Australia’s politicians need to remain focused on the goal of replacing old coal power plants with renewable energy at the lowest possible cost rather than becoming obsessed with ruling particular policies in or out.
The majority of Australia’s existing coal-fired power plants are old and will need replacing in the coming years.
The impending closure of these old coal power plants is a reality, irrespective of our need to reduce emissions and meet our international commitments under the Paris climate agreement. The biggest threat to our energy security is if we can’t deliver new investment in energy generation.
According to Bloomberg New Energy Finance, renewable energy is now the cheapest type of new power generation that it is possible to build today. This will only continue into the future as the cost of renewable energy continues to fall and new coal-fired power remains expensive, risky and unbankable for investors, and gas generation continues to rise in cost because it is struggling to secure adequate gas supplies at an affordable price.
Any approach which favours coal or gas over renewable energy will lock in higher overall costs for consumers for decades to come. To support the transition and modernisation of our energy system we need policies that both support a sensible phase-out of coal and bring in new renewable energy generation at the lowest possible cost.
The renewable energy sector is experiencing unprecedented levels of investment right now, with $5.1 billion worth of investment and 3000 jobs from the projects which will be constructed in 2017 alone. But the vacuum of sensible and stable federal policy beyond 2020 risks stalling these economic benefits into the future.
Despite the falling cost of renewables, some form of policy support will likely to be necessary after the end of the decade due to the energy market being dominated by old coal-fired power stations which were built using taxpayer funds many decades ago, and now just have to pay for fuel and maintenance.
A variety of policy options exist that will achieve this effectively, and it is important not to become obsessed with one particular method and lose sight of the end goal. It is disappointing to see political parties rule out some of these policy options without fully considering their merits.
Without clear federal energy and climate policy beyond 2020, the level of new investment in clean energy will likely fall and be reliant on state and territory policies. Our preference has always been for strong and stable national energy policy, but there is a policy void beyond 2020.
We welcome Federal Labor’s renewed commitment to achieving 50 per cent of Australia’s energy supply from renewable sources by 2030. Labor’s preferred option of an Emissions Intensity Scheme (EIS) would help ensure the managed closure of coal generation and help the business case for renewable energy.
It is unclear whether an EIS alone would be sufficient to deliver ongoing strong investment in new renewable generation beyond 2020. This would be subject to the specific design of the policy and a range of other factors occurring in the energy sector. Additional policy support for renewable energy may still be required to achieve Labor’s strong commitment to 50 per cent renewable energy by 2030.
If Australia is to ensure a stable, secure and affordable energy supply in the future, we will need a suite of sensible and long-term policies to ensure the transition to clean energy is well managed.
Kane Thornton is chief executive, Clean Energy Council.