Anthony Albanese will commit a Labor government to adopting a target of zero net emissions by 2050, in a speech titled “Leadership in a New Climate” to be delivered on Friday.
The opposition leader’s embrace of this target, which the ALP also took to the last election, is in line with the policies of state and territory governments, many companies and the Business Council of Australia. It is also the public stand of some Liberal moderates but is totally rejected by the Nationals and hard-line Liberals.
Prime Minister Scott Morrison has refused to adopt it.
“Currently no one can tell me that going down that path won’t cost jobs, won’t put up your electricity prices, and won’t impact negatively on jobs in the economies of rural and regional Australia, ” he said this week.
In his speech, released ahead of time, Albanese also says a Labor government would never use Kyoto credits to meet Australia’s Paris targets, as the government will do if that is necessary.
And Albanese again condemns the government for putting $4 million into a feasibility study for a coal-fired power station in Collinsville, Queensland.
But Albanese is leaving until closer to the election the shorter-term emissions reduction target Labor will adopt.
At the last election it committed to a 45% reduction in emissions by 2030. Labor first took that target to the 2016 election and Albanese has previously said it was a mistake not to review it before the 2019 poll.
He says in his speech the 2050 carbon-neutral target should be “as non-controversial in Australia as it is in most nations”.
“This will be a real target, with none of the absurd nonsense of so-called ‘carryover credits’ that the prime minister has cooked up to give the impression he’s doing something when he isn’t.
“That’s not acting. It’s cheating. And Australian’s aren’t cheaters.”
On the Collinsville project, he says: “Let’s be clear. There is nothing to stop a private company investing its money in such a proposal. The reason it hasn’t is it doesn’t stack up.”
The $4 million is “just hush money for the climate sceptics who are stopping any real reform and who stopped the National Energy Guarantee supported by Turnbull, Morrison and Frydenberg.
“It’s pathetic. If it made sense the market would provide funding.
“The climate sceptics are market sceptics as well,” Albanese says.
“Investors will not contribute because the economic risks are simply too great. The costs are higher and rising. And the cost of alternatives like renewables is lower and falling.
“Everyone in the electricity sector knows that the only way a new coal power plant will be built in Australia is through significant taxpayer subsidies, including a carbon risk indemnity that the Australian Industry Group estimates would cost up to $17 billion for a single plant.
“That’s why one hasn’t been opened since 2007, construction hasn’t begun on one since 2004 and tenders haven’t been called this century,” Albanese says.
Meanwhile the terms of reference for the bushfire royal commission, released by Morrison on Thursday steer away from the issue of emissions reduction.
They acknowledge “the changing global climate carries risks for the Australian environment and Australia’s ability to prevent, mitigate and respond to bushfires”. But the inquiry is to report on
improving coordination across all levels of government in managing natural disasters
improving preparedness, resilience, and response in dealing with natural disasters
whether changes are needed to Australia’s legal framework for the involvement of the Commonwealth in responding to national emergencies.
As it transpired, that target was easily met. But the then industry minister Ian Macfarlane described the task as an “enormous challege”, and industry figures suggested the required wind energy was “almost impossible”. Even Taylor initially said the target was “too high”.
The cut itself was bad enough for the renewable energy industry. But the uncertainty created during the review devastated investment.
Investment did boom following bipartisan support for the new, lower target. But we can only speculate what may have been possible without the uncertainty created by the review.
It’s not looking rosy for renewables
The drop-off in investment is a worrying trend for the renewable energy industry, and for climate action more broadly. We can expect a drop-off in new additions in capacity in line with the drop in investment.
The table above shows the current committed projects for next 12-18 months. While more projects are likely to be committed over the next 18 months, it’s hard to see the peak of 2018 repeated soon, particularly with investment dropping away.
The achievement of the renewable energy target leaves a federal policy void. Renewable energy may now be the lowest-cost source of new electricity supply. But it is competing against assets such as coal-fired power stations with sunk costs – meaning that new renewables projects are essentially competing only with a coal plant’s fuel costs. Absent a price on carbon or similar policy, coal assets are allowed to pollute the atmosphere for free.
