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Gaps in the Government’s Energy Green Paper

By Chris Greig

The government’s energy Green Paper proposes reforms that will be difficult to deliver while ignoring several long-term issues.

The Australian government’s Energy Green Paper has weaknesses in three critical areas – its short-term focus, failure to recognise economic risks associated with greenhouse gas emissions, and institutional and fiscal barriers to proposed reforms.

The majority of the document is focused on resolving near-term issues but falls short in positioning Australia’s energy strategy to support the significant investment that will be required in the medium to longer term.

The Green Paper proposes a range of reforms and suggestions that appear difficult to deliver under present policy settings due to institutional constraints – such as lack of bipartisan support or policy misalignment between the Commonwealth and states – and/or fiscal constraints – such as funding cuts to research institutes, universities and state-owned utilities, and reduced profitability in the energy and resources sector.

Its general acceptance that Australia and the rest of the world will continue to rely on fossil fuels for several decades may reflect reality but comes with significant risk that the Green Paper largely ignores. Failure to recognise and plan for the real geopolitical and economic risks that Australia will find itself out-of-step with international thinking around greenhouse gas emissions and climate change leaves the country exposed to possible future international moves to limit and/or price carbon emissions.

In taking the Green Paper through to the White Paper stage the government should consider several additional topics.

The Green Paper does not adequately address the security and reliability of Australia’s power systems or transport fuels. We need energy policy settings that create long-term certainty for investors – a critical issue for Australia as investment in the electricity sector is at very low levels despite low interest rates.

Policies should be more supportive of innovation and investment in more efficient, less emission-intensive technologies, including both renewables and nuclear energy, so that it is easier to write down and replace older, inefficient and emission-intensive fossil-fired plant and equipment. Australia also needs to characterise its geological storage resources to better understand the potential of carbon capture and storage as a carbon mitigation option.

We must address the issues that are preventing a resolution of current restrictions on coal seam gas exploration and/or hydraulic fracturing in NSW and Victoria, and provide incentives to attract and accelerate investment in the exploration and development of unconventional gas resources onshore.

Importantly we must improve community engagement – which rests on increased community trust in both industry and government.

The present cost /price/value relationship for electricity is not effective. Australia must modify tariff structures and broaden tariff choices to better align retail electricity prices with time-of-day cost and service value.

The Green Paper’s language needs to be stronger. The stated goal of securing reliable and affordable energy in a technology-neutral way that could also help to lower emissions should be recast as securing reliable and affordable energy in a technology-neutral way that will transition the energy sector to lower emissions.

Recommendations

In framing the imminent Energy White Paper, the government should:

  • include an objective to strengthen the resilience of the electricity system over the next decade by creating incentives for significant capital renewal and diversification (given risks around carbon intensity);
  • take a strong position on nuclear power and support amendments to the Australian Radiation and Nuclear Safety Act and the Environment Protection and Biodiversity Conservation Act that would allow construction and operation of nuclear power plants – if the markets and communities accept them and plant owners/funders choose to invest in nuclear power;
  • undertake a rigorous risk assessment of Australia’s energy security in respect of transport fuels, including consideration of the potential contribution of electric vehicles associated with low-emission electricity supplies;
  • improve education and training, which must go beyond the Industry Skills Fund. Initiatives should also seek to increase the RD&D talent base by developing home-grown talent, attracting international expertise and fostering international connections of researchers and industry;
  • increase strategic RD&D investments in large-scale solar power, large-scale energy storage, intelligent networks, carbon storage resource characterisation, improving productivity of gas extraction and low-emission liquid fuels technologies ( particularly for aviation, maritime and heavy logistics); and
  • develop a robust and independent techno-economic evaluation process to support strategic investments in RD&D.

Chris Greig FTSE is Professor of Energy Strategy and Director of the University of Queensland’s Energy Initiative. He is internationally recognised for his vision and leadership in low-emissions energy, especially carbon capture and storage.