GARY MOORHEAD. Cheap renewable energy and the future of manufacturing.

Whether it’s economic recovery post COVID, enhancing our future defence capabilities or even helping deal with climate change, manufacturing has become the new black. But before we can see any lift in manufacturing performance, a truly wicked problem must be overcome.

Since World War Two, even more than protective tariffs, cheap, abundant and reliable supplies of electricity and gas have been a major underpinning of our domestic manufacturing industry.

However, in the last decade, energy has become expensive, unreliable and scarce, driving existing industries off-shore or into closure and stifling new investment. While many factors have contributed, such as: privatisation (encouraging a focus on making short term profits from customers who had traditionally relied on long term arrangements), misguided regulation (leading to gold-plating of networks or delaying approvals for new plant), shorting of supply (closure of Northern and Hazelwood power stations), the greatest failure has been the absence of a national policy to handle the transition to renewable energy.

What makes this even more tragic is that Australia seems unique among nations in stuffing this up. Dealing with the transition has its challenges for every nation, but only here has it caused total policy paralysis – at least federally. Part of our problem is that energy policy – linked to climate policy – has become such a potent political weapon. It has been used to remove leaders on both sides of politics and to create wedges between previously aligned groups, such as progressives and workers. And the more it is linked to climate policy, the more polarising the debate becomes.

So it was quite a shock to tune into a webinar about energy policy recently, organised by the Clean Energy Council, where every state energy minister managed to sound like they were vaguely on the same page.

https://www.cleanenergycouncil.org.au/resources/resources-hub/clean-energy-ministerial-forum

Perhaps it was a reflection of the mood of the COVID-inspired national cabinet. Such was the unanimity that at times it was hard to tell Labor from Liberal.

They were all unanimous on the importance of and the potential for the transition to renewable energy generation to revitalise existing manufacturing and create new industries – and many new jobs. All states were supporting projects and initiatives to support renewable generation – or that would be supported by it. Many were focused around producing hydrogen (as a power source in its own right or as a storage medium for exporting renewable energy) other storage options and electric vehicles.

The focus of the hydrogen projects was firmly on “green” hydrogen production using renewables, with Tasmania and WA both confident that once produced at scale, this could be as cheap as “brown” hydrogen produced from coal. Tasmania’s Energy Minister, Guy Barnett, saw the production of green hydrogen for export as a logical outcome of the State’s target of 200 per cent renewables by 2040. Tasmania has 2400 megawatts of current generation capacity (hydro and wind) and has identified 3400 megawatts of potential pumped hydro capacity. (This is about equivalent to the output of Victoria’s Loy Yang A and B brown coal generators.) Further, Tasmania’s North West Cape has some of the most enduring winds in the world and the cheap energy from these turbines would power the pumped hydro. Victoria’s Lily D’Ambrosio was also enthusiastic about the potential for Bass strait winds powering Victoria’s “Star of the South” planned off-shore wind project (once regulatory issues with building in Commonwealth waters had been resolved).

In what seemed a step forward for rational debate, the ministers were also unanimous about the necessity for getting the transition right, rather than just engaging in boosting renewables as an end in itself. Most encouragingly, they all seemed to have a fair grasp of the technical challenges that would need to be overcome along the way. While all talked about roof top solar in terms of its potential for reducing costs to consumers, they were equally switched on about the importance of managing the stability and reliability issues renewables bring to the grid and the need to create new and expand existing forms of storage. While all confidently asserted that renewable energy targets would be met, they also described in some detail the challenges and necessary solutions to meeting those challenges. Most of these required cooperation between states and with the Commonwealth, both for sourcing funding and creating the right regulatory environment.

WA Minister Johnston gently let the air out of the tyres of some of the more enthusiastic renewable proposals when asked which would come first: an interconnector from WA to the eastern states or to Asia?

“Both are unrealistic” was his answer.

Minister Johnstone made the point that physical connections are too easily broken (as happened to the Basslink interconnector between Tasmania and Victoria in 2015, when a thumb-sized tear to the cable caused a six month outage with the losses still being litigated). Johnstone proposed that it is far more practical to export renewable energy as hydrogen (either liquefied or as ammonia), rather than as electrons.

Ministers also raised the importance of “demand response” (dialling industry usage up or down) as critical to balance variations in wind and solar output. This should provide some encouragement to workers in aluminium smelting and steel production that their industries may survive, not just to produce “green metals”, but to help ensure the stability of a grid reliant on renewables.

The one key element missing from the forum was an indication that the federal government might be close to producing a national energy plan, absent since 2013. Federal Energy Minister Taylor, provided a recorded speech for the forum and did not mention a national plan (raised as a critical issue by a number of his state counterparts) despite the recent offer of a “bipartisan approach” to energy policy by the Labor Opposition Leader, Anthony Albanese.

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