In a budget response that seemed designed to connect the dots between cheap energy, industrial resurgence, new skill sets and jobs, Opposition Leader, Labor’s Anthony Albanese has put rewiring the country’s electricity network as central to recovery from the Covid-driven recession.
Albanese’s Budget in Reply speech presented at Parliament House late last week, lampooned the Morrison Government’s record on energy policy to address climate change, saying it remained “frozen in time while the world warms around it”.
More specifically, he acknowledged that “the current [energy] network takes no account of the rise of renewables as the cheapest new energy source, and doesn’t help link these new sources up to the national grid”.
A Labor Government, he vowed, would establish a Rewiring the Nation Corporation, which could utilise “the Commonwealth’s ability to borrow at lower interest rates” to fund the projects needed to rebuild the grid, which “have all been identified in the Australian Energy Market Operator’s Integrated System Plan” (ISP).
He promised to hire Australian steel and construction workers to upgrade the grid, in a $20 billion infrastructure investment plan that he says will break even.
Existing practice is that system upgrades are funded by private network operators, and the Opposition energy and climate change spokesman Mark Butler said, “some transmission companies have already reported trouble accessing finance for these critical projects and are seeking rule changes to fast-track revenues from Australian consumers.”
Using the Rewiring the Nation fund, would provide lower interest rates than private finance and result in “lower power bills for Australians”.
The Clean Energy Council (CEC) welcomed the Opposition commitment to inject billions into accelerating investment in Australia’s electricity network” and unlocking “the next wave of renewable energy investment”, it said in a post-budget-reply media release.
It said that while network service providers and private investors “have demonstrated a strong willingness to own and operate new transmission infrastructure, the regulatory regime is not fit-for-purpose in providing certainty” and encouraging the kind of investments that such long-term assets require.
Taking on the risk
Advocate for commercial and industrial users, the Energy Users’ Association of Australia (EUAA) was also optimistic regarding the utility of Labor’s plan, particularly for reducing risks to consumers of over-investment in a changing energy ecosystem.
“Rapid evolution of technologies and consumer usage patterns means we are faced with a highly uncertain future,” said EUAA CEO Andrew Richards in a statement.
The advocacy group points out that 40% of energy bills are already attributable to the cost of network infrastructure, and that billions of dollars worth of investment in what are now urgently needed upgrades may lead to future stranded assets as technologies become superseded.
Richards said that “significant financial contribution from government” that supports the rollout of the ISP, could “help shield energy users” from such risks and costs and as such would be “welcomed by the EUAA”.
In The Australian newspaper on Friday, Bruce Mountain, Director of the Victoria Energy Policy Centre commented, “Having the Commonwealth running competitive tenders for network providers could drive down costs,” in an environment where power supply has been the responsibility of state governments which then compete for Commonwealth funding for infrastructure projects.
Can any ruling party maintain an unbiased, technologically attuned mindset?
But said Mountain, under Labor’s plan, the question becomes, “how does the Commonwealth work with the states on planning priorities and keep politics out of it?”
Mountain has been a strong critic of the viability of projects such as the Marinus Link, which is proposed to connect Tasmania’s ‘Battery of the Nation’ pumped-hydro energy-storage capabilities to the mainland.
In the VEPC analysis commissioned by the Bob Brown Foundation into the economics and greenhouse gas impact of the combined projects, and published earlier this year under the title Wrong Way, Go Back, he and co-author Steven Percy, Research Fellow at the VPEC, wrote that, “even if Hydro Tasmania could provide 1,500 MW of hydro and pumped storage without incurring any additional cost, it will still be cheaper to build 1,500 MW of batteries in Victoria rather than to build Marinus Link”.
Going for the flow states
Mountain told The Australian that the government should, instead of devoting funds to massive, risky and long-lead-time projects such as Marinus and Snowy 2.0, prioritise transmission upgrades between states and infrastructure to connect emerging renewable energy zones (REZs) to major cities.
The CEC noted in its post-budget statement that, “The ISP identifies the highest priority transmission projects with a clear business case to benefit electricity customers concerning the price, security and reliability of the energy system.”
Among the actionable ISP transmission projects for 2020 are Project EnergyConnect, a new 330 kV double circuit interconnector between South Australia and New South wales and the central-West Orana REZ Transmission Link, which comprises network augmentations to support the highly popular development of NSW’s first renewable energy zone — a plan that drew nine times the required investor interest.
AEMO has also prioritised Marinus Link, which comprises two high-voltage DC cables, each with a capacity of 750 MW, connecting Tasmania and Victoria, which is deemed actionable “with additional decision rules”.
Ensuring equitable use of Commonwealth funds
The ISP has identified projects that do indeed better enable the flow of energy between states, and therefore between different time and weather zones, which will help balance supply in the grid; yet Mountain warned that Albanese’s plan is open to “pork barrelling” — that proud practice of channeling government funds to win votes in certain electorates.
Rewiring the Nation is forecast by Labor and by industry groups such as the CEC to create thousands of jobs, particularly in regional areas of Australia; Albanese says it will also “deliver up to $40 billion in benefits”. Such economic stimulus will be welcomed and likely hotly contested.
“To handle the seismic shift expected in electricity generation by 2040,” said Andrew Dylan CEO of Energy Networks Australia, earlier this year, “we will need targeted investment in key transmission connections.”
Successfully bringing billions of dollars to bear on the right moving targets may yet prove more complicated than it seems, but the ALP’s focused commitment eclipses the Liberal National Coalition’s scattergun approach, to funding various technologies that will support further gas development and even “clean coal”, which remains a misnomer.
Albanese said in his budget speech that “fixing transmission” is also “technology neutral”, words that the ruling coalition uses to falsely indicate a lack of bias towards which technologies should be developed. Labor’s plan, however, is more likely to, as Albanese said, “allow the market to drive least cost, new energy production”.
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