Long read: White elephant Morrison Government announces gas-led relapse


The free market does not have a mind, but by forcefully intervening in the transitioning energy market to prop up what is only meant to be a crutch anyway, gas-fired power, Prime Minister Scott Morrison is proving he doesn’t have a mind either. The Morrison Government tells us that we need to use gas-fired power as a crutch to carry us through the energy transition. Of course, it doesn’t take much grasp of the obvious to realise that the use of a crutch in a country with the resources of Australia can only be a psychosomatic symptom of political insecurity.

Prime Minister Morrison announced today that he is prepared to build a new gas-fired power station in the Hunter Valley, NSW, if energy giant AGL doesn’t make up for the capacity lost when the Liddell power station closes in 2023. If the private sector failed to “step up”, says Morrison, then, we are to assume, the Government will step in, leaving us all wondering at the question hanging in the room like an elephant: If the private sector doesn’t believe in coal and gas, why does Scott Morrison?  

That isn’t all though, Morrison also says his Government will underwrite the construction of gas pipelines to feed a new Australia Gas Hub expanded out of the existing hub in Wallumbilla, QLD. 

“To ensure affordable, reliable power,” said the Prime Minister, “we need the market to deliver 1,000 MW of new dispatchable capacity by the summer of 2023-24. With final investment decisions by the end of April 2021. Now, that’s less than eight months, and we’re counting. Each day.” The country is counting too Prime Minister, counting on you to lead us out of recession, and the done-for gas sector is your strategy? 

“So, this is the plan,” said Morrison: “If the energy companies choose to step up, and make these investments, to create that capacity – great. We will step back. If not, my Government will step up and we will fill the gap. And to this end Snowy Hydro is already developing options to build a gas-generator in the Hunter Valley should the market not deliver.”

Morrison presented his government’s gas-led recovery as if it were a strong stand against private sector ambivalence. But the truth is, Morrison doesn’t have the guts to take the possible short-term hit of an unbridled transition to renewables. The last decade has seen a significant drop in the life-expectancy of Prime Ministers, and it seems Morrison doesn’t want to risk being back-stabbed by his own party for doing what is right for Australia in the long term. It should come as no surprise that the kind of ‘big men’ proclaiming themselves as heroes are only broadcasting their cowardice. Too cowardly to lead a party that is itself too cowardly to go cold-turkey from fossil fuels – their inflated egos like elephants in the room. 

Around the Grounds: gas-led recovery or relapse? 

When asked by the ABC whether there is a clear need to generate non-renewable power in Australia in a bid to keep prices down and maintain reliability, Tony Wood, the Grattan Institute’s energy program director, said, simply, “No.” Wood noted that prices are already coming down (which should reflect in retail prices over the next 12-months), and in terms of reliability that the Australian Energy Market Operator’s (AEMO) forecast for next decade is “pretty good.” “So it is not exactly obvious that we need these significant threats of government intervention,” said Wood. 

On the point of whether the private sector would step up to Morrison’s April deadline, Wood said that companies like AGL were already stepping up, although not with as much as 1,000 MW, but that is because “we don’t need 1,000 MW of additional capacity in the market…we need the best part of 300 (MW) over the next five or six years.” 

AGL seem to agree with Wood, hence why the energy giant has laid out plans for the deployment of around 1,200 MW of utility-scale batteries across multiple locations, including a massive 500 MW battery system at its Liddell site.

Wood concludes that there is “just a disconnect between what the Government is talking about and what the market actually needs.” This is partly because, as Wood says, the idea of a “gas-led recovery” is a mirage – because the idea of getting really low price gas, economically, “is gone.” 

Indeed, as The Australia Institute’s Richie Merzian pointed out on Sky News, “Gas makes energy prices more expensive. Australia has tripled gas supply in the last decade on the east coast, yet Australians are paying more for gas.”

