Finance Finance News Alan Kohler: IEA lays out energy challenge as Australia missteps again
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Alan Kohler: IEA lays out energy challenge as Australia missteps again

neg-longford-gas-plant
The move away from fossil fuels is urgent, but Australia is still playing politics. Photo: AAP
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Forget the government’s ridiculous plan to build a new gas-fired power station in the Hunter Valley – it will never get built.

The most important thing to happen to Australian energy policy yesterday was not that, but the International Energy Agency’s new report, Net Zero by 2050: a Roadmap for the Global Energy Sector.

The coincidence of timing was exquisite of course, with the IEA announcing the end of fossil fuels for making electricity at the same time as the Australian government announces a $600 million plant to make electricity from fossil fuels.

But it’s just another in a long line of missteps by this government on climate change and probably won’t be the last.

This Kurri Kurri gas-fired generator won’t get built because it’s not needed and will push prices up, not down, and even Scott Morrison and energy minister Angus Taylor aren’t that crazy, are they?

The IEA report, on the other hand, is a big deal – the first comprehensive global roadmap to zero emissions by 2050.

It says there should be no new oil and gas fields approved, and no new coal mines or mine extensions.

The least efficient coal-fired power stations must be phased out within nine years and the remaining coal plants have to be retrofitted with carbon abatement technology.

By 2050, almost 90 per cent of global electricity generation has to be renewable, of which 70 per cent is wind and solar and the rest nuclear.

It is a huge U-turn from an agency that was set up in 1974 after the first oil shock to maintain global oil supplies.

For close to 50 years the IEA has been the leading proponent of fossil fuels; it has now flipped 180 degrees and says that to reach net zero emissions by 2050, fossil fuels have to go, no ifs or buts, and much more quickly than previously thought.

By 2050, the IEA says, the energy world looks completely different and the implications for Australia are immense.

Needless to say, the Morrison government hasn’t begun to prepare Australia for the transition away from the materials on which so much of the national wealth and prosperity is based.

The next 30 years are going to be enormously challenging for all of us in this country, and especially for those in charge. There is no time to waste.

Here are some key points from the report:

  • Commitments made so far fall well short of what’s needed, and even though countries covering 70 per cent of global emissions have pledged to achieve net zero by 2050, most don’t have any firm policies to do it
  • The path to net zero is “narrow” – it requires “immediate and massive deployment of all available clean and efficient energy technologies”
  • In 2030 the world economy is 40 per cent larger than it is today but uses 7 per cent less energy
  • About 55 per cent of emissions reduction come from consumer choices, like buying an electric vehicle, retrofitting a house with energy efficient technology or installing a heat pump
  • Unabated coal demand declines by 90 per cent to just 1 per cent of total energy use in 2050
  • Gas demand declines by 55 per cent and oil declines by 75 per cent
  • Investment in transmission and distributions grids has to triple
  • Annual investment of $US90 million in EV charging points will be needed by 2030
  • Annual battery production for EVs goes from 160 gigawatt hours (GWh) today to 6600 GWh in 2030
  • And total energy investment surges to $US5 trillion per year, adding 0.4 percentage points to global annual GDP growth.

In general, achieving net zero emissions hinges on a “singular unwavering focus” from all governments, working together with each other and with businesses, investors and citizens.

There is some good news for the Morrison government: The IEA supports the focus on technology, as part of the overall effort, and while the “Technology Investment Roadmap” produced by Angus Taylor last year didn’t get a mention, the IEA agrees with Mr Taylor that Australia can be a major exporter of hydrogen.

But so much more is laid out in the IEA’s own roadmap that is challenging for the Australian government, not supportive, especially the idea that there can be no more oil and gas fields and no more coal.

And they certainly can’t be building fossil fuel-powered electricity generators in the Hunter Valley, not that there’s any danger of that actually happening. It was merely an announcement.

The Environmental Impact Statement for the project, lodged with the NSW Department of Planning, says that the plant will operate for an average across the year of 2 per cent of its rated capacity of 660 megawatts. That’s 115,632 megawatt hours per year.

Gas politics: Scott Morrison spruiking a power plant that is unlikely to be built. Photo: AAP

The capital cost is $600 million. Just to cover that cost over 15 years would require a power price of $346 per MWh (600 million divided by 115,632 MWh times 15).

The current price of electricity in NSW on the futures market for 2024 is $57.74 per MWh – one sixth of the price required just to cover the cost of building the plant.

So it can’t bring down power prices, only drive them up.

And electricity experts are lining up to tell us it’s not needed to replace the Liddell power station when it closes, and the line includes the people who run the grid and are responsible for energy security, like Kerry Schott of the Energy Security Board. All of them, to a person, are baffled at the announcement.

So why did Scott Morrison make it?

Well, a clue might be in the fact that two Labor MPs, Joel Fitzgibbon and Meryl Swanson, have come out in favour of it, breaking with their party leaders.

They hold the two key Hunter Valley seats for the Labor Party (Hunter and Paterson, where the new power station is to be built) and hold them pretty comfortably: 53/47 and 55/45 respectively at the last election.

But the Coalition brains trust obviously think they can win either or both of them, and Mr Fitzgibbon and Ms Swanson apparently agree, otherwise why support a Coalition idea?

Yes folks, it’s just politics, not energy policy.

Alan Kohler writes twice a week for The New Daily. He is also editor in chief of Eureka Report and finance presenter on ABC news.

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