Bowen’s big bang energy push puts heat back on Coalition

It’s those exemptions that infuriate McKim and the Greens, who are on a war against every new molecule of gas, regardless of warnings by regulators that looming shortfalls will destabilise the energy grid.

Such are the distortions of climate policy without an economy-wide carbon price.

In normal times, McKim’s “disallowance motion” wouldn’t stand a chance.

But these are not normal times, particularly when it comes to gas and the Coalition’s growing willingness to throw the industry under the bus to cause Labor short-term political pain.

Nowhere was this more on show than this month’s Senate shenanigans over legislation to enable cross-border transfers of captured CO2 – known as the “sea dumping” bill.

Critical to a series of offshore gas projects including Santos’ Barossa field, the transfer of greenhouse gas for sequestration in depleted wells in Timor also offers a pathway for Australia’s biggest north Asia LNG customers to meet their own net zero emissions targets.

In other words, the whole thing should have been a no-brainer for the Coalition.

Instead, the opposition demanded a series of side-deals, including a Senate inquiry into Labor’s transmission network plans, a non-starter for Labor.

Harming the industry

The result – harming the industry and triggering further unease among gas customers in Japan and South Korea – was four days of debate on the Senate floor that gave the Greens a platform to attack and demonise carbon capture and storage.

“It was the Liberals’ gift to the Greens and their kooky supporters,” said one Labor minister. “They ended up supporting sea dumping, but wasted the Senate’s time.”

Labor is particularly aggrieved that the gas industry was almost silent in reminding the Coalition of the stakes, not least because cabinet’s support for the sea dumping legislation was far from popular across the dominant left-flank of caucus.

A similar dynamic is emerging on Treasurer Jim Chalmer’s proposals to bring forward $2.4 billion revenue over four years under the Petroleum Resource Rent Tax. Despite appeals from the gas industry to support the Labor tax, the Coalition is threatening to block the PRRT changes unless Labor backs measures to make it easier for gas projects to go ahead.

Some of these measures are already being developed by the government, including reforms to offshore approvals, but exempting gas from planned environmental protection laws is another non-starter for Labor.

While they would rather pass the PRRT bill with the Coalition as it currently stands, Labor is making it clear behind the scenes that it will have no alternative but to negotiate with the Greens, who want the tax grab doubled.

If that happens, the industry will only have itself to blame, say Labor insiders.

Raw politics

Much of the Coalition’s new-found willingness to make life difficult for Labor is driven by raw politics, particularly since the Voice referendum result.

Liberals and Nationals are betting that voters will turn on Labor in WA and Queensland, particularly in electorates close to the gas industry.

But that ignores the real risk the Coalition will overplay its hand.

Climate, gas and energy politics can swing on a dime. And Labor has the advantage of holding the biggest policy levers.

Energy is resolutely back on the agenda this week with Chris Bowen pulling the covers off biggest policy evolution in this space since Malcolm Turnbull made Snowy 2.0 his cornerstone climate gambit in 2017.

Labor and Bowen will be praying the vast new green energy underwriting effort announced on Thursday does not suffer the same fate as Turnbull’s hideously over-budget and endlessly delayed project.

But while Snowy 2.0 teeters on the brink of white elephant status, Bowen’s dramatically expanded Capacity Investment Scheme is far bolder and orders of magnitudes more consequential.

If successful, the scheme will accelerate roll-out of renewable energy and storage by incentivising states to remove regulatory barriers and provide existing and future energy generators with revenue certainty.

By one estimate, it will help underwrite investments of $40 billion or more, unlocking 32 gigawatts of new capacity and help recover Bowen’s faltering goal of reaching 82 per cent renewable energy by 2030.

Insurance against price spikes

It also provides much needed insurance against future price spikes caused by offshore factors and instability if coal exits the grid faster than expected.

Politically, it shifts the immediate burden of funding the energy transition from households to private investors and future Commonwealth budgets.

The biggest risk is that Canberra pays too much to guarantee revenues for certain projects. Or encourages investment in the wrong place. Time will tell on that front, but the expanded scheme is unquestionably better than what we have now.

Under the existing Renewable Energy Target – which Bowen’s capacity investment scheme will eventually replace – households are already subsidising renewables to the tune of about $2 billion a year, according to energy expert Matt Warren.

Calculations by the Productivity Commission suggests this money is poorly spent, flowing to wind and solar projects that would have gone ahead without the featherbedding, at an effective indirect carbon price of up to $220 per tonne.

Such are the distortions of climate policy without an economy-wide carbon price.

Coalition energy spokesman Ted O’Brien says Labor is “writing a blank cheque” to renewables investors.

Sure. Australians will have to trust Labor that it will not lose its mind and pay above-the-odds under its new scheme. But O’Brien is yet to detail how much his own nuclear energy alternative would cost taxpayers.

Bowen’s big bang policy push will never please those who do not accept the need for an energy transition.

But even without one, we’d all be spending money on renovating the creaking legacy system.