November 26, 2015

How the Greens Plan to Deliver 90% Renewables in Australia by 2030

The Greens have unveiled their energy policy ahead of the next federal election and small target policy it ain’t.

You want detail?

They’ve released a closure schedule detailing the year major fossil fuel power stations would need to begin shutting off individual generating units, with the listing for NSW generators below as an example.

Tired of politicians refusing to lay out ambitious policies while in opposition?

Well the Greens want to shut down all the coal-fired power stations while they simultaneously try to use electricity to replace the use of oil in transport and gas in heating. The Greens say that based on analysis by ClimateWorks it should be possible to double energy efficiency by 2030, which they’d seek to achieve, but these extra power loads mean electricity consumption would grow from 247 terawatt hours today to 358 TWh by 2030.

So no returning to the trees for the Greens, it seems.

Instead it seems they want a Tesla in every driveway and an air conditioner in every living room (alongside solar panels on the roof), not to mention a high speed electric train to take you interstate.

So what’s going to fill this huge massive gap as coal shuts off and power demand surges?

As you’d expect for the Greens it will be 90 per cent renewable energy by 2030. The Greens foresee that wind and solar PV will fill the bulk of energy requirements because they are the cheapest source of renewable energy that is capable of being rapidly expanded. Hydro, biomass, solar thermal (with heat storage), geothermal and a small amount of fossil fuels, alongside widespread deployment of batteries and electric vehicles will then provide a source of controllable power that can be flexed up and down as wind and solar output varies. The chart below details the possible fuel mix the Greens imagine would fill the place of the shut-down fossil fuels. Although they sensibly note this is not “prescriptive, because technology shifts, cascading cost savings, energy efficiency gains and the switch to electrification of vehicles and fuel-powered infrastructure are impossible to anticipate over a 15-year timeframe.”

So how will this all be paid for?

This is where the Greens have decided to basically abandon the liberalised electricity market.

They don’t foresee this transformation being driven by carbon pricing nor by largely expanding the Renewable Energy Target, which works via a market in tradeable certificates.

Indeed, they observe that while they still want to reinstitute a carbon price, “on its own, a price on pollution will not drive the necessary transformation in the energy sector unless the price was set at around an unrealistic $100 a tonne [of CO2]”.

Instead the Greens propose that a more hands-on government authority drive the process and that government would once again get back into the business of owning power stations.

This authority they title ‘Renew Australia’, would offer long-term contracts to private sector and community-based operators, guaranteeing them a minimum price for power and selecting them via reverse auctions similar to that undertaken by the ACT Government.

The Greens have proposed this initiative, rather than relying on an expansion of the Renewable Energy Target, because they reason that a government contract provides a more secure source of revenue conducive to low-cost finance than relying on synthetic market that can be undermined by policy changes.

But the Greens have gone beyond this, also proposing that Renew Australia would itself be an owner-operator of power plants funded by raising capital via government bonds. This represents a complete reversal of Australian policy thinking since the Keating-Hawke government kicked off the process of market liberalisation, the competition policy reforms and a steady pullback of governments from owning major business enterprises.

The chart below provides one of two scenarios for how the Greens envisage each policy mechanism driving the growth of renewable energy in Australia’s electricity supply. The pink shaded section represents the role of the Renewable Energy Target, which since 2001 has been the major driver of new renewable energy installations in the country.

While the Greens want to expand this scheme further, increasing it to 52,500GWh by 2030 from the current target of 33,000GWh in 2020, Renew Australia’s direct contracting and ownership of power stations becomes more important by 2020. The Greens have also chosen not to detail any additional policy mechanisms to support the installation of solar PV on rooftops beyond the existing Small-scale Renewable Energy Scheme.

Most critics of the Greens and renewable energy will probably get stuck at the stage of choking on the idea of closing down all Australia’s power stations to replace them with renewable energy within 15 years – a truly incredible feat to contemplate.

But what will unnerve even many of those who share the Greens’ aspiration of decarbonising the power system is their intention to roll-back markets in the power sector.

The Greens argue such an approach is necessary because,

“…of the size of the transformation to our energy system and the speed at which we need to transform, Australia needs all shoulders to the wheel. Government has a key role to play. The market cannot achieve the necessary transformation in the required timeframe on its own without clear signals and guidance from the government - acting in the public interest.”

At present many of those businesses trying to build large-scale renewable energy power projects are finding that even with a government stating they will “never ever” reduce the Renewable Energy Target again, they are struggling to attract investment without a major power retailer providing a contract that provides revenue certainty. A number would love the idea of a government long-term contract for their power.

However, many will also be unnerved by the idea of having to compete against a government authority that is also their primary customer.

In addition many of those outside the renewable energy sector will worry about the potential for us to repeat the mistakes of the past as government authorities went overboard building power stations for which the demand wasn’t there to justify them. Then they went further, trying to attract energy-intensive industries to justify these power stations. This led to a lot of wasted resources. 


 

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