Don’t Leave Us in the Dark, Mr Morrison
Just now, the Morrison government still seems secure. Its narrow but decisive win has shattered an opposition that had thought it was coasting to victory. The Labor Party is about to begin a civil war between green-left ideologues and old-fashioned pragmatists that the ideologues are likely to win, at least in the short-term. Even so, governments are expected to tackle problems, not just to play politics and in a host of areas, the Morrison government confronts practical challenges that it shows little sign of fixing.
The government has no plan to reduce a wage-suppressing, infrastructure-clogging, near-record level of immigration, which is being driven by an influx of people on semi-permanent work and study visas, rather than by the so-called “permanent” intake, which has been cut by a token 15 per cent. As our strategic situation deteriorates, the government talks about the largest defence build-up in Australia’s peacetime history, but it’s also the slowest, with even the first of the new submarines not due for fifteen years. The economy remains subdued, but there’s no appetite for serious structural repair, like a tax-mix shift. Our governmental structures remain gummed-up, with a permanent Senate majority in favour of more spending, more regulating and more tax on our most productive people and with too many vital decisions disappearing into COAG, our local version of the EU, never to reappear other than as plans for more spending and more regulating.
The most important issue is energy. The power supply never used to be a federal issue until Canberra’s emissions-reduction policies sent prices through the roof and reliability through the floor. Now, everyone looks to the federal government for a solution, yet it’s the states that will have to agree to it – which gives the green-left (whether they’re so-called progressive Liberals or an emissions-obsessed Labor Party) a veto over good policy. The hotter the coming summer, the more likely it is that there will be severe blackouts and power rationing – coupled with further price hikes – that the public will almost certainly pin on the Morrison government. If this can’t be sorted, at some point, the public will eventually look to Labor for solutions, regardless of how many times the government claims that Labor would make a bad situation even worse.
Despite all the green lobby hype, more than 60 per cent of our power supply still comes from coal, even though we’ve now achieved the Renewable Energy Target and even though virtually all our new power supplies are wind and solar (with the exception of the Snowy 2.0 pumped hydro scheme, which won’t become available until at least 2025).
It should have been obvious, at least since the South Australian state-wide blackout in late 2016, that unreliable, intermittent, renewable power is destabilising the power supply. Renewable power, as its boosters claim, is indeed very cheap – but only when the wind blows and the sun shines. The problem is that we don’t just need power that’s cheap and available when the weather is favourable. We need power that’s there all the time and by far the cheapest form of 24/7 power remains coal. That’s why our thermal coal exports are at record levels and tipped to go even higher as Asian countries (without our emissions obsession) consume more energy to boost their people’s standard of living.
Once renewables are a large percentage of the power supply, the wholesale price of electricity gyrates wildly from zero to tens of thousands of dollars per megawatt hour as the supply from wind and solar booms and busts with the weather. But even though coal remains the cheapest form of base-load power, large coal-fired power stations (especially the old ones that we have) are hard to ramp up and down as the supply of renewables peaks and troughs.
Hence private power companies have an incentive to close down coal stations that are uneconomic for much of the day, while wind and solar is available, even though they’re essential during the night when the sun is down and the wind fades. This is how South Australia lost the Northern Power station in 2015, Victoria lost the giant Hazelwood station in 2017 and NSW will lose the almost equally large Liddell station in 2023. And why wouldn’t they? Prematurely retiring old coal-fired power stations saves on maintenance, boosts the value of their remaining coal stations and boosts their profits, as the wholesale price of power skyrockets. Plus, like AGL, they can run virtue-signalling ads boasting about how green they are; because regardless of whether the power price is high or low, their wind and solar farms generate a hefty income via the renewable energy certificates that power retailers have to purchase and consumers have to pay for.
The Morrison government’s response, prior to the federal election, was to seek expressions of interest from the market for the provision of new, 24/7 base-load power. Of the short-listed proposals, only one involves a modest expansion of coal-fired power. The rest back more pumped hydro (even though pumped hydro actually consumes more power than it generates and is only feasible via a surfeit of wind and solar power at certain times) and more gas-fired power (even though the gas price is high and supply is highly constrained because of export contracts and green-driven bans on further exploration and extraction).
Post-election, there’s been no advance on this, despite the government’s new-found political authority and confidence.
The fundamental problem is that political risk has made coal-fired power generation a no-go zone for private investors worried about the new emissions restrictions that a future Labor government might impose on them. Likewise, half a century ago, it took state government agencies to originally build our power system, because the private sector wouldn’t make the long-term investment required.
So, if we are to have new coal-fired power stations, government will have to build them. A government that’s prepared to spend upwards of $10 billion all-up on Snowy 2.0 shouldn’t be philosophically averse to building some new coal-fired power stations. But does it have the political courage to get it done?
Ross Fitzgerald is Emeritus Professor of History and Politics at Griffith University and the author of 40 books.
Quadrant Online, 19 September 2019
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