There are lessons to be learned from Germany to ensure a less bumpy transition to a decarbonised electricity sector. “Deployment corridors” help make the development of renewable energy sources more predictable, improve integration into the power system, and keep additional costs to consumers manageable.
But unless emissions-intensive generation closes or renewable energy support is reintroduced, renewable energy expansion in Australia is unlikely to proceed at the pace required to meet the Paris targets. Keeping the global average temperature rise well below 2℃ requires “rapid and profound near-term decarbonisation of energy supply” and strong upscaling of renewables.
The states are attempting to fill the federal policy gap. Several have their own renewable energy support schemes and all states in the east coast’s National Electricity Market have committed to net zero emissions by 2050.
Continued renewables growth also requires transmission infrastructure and storage technologies to ensure the distributed energy can be delivered where it is needed, and that reliability is maintained. Several states have also recently committed resources to transmission investment.
The state-led action calls into question the effectiveness of the Council of Australian Governments’ (COAG) energy council. The group comprises the nation’s energy ministers and claims to maintain national “policy leadership” on energy. However it hasn’t met in almost nine months and its overarching agreement is more then 15 years old, and doesn’t refer to environmental outcomes or emissions cuts.
A new direction for the council is probably wishful thinking in the current political environment. But as emissions continue to rise in Australia, the need for significant reform only intensifies.
In the absence of a new national target, the states have been leading the way and driving renewable energy in Australia. Victoria, New South Wales and Queensland between them have invested some A$20 billion into building 11,400 megawatts of generation capacity.
While the states have worked admirably to advance renewable energy – and federal energy policy has long been politically toxic – there is a clear cost to pursuing many fragmented policies instead of a unified vision.
Our research, modelling the effect of state versus national renewable energy targets in the National Energy Market system found there was little difference in the overall cost, but that states without strong renewable targets tended to miss out on investment.
We need national thinking
Most jurisdictions have net zero emissions targets by 2050. States also have ambitious but achievable shorter-term renewable energy targets and programs.
There are plenty of arguments for states pursuing their own renewable energy targets, not least because they can fill the policy vacuum left at the national level.
States are responding to the immediate need to replace retiring power stations and can explore innovation with greater ambition. It makes perfect sense for states to compete to attract jobs and investment.
But Australia’s federal government has a domestic and international obligation to reduce greenhouse gas emissions from fossil fuels. National policies are more efficient, can harness better resources across our diverse geography and maximise returns for the whole system.
What’s more – as many column inches have pointed out – strong federal policy improves investment certainty and reliability, lowering the cost of inevitable infrastructure upgrades. And those upgrades can be better integrated into our existing national electricity system if the building (and money) doesn’t stop at internal borders.
We simulated two scenarios: first, that all states implement polices to achieve their respective renewable energy and net zero emissions targets by 2050.
The second scenario assumed a national target would be used to result in the “same outcome” of 100% renewable energy by 2050.
The model calculates required energy investments with 5-year increments from today to 2050, including considering the existing generation currently operating. The model simultaneously optimises the mix of generation, transmission and storage to minimise the total system cost from 2020 to 2050.
A key difference in results is where and when new generation is built. Under the state-driven approach, unsurprisingly, investment shifts towards states with more ambitious targets.
The two figures below show how state-based targets drive more investment into Queensland than would be the case under a national target scheme.
Broadly speaking, under a national target, we see more efficient use of renewable energy and associated resources. NSW – with net zero 2050 target but no interim renewable energy target – would get a greater share of the renewable energy investment.
NSW would consistently see substantially more investment under a national target scheme. This would be around 20% more generation in the 2030s in NSW, and up to 20 terawatt-hours more energy generated in the years 2030 to 2045.
The rollout of “where and when” to build new renewable and other generation to replace ageing fossil fuel power plants also impacts heavily on the sequencing and timing for major transmission upgrades across the NEM – especially interconnectors between states.
The graph shows that under a state target based approach we build more transmission infrastructure earlier than under a national approach. Under a national target approach, we would end up building more transmission infrastructure – albeit later.
