Scott Morrison – Energy market retreat as climate politics converge
Gas-fired peaking generation, along with batteries and hydro, is needed to keep the lights on when the wind doesn’t blow and the sun doesn’t shine. For Mr Morrison, championing gas has aimed to shift the Coalition away from its commitment to coal, as shown by the new demands from rebel Nationals MPs Barnaby Joyce and Matt Canavan, a former resources minister, for government-built coal-fired power plants.
How Australia reaches net zero should include all options, including gas, carbon capture and storage, and even nuclear power.
While the gas-fired recovery push has made political sense for Mr Morrison and can be legitimised in policy terms, it also has increased investment risk by threatening to pile intervention upon intervention.
When Mr Morrison launched his gas-led recovery plan in September 2020, there was big-stick talk of hitting the LNG export industry with domestic reservation restrictions that supposedly would drive down local gas prices, trigger a manufacturing renaissance, and transform the east-coast gas market into the cheap and plentiful equivalent of America’s Henry Hub pipeline.
Thankfully, the government has backed away from the worst of this, to the dismay of manufacturing interests and the AWU. As the federal Treasury and the Productivity Commission warned, a full-blown gas reservation policy would create sovereign investment risk, discourage new exploration and development projects, and ultimately lead to higher gas prices.
Mr Morrison’s other big-stick threat last September was a government-built gas plant if the private sector failed to build new dispatchable power generators to replace the Liddell coal-fired plant due to close in 2023.
Energy Australia’s plan for a gas fired generator near Wollongong, and Origin Energy’s proposed gas peaking station in Newcastle and giant battery at Liddell, have both been paused due to the investment uncertainty created by the Liberal NSW government’s state energy road map in November.
In contrast to Mr Morrison and federal Energy minister Angus Taylor, NSW energy minister Matt Kean downplayed gas in favour of underwriting more renewables, battery storage and pumped hydro projects, while accusing big energy companies of profiteering from the closure of coal-fired plants.
The way out of this policy mess will require Mr Morrison to follow Joe Biden’s global lead by committing to net zero emissions by 2050 in order to anchor Australia’s climate change expectations and shore up investment confidence. But how Australia reaches net zero should include all options, including gas, carbon capture and storage, and even nuclear power.
As suggested by the dramatic falls in the cost of solar power, a market framework – such as revenue-neutral carbon price – remains the best way to drive private investment in the technology that cuts emissions and firms the power supply at least cost to energy users and least risk to taxpayers.