The Australian Workers Union (AWU) welcomed Morrison’s announcement, calling it a “step in the right direction.” The AWU has been campaigning for more domestic gas use for a manufacturing industry for some years now. However, let’s be clear, a secure domestic supply of gas for the manufacturing industry is a very different thing to gas-fired electricity generation and a new gas-fired generator in the Hunter Valley is a major market intervention. Moreover, as Tony Wood pointed out, if you were going to secure a cheap domestic supply of gas, you would do it on the West Coast, not the East. Wood also pointed out that if gas was so important to a manufacturing boom, why wasn’t there a manufacturing boom when gas was cheap? 

The AWU has been understandably frustrated that Australia has spent recent decades shipping its gas in liquid form to our Asian neighbours as the world’s largest gas exporter while at home Australians are paying the highest prices for gas amongst developed nations. But Morrison’s gas-led recovery and ultimatum to private industry is not a step in the right direction, like Australia’s LNG exports, Morrison’s Government is pillaging Australia’s wealth for the profit of the few, something the AWU should be better at recognising. 

For Katharine Murphy of The Guardian, Morrison’s gas-fuelled power plan is the crowning achievement of the Coalition’s royal energy policy stuff-up. “Morrison’s current position on energy is a creaking anachronism dressed up as a deep insight,” said Murphy, evidently sick and tired covering the pitiful squirms of the Coalition’s shared brain cell. 

“We are here because Morrison’s corporate advisers, with backgrounds in the fossil fuel industry, are pushing for precisely this outcome” said Murphy, who went on to quote the Prime Minister: “A key voice, he said, had been Andrew Liveris, a former Dow Chemical executive and current Saudi Aramco board member, who ‘sat down with me at Kirribilli’ and said if ‘you want to change manufacturing in this country, you’ve got to deal with gas.’ Quelle surprise.” 

One can sympathise with Murphy for having been “cursed to cover this soul-eroding public policy car crash,” but the truth of the matter is, we’re all cursed with this mess. After all, the Coalition is in so far over its head that it’s threatening to come in over the top of the market if it doesn’t do what the Coalition wants. A fine example of greed growing into petulance. But let’s be clear about this threat, the Morrison Government is saying that it will invest enormous quantities of our tax dollars to prop up a sector the market is leaving behind, maybe it should invest in Blockbuster Video while it’s at it. As Murphy put it, Morrison is having the taxpayers “bear the risk of a set of propositions that have all the hallmarks of a boondoggle.” 

Unfortunately, The Age’s and The Sydney Morning Herald’s chief political correspondent, David Crowe (who got wind of the announcement a day ahead), failed to recognise the clear political play at hand. Crowe says that those who want to stop Morrison’s gas plan are outnumbered because Labor is divided. Evidently, Crowe needs to be reminded that posterity outnumbers any piffling majority the Morrison Government has. 

The Australian Financial Review’s Phillip Coorey played a similarly straight bat in his account of the Prime Minister’s announcement of a gas-led recovery, covering the news like it was just that, new, and not what it really is, which is a continuance of the same addictive behaviour – selfish, audacious, destructive.

Coal and gas are already being swept away by wind and solar 

According to the AEMO, wind and solar contributed 11.7 GW (46.5%) of total energy at the settlement period around midday on the 20th of August. A mark surpassing the previous record set in November 2019 by some 400 MW. 

Despite Federal Government obstinacy, records of clean energy integration are falling with the ease of Neymar in the penalty box. Indeed, Rystad Energy analysis has shown that the combined power production of coal and gas will be overtaken by solar and onshore wind generation by 2026. 

Gas peaked in 2017 at 55.33 TWh after a decade on the rise. But as analysis from Cornwall Insight Australia Lead Consultant Lumi Adisa demonstrates, looking New South Wales (NSW) in particular, Q2 2017 saw gas and hydro’s total share of merchant revenues (excluding coal) reach 76%, while wind and solar shared a total of 24%. Three years later, in Q2 2020, and those figures have almost reversed, with gas and hydro sharing 40% of non-coal merchant revenues whilst wind and solar have soared to a 60% share.

In the last three years, wind has more than doubled its capacity in NSW while gas’ revenue share has dropped from 42% to 18%. Over that same period solar has also increased its revenue share in NSW from 7% to 14% thanks to a four-fold increase in capacity. What we are seeing then is wind and solar pushing out gas, with wind outperforming solar on revenues but with solar growing.