Again, broadly speaking, we would build more generation at renewable energy resource-rich areas such as NSW which happen to be near major demand centres like cities. This would delay the need for some infrastructure spend.
What about system reliability and energy costs?
The good news is it appears under either a state-based or a national target approach the outcome in 2050 is similar. The difference in total system costs is only about 1% higher in the state-based targets scenario – so, virtually nothing.
State-based renewable energy targets lead to redistribution of renewable investments in favour of the states with a mid-term renewable energy target.
In the Australian context, the current state-based renewable energy targets have no impact on undermining power system reliability and virtually negligible impact on pushing up power prices.
Perhaps NSW should take particular note – as it would appear that it would benefit greatly from either a national target approach or an interim state target for itself.
The debate about state versus national approaches to energy policy has been going for the past 30 years and no doubt will be around for another 30. In the meantime, we need a stronger hand on the transition tiller or we will waste precious resources and time, and likely have major unintended consequences.
A Shorten government would add about 100 high polluters to those subject to an emissions cap, and drastically slash the present cap’s level, under the opposition’s climate policy released on Monday.
Labor would aim for a new threshold under a revamp of the existing safeguards mechanism of 25,000 tonnes of direct carbon dioxide pollution annually, which would be phased in after consultation with industry.
This would be a major reduction from the current cap of 100,000 tonnes. About 140 to 160 polluters come under the existing cap.
The safeguards mechanism was established by the Coalition government to cap pollution for the biggest polluters by setting limits or “baselines” for facilities covered. But Labor says it has been ineffective.
On transport, the policy sets an ambitious target of having electric vehicles form 50% of new car sales by 2030. The government fleet would have an electric vehicle target of 50% of new purchases and leases of passenger vehicles by 2025.
The climate change policy covers industry, transport and agriculture, with the proposed measures for the electricity sector, including an in-principle commitment to a national energy guarantee (NEG) and subsidies for batteries, already announced.
The agriculture sector would not be covered by the expanded safeguards policy.
The government’s emissions reduction fund – recently allocated a further A$2 billion over a decade and renamed – would be scrapped if Labor wins the May election.
The climate policy is the third of three key policy announcements the opposition wanted to make before the election is called, likely next weekend. The others were the wages policy and the announcement of the start date – January 1 – for the proposed crackdown on negative gearing.
The opposition has committed itself to a 45% economy-wide reduction in emissions relative to 2005 levels by 2030, compared with the government’s commitment to a reduction of 26-28%.
Labor’s policy confirms that it would not use Australia’s credits from the expiring Kyoto Protocol to help meet its Paris target, saying this course is “fake action on climate change”. Bill Shorten said on Sunday: “It’s only the Australian Liberal Party and the Ukraine proposing to use these carryover credits that I am aware of.”
Labor says it would “work in partnership with business to help bring down pollution.”
“Labor’s approach isn’t about punishing polluters. It’s about partnering with industry to find real, practical solutions to cut pollution, in a way that protects and grows industry and jobs.”
“There will be no carbon tax, carbon pricing mechanism, or government revenue,” Labor says.
“Rather, Labor will reduce pollution from the biggest industrial polluters by extending the existing pollution cap implemented by Malcolm Turnbull.”
“Pollution caps will be reduced over time and Labor will make it easier for businesses to meet these caps by allowing for industrial and international offsets.”
The expanded scheme’s new threshold would capture an estimated 250 of the biggest industrial polluters – 0.01% of all businesses.
Businesses would be able to earn credits for “overachievement” – reducing pollution below their baselines. They could sell these credits or use them to meet their future cap.
“Tailored” treatment would be provided to emissions-intensive trade-exposed industries (EITEs) such as steel, aluminium and cement. There would be a A$300 million Strategic Industries Reserve Fund “to support these industries in finding solutions to cut pollution and remain competitive”.
A Shorten government would consult with industry and experts on baselines for individual entities and the timing of reduction.
It would also put in place “a well-functioning offset market and reinvigorate the land offset market”.
“Currently, a facility that emits more than its baseline must offset excess emissions by purchasing offsets, primarily from the land sector. But currently businesses cannot access international offsets, or offsets from the electricity sector.
