A Government Program to lock-in Fossil Fuels

Sep 20, 2020

The federal government’s “Next Generation Energy Technologies Investment Package” is designed to lock-in fossil fuels.

In the lead-up to its budget, the federal government today released the background to its so-called “Next Generation Energy Technologies Investment Package” the clearest statement so far of its energy policies.

The package includes new funding for the Australian Renewable Energy Agency (ARENA) and “an expanded toolkit” for both ARENA and the Clean Energy Finance Corporation (CEFC). At first glance, baseline funding to ARENA of A$1.43 billion over 10 years looks impressive, but it’s unclear whether ARENA would have any funds available for renewable energy under the proposed overhauled investment rules, after it has supplied grants for manufacturing technologies such as steel, aluminium, cement, chemicals and fertiliser.

Although the media release includes “a regional hydrogen export hub” (A$70M) and mentions “green steel” (i.e. steel produced using hydrogen instead of coal), it gives the game away by listing the locations it has in mind for this hub, almost all of which are coal mines or gas fields. Thus the government holds out the prospect of “green” steel while planning to establish an industry for “blue” steel, i.e., steel produced using fossil fuels with carbon capture and storage (CCS), if it ever becomes economically competitive.

The proposed CCS fund of A$50M will be devoted to coal and gas hubs. CCS is very inefficient and very expensive; demonstration plants have performed poorly. The government has already spent $1.3 billion on it without getting a single large-scale CCS site for coal and only one for gas. Clearly, the intention is to lock Australia into continuing use of coal and gas for decades without achieving substantial emissions reductions.

Despite the rhetoric about creating infrastructure, the background document doesn’t mention funding the urgently needed Renewable Energy Zones, coupled with new and augmented transmission lines, as set out by the Integrated System Plan of the Australian Energy Market Operator (AEMO). Indeed, the government’s release doesn’t mention explicitly any new funding for renewable energy or electric vehicles.

The release appeared almost simultaneously with the governments threat to fund a 1000 MW gas-fired power station in the Hunter Valley, allegedly to replace the anticipated closure of the Liddell coal-fired power station in 2023. However, the government’s own Liddell Taskforce reported that – taking account of projects already committed in batteries, transmission upgrades and peakload gas – new dispatchable supply of 215 MW would be “more than sufficient” to maintain reliability. (“Dispatchable” power stations can supply power promptly on demand.) Although gas is an expensive fuel, the government would make its electricity appear cheaper by imposing the capital cost of the power station, over $1 billion, onto taxpayers.

The package confirms that the only industries and jobs of interest to the government are those based on fossil fuels. Yet the gas industry is capital intensive, with most jobs limited to periods of construction. If expensive new gas infrastructure is proposed for resuscitating Australia’s manufacturing industries, then a case must be made that the proposed specific products (e.g. plastics, chemicals, fertiliser) would be competitive internationally and, if so, could not be made by using green hydrogen.

Rejecting a backward step to fossil fuels, community organisations have proposed plans to create many jobs, based on using renewable electricity and energy efficiency (here, here and here]. This is the way forward, environmentally, socially and economically.

Mark Diesendorf is Honorary Associate Professor in Environment & Governance at UNSW Sydney.

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