New analysis from the Australian National University (ANU) concurs with Dixon, leading Professor Professor Andrew Blakers to insist that “we urgently need more investment to remove bottlenecks in deployment of further renewables.” 

“An effective way to do this is to upgrade transmission lines from rural Renewable Energy Zones, such as those recently announced in NSW and Queensland, to our cities,” said Blakers. “While our governments have been slow to act on transmission, if the Federal and state governments make determined efforts to rapidly resolve these bottlenecks, we can get ahead of the solar and wind construction curve instead of lagging behind it.” 

Investors don’t like hot air

Resources Minister Keith Pitt said: “The government wants the private sector to step-up and make timely investments in the gas market.” But investors have resoundingly rejected investing in dirty fuels the longer the energy transition has progression, because, due to common sense, investors don’t want to invest in stranded assets. 

The Australian Energy Council (AEC), which represents major investors in generation and the majority of Australian electricity generators, is already declaring the Government’s approach as counter-productive. AEC Chief Executive Sarah McNamara said investment in generation had already slowed to a near stop because of the Government’s energy policy uncertainty, and now that the Government is threatening to intervene if private investment isn’t made in a stranded asset like gas (again, AEMO has said no new gas generation is required in coming decades), investors are even more deterred. “There are no material reliability concerns that would warrant this kind of interventionist approach,” said McNamara, “and there are already mechanisms in place to address any shortfall identified.”

Of course, the Morrison Government knows the private sector isn’t interested in coming to the rescue of the gas sector. If the Government didn’t know the likelihood of private gas investment was so low then Energy and Emissions Reduction Minister Angus Taylor wouldn’t be attempting to sabotage the Clean Energy Finance Corporation (CEFC) by surreptitiously changing its mandate to not only allow it to invest in gas projects, but unprofitable gas projects.

To use CEFC funds to invest in gas generation is like using Defence Force funds to hire an insurgency group. The latter sabotages the efforts of the former. Of course, this is not to say non-clean energy is outside of CEFC’s remit, the investment bank’s guidelines, set when the CEFC was founded by the Gillard government in 2012, state that it can invest in fossil fuels if the technology delivers 50% less emissions compared to the generation systems currently connected to the grid. Whether gas meets this guideline or not, it’s not 2012 anymore, we’re in what feels like the 46th month of 2020 now and patience for Taylor’s tricks has well and truly run out.

Now, would Taylor be going to such lengths if private sector investment weren’t fleeing from fossil fuel investment like it was fleeing from ISIS? Only last month major insurer Suncorp announced that it will cease any financing or insuring of the oil and gas industry by 2025. In July, Hesta, a leading industry superannuation fund trusted by 860,000 Australians also joined the growing corpus of major investment firms nationwide calling on the Federal Government to encourage large-scale renewable investment and clean up its dirty energy strategy.

More mess to clean up 

From the other side, the Clean Energy Council (CEC) says that the Government’s commitment to new gas generation is “unnecessary and unhelpful”, and that “Clean energy investors are ready to build the next wave of new renewable energy and energy storage projects to meet the challenge set out in the Federal Government’s investment ultimatum. CEC Chief Executive Kane Thorton said: “Wind, solar and storage technologies are by far the cheapest form of new electricity generation for Australia and can provide the flexible, reliable and secure generation we need.”

“Gas generation,” continued Thornton, “is costly to build and expensive to run. The only way that a new gas-fired power station will get build in Australia is if government builds it using taxpayers’ money, and that’s because it’s largely uneconomical when compared to renewable energy and energy storage equivalents. There’s a good chance that a new plant could become a white elephant, unable to compete with firmed renewables.”

The term “white elephant” is perhaps more apposite than Thornton realises. In 1927, Ernest Hemingway published a story called “Hills Like White Elephants” in a literary magazine called, fittingly, Transition. Like many of Hemingway’s works, the story in part exposes male vulnerability and the guises used to mask it. That the term “white elephant” alludes to something useless or unwanted and yet enormously troublesome is particularly applicable to the Morrison Government because there is nothing more useless, unwanted and catastrophic than a pack of gassed up cowardly men puffing their chests.

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