“Labor will make it easier for covered businesses to meet any offset obligations, not only by allowing for the creation and sale of offsets if emissions fall below baselines, but also through the purchase of international offsets and potentially offsets from the electricity sector.
“We will also boost offset supply through revitalising the Carbon Farming Initiative (CFI) – including reforms to strengthen the integrity of the CFI, and increasing land and other sector abatement opportunities.
“This will include exploring the establishment of ‘premium’ land sector credits to provide substantial environmental, biodiversity and other co-benefits, establishing a Carbon Assessment Standard to boost the bankability of offset projects, and re-vitalising offset methodology research and development with an additional A$40 million in funding over four years.
“Labor’s plan will help industry reduce pollution at least cost, and give traditional owners, farmers, the forestry industry and traditional owners new opportunities to earn income.”
On transport – which accounts for nearly 20% of Australia’s emissions – Labor says Australia is now last among western countries for electric vehicle uptake.
“Setting a national target will deliver more affordable electric vehicles into the Australian market and drive the switch to electric vehicles, reducing their cost, creating thousands of jobs and cutting pollution.”
Businesses would get an upfront tax deduction to buy electric vehicles, as part of the ALP’s announced Australian Investment Guarantee.
One aspect of moving quickly to government electric vehicle fleets would be that it would develop a secondhand market, Labor says.
“Labor will also work with industry to introduce vehicle emissions standards, to save Australian motorists hundreds of dollars each year at the bowser while driving down pollution on our roads.
“Australia is now one of the only developed nations without vehicle emissions standards in place. As a result, motorists will pay as much as A$500 each year more at the bowser than they should be, as well as seeing pollution on our roads skyrocket.
“Labor will consult on the timeline and coverage of vehicle emission standards to ensure consumers are made significantly better off, and aim to phase-in standards of 105g CO₂/km for light vehicles, which is consistent with Climate Change Authority advice.”
These standards would be in line with those in the United States but less stringent than those in the European Union.
“These standards will be applied to car retailers to meet average emissions standards, rather than imposing blanket mandatory standards on manufacturers.
“This will allow retailers to meet the standards by offsetting high emissions car sales with low or zero emissions car sales – such as electric vehicles.”
The government has reacted predictably to the Labor climate plan, branding it a “new tax”, ahead of what will be a major Coalition scare campaign in the election.
Scott Morrison said the opposition leader “does not have a plan, he just has another tax.
“What we’ve got here is a ‘re-Rudd’ of a failed policy that costs jobs, that costs businesses, that will cost Australians at least $9,000 a year, with the reckless targets that Bill Shorten will make law.”
On electric cars, Morrison said Shorten needed to explain how in 10 years he would take them from 0.2% of the market to 50% – because if he didn’t achieve his “reckless target […] he has to come back and get that money off you”.
Energy Minister Angus Taylor said the Shorten policy “would be a wrecking ball in the economy.
“It would raise the price of electricity and the price of gas and the price of food and the price of cars. Labor needs to come clean on the detail – not just the mechanism, which we know is the carbon tax.”
The Business Council of Australia welcomed the further details Labor had provided but said there were unanswered questions including “what mechanism will drive and manage the transition to lower-emissions generation in the electricity sector?”
“It remains unclear how abatement will be delivered in the electricity sector and how the various announcements made today will contribute to an economy-wide emissions reduction target,” the BCA said.
It said it had strongly supported the National Energy Guarantee (NEG) and called on the ALP, if elected, “to commit to working with the states and territories to implement the scheme as a credible, market-based mechanism to drive abatement and investment in the electricity sector.”
The Labor party has supported in principle a NEG – the plan the Coalition dumped because of an internal split over it.
The Australian Conservation Foundation gave Labor’s policy a qualified tick, describing it as “a serious policy response to the existential threat of global warming that recognises pollution must be cut across all industry sectors.”
“Labor’s climate change plan does address many of the important challenges Australia has in transforming into a zero-pollution economy,” the ACF said.
But “unfortunately, sections of Labor’s policy platform contain significant wriggle room that big polluters may seek to exploit.
