity.

"Renewables are so affordable that by building, contracting or investing in new wind and solar power plants, businesses can significantly reduce their reliance on grid electricity, reducing exposure to volatile electricity prices and future price hikes."

Business owners also reported making their investment back through cost savings in less than five years.

The report also found, contrary to the government's view that coal will provide cheaper power, that: "New solar or wind farms are cheaper than a new coal power station when compared using levelised cost of energy".

The Climate Council’s Greg Bourne said: "This report shows that the rising cost of energy is the number one concern for Australian businesses over the next decade, so it’s no surprise that a variety of businesses … are turning to affordable renewable energy and storage solutions".

What this really shows is that the government's one-eyed approach to coal at the expense of renewables is not only unsustainable for the environment but is also bad for business.

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