These days, the only commercial role for new gas projects is for small-scale back up.
The only rival to the arrogance of Morrison’s gas-led recovery strategy is its irresponsibility.
So much for evidence-based policy as a foundation for good, responsible government.
There is no evidence to support the expansion of gas-fired generation in today’s world, where renewables are decidedly cheaper, and with negligible emissions.
About 30 years ago when I first got active in the climate debate – and when renewable energy was significantly more expensive – gas had merit as a transition fuel, offering 40-60 per cent less emissions than coal-fired power (depending on whether it was black or dirtier brown coal). This is no longer the case.
The only commercial role for new gas projects today is for small-scale back up.
Banks will not fund large-scale gas generation and insurers won’t insure it.
The plant would be a stranded asset within a decade.
Indeed, the only way these projects could be financed today is by government, using taxpayer funds or borrowing, the alternative or opportunity cost of which would be considerable – especially in terms of the effectiveness of a COVID recovery strategy.
For example, the economic and social benefits of social/affordable housing would significantly outweigh new gas generation projects.
It would be grossly irresponsible for the government to fund new gas generation as Morrison is threatening to do if the private sector doesn’t come up with alternative projects, by April next year, to generate the 1,000MW that will be required to offset the scheduled closure of the Liddell coal-fired power plant.
Of course, this could all just be Scotty from Marketing, with another bolshie, headline announcement to claim “leadership” with some climate credibility, but with no intention of follow through as to detail in the midst of what will be an election year.
You may recall that when AGL announced the closure of Liddell, it said that it was no longer commercially viable to keep operating the plant, or to attempt to upgrade it.
It would be able to replace the 1,000MW by the time it closed – at that time it had about five years to do so.
The Turnbull government publicly pressured AGL to stall its decision or upgrade the plant, or it would facilitate a sale – some even speculated that the government could seek to take it over.
This newly found, interventionist attitude of the LNP in the energy sector sits clearly at odds with parties that claim conservative positions in favour of small government, low levels of regulation and a preference for reliance on markets and market forces.
Being true to these positions would see them prefer to put a “price on carbon”, relying on the market to penalise the polluters, accelerate the closure of coal-fired power stations and the transition to renewables, and negate any idea of new coal or gas-fired generation.
Moreover, the government couldn’t justify an intervention by claiming energy market failure, as it isn’t the market that has failed but successive governments.
There are two main factors at work here.
First, Morrison himself, who runs on prejudice, simplistic (focus group-type) assessments of perceived short-term political advantage and his standing with mates.
Second, those mates who seize any moment to further their own special interests and have been appointed as “advisors” to his COVID recovery strategy.
The gas strategy has then been wrapped in hubris claiming a focus on the “criticality of manufacturing” that necessitates Australia diversifying our manufacturing strategy, and urging that our country has to be a “leader” in the global market.
Then the first step in this plan is, of course, the transition from coal to gas as critical to our energy transition.
Clearly, none of this sits well with the fact that, as one of the world’s major exporters of LNG, we failed (with the exception of WA) to reserve a percentage for the Australian market. Nor, with the climate wars having ensured our domestic gas prices have been higher than the world price.
Bottom line – we have never had a gas plan, inflated gas prices have hurt many of our industries, and there is no case for gas as a transition from coal when we can go directly to much cheaper renewable energy.
This direct transition should be a fundamental feature of our COVID recovery strategy.
John Hewson is a professor at the Crawford School of Public Policy, ANU, and a former Liberal opposition leader.