“If it wins government Labor must quickly harden the detail around its policies and resist attempts of industry lobby groups like the Minerals Council of Australia, the Business Council of Australia and the Australian Automobile Association to weaken climate action.”
While Australia is coming to terms with yet another new prime minister, one thing that hasn’t changed is the emissions data: Australia’s greenhouse gas emissions are not projected to fall any further without new policies.
Australia, as a signatory to the Paris Agreement on climate change, has committed to reduce its total emissions to 26-28% below 2005 levels by 2030, and reach net zero emissions by 2050.
New analysis by ClimateWorks Australia has found Australia has three times the potential needed to reach the federal government’s current 2030 target, but this will not be achieved under current policy settings.
Energy is not the only sector
Australia’s emissions were actually falling for more than half a decade, but have been steadily increasing again since 2013. If Australia sustained the rate of emissions reduction we achieved between 2005 and 2013, we could meet the government’s 2030 target. But progress has stalled in most sectors, and reversed overall.
Emissions are still above 2005 levels in the industry, buildings and transport sectors, and only 3% below in the electricity sector. It is mainly because of land sector emissions savings that overall Australia’s emissions are on track to meet its 2020 target, and are currently 11% below 2005 levels.
Despite the current focus on the energy market, electricity emissions comprise about one-third of Australia’s total greenhouse emissions. So no matter what policies are proposed for electricity, other policies will be needed for the other major sectors of industry, buildings, transport and land.
Fortunately, Australia is blessed with opportunities for more emissions reductions in all sectors.
ClimateWorks’ analysis assessed Australia’s progress on reducing emissions at the halfway point from the 2005 base year to 2030, looking across the whole of the economy as well as at key sectors.
We found emissions reductions since 2005 have been led by reduced land clearing and increased forestation, as well as energy efficiency and a slight reduction in power emissions as more renewable energy has entered the market. But while total emissions reduced at an economy-wide level, and in some sectors at certain times, none of the sectors improved consistently at the rate needed to achieve the Paris climate targets.
Interestingly, some sub-sectors were on track for some of the time. Non-energy emissions from industry and the land sector were both improving at a rate consistent with a net zero emissions pathway for around five years. The buildings sector energy efficiency and electricity for some years improved at more than half the rate of a net zero emissions pathway. These rates have all declined since 2014 (electricity resumed its rate of improvement again in 2016).
Looking forward to 2030, we studied what would happen to emissions under current policies and those in development, including the government’s original version of the National Energy Guarantee with a 26% emission target for the National Electricity Market. Our analysis shows emissions reductions would be led by a further shift to cleaner electricity and energy efficiency improvements in buildings and transport, but that this would be offset by population and economic growth.
As a result, emissions reductions are projected to stagnate at just 11% below 2005 levels by 2030. Australia needs to double its emissions reduction progress to achieve the federal government’s 2030 target and triple its progress in order to reach net zero emissions by 2050.
So, while Australia is not currently on track to meet 2030 target, our analysis found it is still possible to get there.
The gap to the 2030 target could be more than covered by further potential for emissions reductions in the land sector alone, or almost be covered by the further potential in the electricity sector alone, or by the potential in the industry, buildings and transport sectors combined. Harnessing all sectors’ potential would put us back on track for the longer-term Paris Agreement goal of net zero emissions.
Essentially this involves increasing renewables and phasing out coal in the electricity sector; increasing energy efficiency and switching to low carbon fuels in industry; increasing standards in buildings; introducing vehicle emissions standards and shifting to electricity and low carbon fuels in transport; and undertaking more revegetation or forestation in the land sector.
The opportunities identified in each sector are the lowest-cost combination using proven technologies that achieve the Paris Agreement goal, while the economy continues to grow.
In the next two years, countries around the world, including Australia, will be required to report on the progress of their Paris Agreement targets and present their plans for the goal of net zero emissions. With so much potential for reducing emissions across all sectors of the Australian economy, we can do more to support all sectors to get on track – there is more than enough opportunity, if we act on it in time.
In practice, these terms depend largely on the infrastructure available. Single-use plastic bags are a good example of a product that is technically recyclable but which is not accepted in most councils’ kerbside recycling collection. That’s because they are often contaminated with food waste and many councils lack the machinery to process them.
