Morrison-Berejiklian energy deal: Opportunity for renewables or climate deal with the devil?

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The Federal and New South Wales (NSW) governments have unveiled a “landmark” energy deal which will both facilitate investment in fossil fuel industries in the state and deliver federal grants and loans for NSW-based emissions reduction initiatives. The first of a series of bilateral energy agreements the Morrison government hopes to sign with its state and territory counterparts has been interpreted both as a huge win for fossil fuel companies and an opportunity for the clean energy sector.

The $2 billion deal includes a number of initiatives, ranging from increasing gas and electricity supply in NSW to improving grid security and supporting emissions reduction projects that deliver genuine abatement. More specifically, the give-and-take agreement will see the Federal government pay for two new interstate transmission links – HumeLink and the Queensland-NSW interconnectors, back new generation projects in NSW through its $1 billion Underwriting New Generation Investment program and financially support the establishment of a pilot renewable energy zone in the Central West. In return, the NSW government has committed to facilitate investment opportunities to inject an additional 70 petajoules of gas per year into the east coast market and remove barriers to coal supply to the Mount Piper Power Station.

The deal includes at least $450 million of federal grants and $510 million more of federal grants or loans for “NSW-based emissions reduction initiatives”, to be matched by $1.01 billion in direct funding from the Berejiklian government. While Prime Minister Scott Morrison underlined at a press conference on Thursday that the deal was about “getting electricity prices down, getting emissions down, getting more power into the system and getting the gas to make that happen”, journalists were eager to know how increasing coal and gas supply can reduce carbon emissions.

“This plan makes perfect sense to us. It’s a good balance and Mount Piper will be in operation until at least 2042. So we rely on that as a critical energy source,” NSW Premier Gladys Berejiklian said. She told reporters that the Narrabri gas project “may very well be” the source of extra gas which would meet the Federal government’s requirement – an additional 70 petajoules.

Gas and emissions reduction?

Noting that deals such as the one with the NSW government will help Australia “meet and beat” its Paris emissions reduction targets, Morrison used the occasion to once again point to the importance of gas as a “transition fuel”. At the National Press Club Address held on Wednesday, Morrison stated that: “There is no credible energy transition plan, for an economy like Australia in particular, that does not involve the greater use of gas as an important transition fuel.” However, energy market experts from the Institute for Energy Economics and Financial Analysis (IEEFA) say nothing can be further from the truth.

“Producing yet more high-cost gas is no panacea to the problem faced in Australia of high domestic prices in a low-priced gas world,” IEEFA gas/LNG analyst Bruce Robertson said. “Gas prices are fixed by the industry at levels far in excess of international parity prices. The tragedy for Australian gas consumers is that despite this abundant and clear evidence of price-fixing by gas producers, nothing of any substance has been done by either politicians or regulators to give substantive relief to energy consumers.”  

The Australian Greens have also rejected Morrison’s statements, arguing reliance on “toxic methane gas” puts Australia’s “weak climate targets on a certain path to failure”. “This is a climate deal with the devil,” Greens MP Adam Bandt said. “We must jump straight to renewables and storage, but Prime Minister is using public money to grow coal and gas. By opening vast gas fields and with toxic methane up to 86x more potent than CO2, Prime Minister is blowing Paris climate targets.”

The deal was also slammed by the Climate Council’s CEO Amanda McKenzie, who said the idea that gas would reduce prices was nonsensical since gas was the reason power prices are so high along the east coast of Australia. “Every dollar toward fossil fuel projects is a dollar toward making heatwaves worse and fires more damaging. It is just crazy, given everything we have lost this summer to even suggest opening new fossil fuel reserves,” she said.

 Always look on the bright side

But the Clean Energy Council (CEC) had a different perspective, interpreting the deal as a new opportunity for clean energy in NSW. According to CEC CEO Kane Thornton, the support for further transmission and a Renewable Energy Zone should provide some exciting opportunities for a wider rollout of renewable and storage technologies in NSW.

“The agreement is a positive step forward for the continued growth of the NSW renewable energy sector,” Thornton said. “While we are still waiting on the detail of where and how the $2 billion will be spent, any initiatives to speed up the rollout of clean technologies, such as hydrogen research, are very exciting for NSW.”

The CEC was particularly content with the promise of underwriting HumeLink and the QLD-NSW interconnector and providing funding for the Central West NSW renewable energy zone, describing the initiatives as a positive move to bring back investor confidence in renewable energy projects. Earlier announcementssurveys, and reports have already unmistakably suggested a massive drop in investor confidence, and a new analysis released by the CEC on Friday arrived as yet another confirmation, revealing a fall from 51 projects worth $10.7 billion in 2018 down to 28 projects worth $4.5 billion in 2019.

The Morrison-Berejiklian deal will also support the federal government’s investments under the Underwriting New Generation Investments (UNGI) program, which shortlisted three potential projects in the state: a pumped hydro energy storage project in Armidale proposed by UPC Renewables, NSW’s first liquefied natural gas import terminal at Port Kembla developed by Australian Industrial Energy and a Delta coal power station upgrade at Lake Macquarie, which Morrison previously described as “very small”.