LAUNCESTON, Australia, Nov 12 (Reuters) - Australia is
turning into an example of what happens when the market leaves
policymakers behind, with renewable energy attracting the
investment dollars even as the conservative government clings to
its vision of a natural gas future.
Two recent announcements underscored that Australia is
moving toward an energy future where renewables play the biggest
part, and the proposed gas-led recovery planned by Prime
Minister Scott Morrison may turn out to be a white elephant.
Fortescue Metals Group, the world's fourth-largest
iron ore miner built from scratch by billionaire Andrew Forrest,
outlined plans on Wednesday to become a global renewable energy
Forrest said his company has so far committed A$1 billion
($731 million) to build a portfolio of renewable energy assets,
including green hydrogen and ammonia, and has a target to have a
225 gigawatts (GW) of installed energy capacity.
"With scale and innovation, we will be able to ramp up
supply of green hydrogen and green ammonia to deliver low cost
energy reliably at industrial scale to customers all over the
world," he told Fortescue's annual meeting.
The second example was the undertaking by the state
government in Victoria, Australia's second-most populous state
and home to Melbourne, to build a 300 megawatt battery as part
of efforts to build electricity capacity.
"With climate change resulting in hotter summers, peak
demand for electricity is rising. At the same time, Victoria's
ageing coal-fired generators are becoming increasingly
unreliable, resulting in a need for additional capacity to
ensure the state's power supply," the state government said in a
statement on its website.
"This additional capacity will lower electricity prices for
all Victorians and deliver significant net benefits to Victoria,
far outweighing the cost of the project," the government said.
There are two key messages to unpack in that statement.
The first is that the coal-fired power plants, long the
mainstay of Victoria's, and indeed Australia's, electricity
system, are now deemed ageing and unreliable.
The second is that installing a battery, which will become
the largest in Australia, will result in lower electricity
prices and be profitable.
This undercuts the argument from Morrison, who leads the
Liberal-National coalition federal government, and the
supporters of a gas-fired recovery that renewables can't provide
sufficient reliability and will be expensive.
The federal government's gas-fired recovery plans rest on
subsidising the transportation of natural gas from the remote
areas in which it is found to the major urban centres on
Australia's east coast.
It may also involve the government building its own
gas-fired power plant near the biggest city of Sydney, given
that no private sector generator currently has plans to build
such a plant, mainly on the grounds of the lack of a profitable
What Morrison has yet to outline is the extent of the
subsidies that will be needed to make natural gas "cheap" enough
to compete with renewable energy in Australia's power market.
Given that much of the natural gas is located in remote
basins thousands of kilometres (miles) from the major east coast
cities, it's likely that these subsidies would have to be vast,
and long-lasting, in order to make the fuel competitive.
There is an old saying that anything can be made to work if
there is sufficient taxpayer subsidies to do so, and it appears
this is the path that Morrison intends to follow.
It will likely end up being costly for the taxpayer and
deliver a poorer outcome than if the same money was invested in
boosting the use of renewable energy, backed by battery storage
or pumped hydro, or even supported by gas-fired peaking plants.
But the most damning reaction to Morrison's gas-led recovery
plan is how the market has ignored it and moved on.
(Editing by Richard Pullin)