On its own, the new 100% target is not enough, because it doesn’t guarantee that recyclable or reusable items will definitely be recycled or reused. To really make a difference, we also need policies and market incentives to ensure that these things end up where we want them to.
We can see this principle in action by looking at the issue of drink containers. Glass and plastic bottles are already 100% recyclable, yet there is a stark difference in recycling rates between states that do have container deposit schemes, and those that don’t.
Despite the Australian Bureau of Statistics’ attempt at a National Waste Account in 2013, little nationwide data are available, thanks to a lack of a consistent reporting framework across different jurisdictions.
Plastic not fantastic
In sectors where not all waste is fully recyclable, the problem is more complex still. Of the seven categories of plastic packaging, only three are economically viable to recycle: PET (soft drink bottles); HDPE (milk bottles); and PVC (shampoo bottles). The other four – LDPE (garbage bags); PP (microwaveable cookware); PS (foam hot drink cups); and other plastics – are less economically viable and so are recycled at much lower rates. While these plastics will still be allowed under the new target as they are technically recyclable, the new target might prompt a switch to less problematic materials.
Globally, around 78 million tonnes of plastic is used every year, but only 14% is collected for recycling, while 14% is incinerated and the remaining 72% ends up in landfill or as litter in the environment.
The problems are no less vexing for other types of waste. With market rates for many types of recyclable paper having dropped to zero in the wake of China’s import restrictions, it will be hard to see how some products will be recycled at all, if left purely to economic forces.
Retailers may have to embrace more innovative solutions to improve the quality of recycling waste, such as reverse vending machines, which accept items such as aluminium cans and plastic or glass bottles – as long as they are cleaned and sorted. However, without creating a local waste market or government incentives, we cannot expect retailers to buy their packaging back.
And this is before we even consider the complexities of composting and reuse. Compostable waste as a whole is already facing problems due to a high contamination rate, and lack of separate bin for recycling organic waste in many local councils. Reuse, meanwhile, needs us to tackle the eternal problem of people’s perceptions and behaviour about using old packaging again.
Will some kinds of packaging disappear?
Under the product stewardship initiative, which calls on producers and retailers to take care of the waste produced after consumption of goods, it seems more likely that some materials will simply be phased out of the product supply chain altogether.
The impending plastic bag bans in several states and leading supermarkets offers a chance to replace them not with heavier, more durable plastic, but with biodegradable, renewable and eco-friendly natural materials such as hemp.
In turn, this would boost hemp production (alongside the legalisation of hemp-based medicine and food products in Australia). This could lead to the opportunity for manufacturing industry to produce environmentally friendly biodegradable plastics. Hemp-based biodegradable plastic would significantly safeguard the environment, even if we failed to achieve a 100% recycling of biodegradable plastic packaging. Similarly, glass or aluminium might be used instead of plastic, and are more easily recycled.
Even more innovatively, we might even see the arrival of edible packaging derived from the milk protein casein, formed into film rather like plastic cling wrap, which can be used to package foods such as butter or cheese.
We’ve established that it’s not enough simply to set a target of making 100% of our waste recyclable, compostable or reusable. To really feel the benefits we need a follow-on target, such as actually recycling 100% of our packaging by 2030.
For this to work, we would need three things:
legislation, regulations or incentives for manufacturers to develop new packaging types;
an increase in public participation rates in recycling; and
the development of a strong domestic market for recyclable materials.
Finally, we should remember that waste prevention is better than waste management. Everyone – from governments, to manufacturers, to retailers, to consumers – should focus first on generating less waste in the first place. Then the fiendish problem of what to do with our waste will be all the smaller.
Australia can meet its 2030 greenhouse emissions target at zero net cost, according to our analysis of a range of options for the National Electricity Market.
Our modelling shows that renewable energy can help hit Australia’s emissions reduction target of 26-28% below 2005 levels by 2030 effectively for free. This is because the cost of electricity from new-build wind and solar will be cheaper than replacing old fossil fuel generators with new ones.
Currently, Australia is installing about 3 gigawatts (GW) per year of wind and solar photovoltaics (PV). This is fast enough to exceed 50% renewables in the electricity grid by 2030. It’s also fast enough to meet Australia’s entire carbon reduction target, as agreed at the 2015 Paris climate summit.
Encouragingly, the rapidly declining cost of wind and solar PV electricity means that the net cost of meeting the Paris target is roughly zero. This is because electricity from new-build wind and PV will be cheaper than from new-build coal generators; cheaper than existing gas generators; and indeed cheaper than the average wholesale price in the entire National Electricity Market, which is currently A$70-100 per megawatt-hour.
Electricity from new-build wind in Australia currently costs around A$60 per MWh, while PV power costs about A$70 per MWh.
During the 2020s these prices are likely to fall still further – to below A$50 per MWh, judging by the lower-priced contracts being signed around the world, such as in Abu Dhabi, Mexico, India and Chile.
In our research, published today, we modelled the all-in cost of electricity under three different scenarios:
Renewables: replacement of enough old coal generators by renewables to meet Australia’s Paris climate target
Gas: premature retirement of most existing coal plant and replacement by new gas generators to meet the Paris target. Note that gas is uncompetitive at current prices, and this scenario would require a large increase in gas use, pushing up prices still further.
Status quo: replacement of retiring coal generators with supercritical coal. Note that this scenario fails to meet the Paris target by a wide margin, despite having a similar cost to the renewables scenario described above, even though our modelling uses a low coal power station price.
The chart below shows the all-in cost of electricity in the 2020s under each of the three scenarios, and for three different gas prices: lower, higher, or the same as the current A$8 per gigajoule. As you can see, electricity would cost roughly the same under the renewables scenario as it would under the status quo, regardless of what happens to gas prices.
Balancing a renewable energy grid
The cost of renewables includes both the cost of energy and the cost of balancing the grid to maintain reliability. This balancing act involves using energy storage, stronger interstate high-voltage power lines, and the cost of renewable energy “spillage” on windy, sunny days when the energy stores are full.
The current cost of hourly balancing of the National Electricity Market (NEM) is low because the renewable energy fraction is small. It remains low (less than A$7 per MWh) until the renewable energy fraction rises above three-quarters.
The renewable energy fraction in 2020 will be about one-quarter, which leaves plenty of room for growth before balancing costs become significant.
The proposed Snowy 2.0 pumped hydro project would have a power generation capacity of 2GW and energy storage of 350GWh. This could provide half of the new storage capacity required to balance the NEM up to a renewable energy fraction of two-thirds.
The new storage needed over and above Snowy 2.0 is 2GW of power with 12GWh of storage (enough to provide six hours of demand). This could come from a mix of pumped hydro, batteries and demand management.
Stability and reliability
Most of Australia’s fossil fuel generators will reach the end of their technical lifetimes within 20 years. In our “renewables” scenario detailed above, five coal-fired power stations would be retired early, by an average of five years. In contrast, meeting the Paris targets by substituting gas for coal requires 10 coal stations to close early, by an average of 11 years.
Under the renewables scenario, the grid will still be highly reliable. That’s because it will have a diverse mix of generators: PV (26GW), wind (24GW), coal (9GW), gas (5GW), pumped hydro storage (5GW) and existing hydro and bioenergy (8GW). Many of these assets can be used in ways that help to deliver other services that are vital for grid stability, such as spinning reserve and voltage management.
Because a renewable electricity system comprises thousands of small generators spread over a million square kilometres, sudden shocks to the electricity system from generator failure, such as occur regularly with ageing large coal generators, are unlikely.
Neither does cloudy or calm weather cause shocks, because weather is predictable and a given weather system can take several days to move over the Australian continent. Strengthened interstate interconnections (part of the cost of balancing) reduce the impact of transmission failure, which was the prime cause of the 2016 South Australian blackout.
Since 2015, Australia has tripled the annual deployment rate of new wind and PV generation capacity. Continuing at this rate until 2030 will let us meet our entire Paris carbon target in the electricity sector, all while replacing retiring coal generators, maintaining high grid stability, and stabilising electricity prices.