Australia goes from being power rich to facing an energy crisis

Growing up in Melbourne in the 1950s and early 60s, I could never have anticipated that, a half-century later, Australia would have an energy crisis.

Throughout the 20th century, Victoria’s relative economic prosperity was sustained by cheap brown coal from the Latrobe Valley area. Coal extraction led to job creation and increasing living standards. Other states, particularly NSW and South Australia, also benefited from extensive coal reserves to sustain their manufacturing industries.

The Hazelwood Power Station, based at Morwell in the Latrobe Valley, is about to close down. This is expected to lead to increased ­energy prices in Victoria and diminish the capacity of the national power grid.

It also will probably bring about a situation whereby SA’s ­energy supply will be even more unreliable than it is today since some of Hazelwood’s coal-powered energy is used by SA to fill gaps in its own power supply.

On Thursday we witnessed the spectacle of SA Premier Jay Weatherill berating Josh Frydenberg, the federal Environment and Energy Minister, over the Turnbull government’s energy policy.

Talk about denial. According to Weatherill, the energy predicament facing his state in particular and the nation at large is the result of poor government in Canberra over the past decade. Weatherill heads a Labor government that was first elected in 2002. Yet the SA Premier maintains that neither he nor his Labor predecessors bear any ­responsibility for power price rises or energy blackouts in his state.

SA is but a case study of Australia’s energy problems. Last month Paul O’Malley, chief executive of BlueScope Steel, said energy costs in the US were up to 10 times lower than what his ­company paid in Australia. High ­energy prices also hit hard at ­medium and small ­businesses. What’s more, Australian wages are high by international standards.

How did this come about? SA provides the answer. As Weatherill has conceded, the state’s rapid embrace of renewable energy was a gamble. A losing one, as it turns out. Now about 40 per cent of ­energy generated in SA comes from renewable ­energy — some solar but primarily wind.

As Frydenberg explained the situation at the Sydney Institute on February 27: “The challenge is that the quantity of (renewable) generation varies from supplying less than 1 per cent of South ­Australia’s demand ­compared to 80 per cent … When the wind’s not blowing and the sun’s not shining, power is not being generated. This means that days of easily fore­castable supply are over.”

After more than a decade of ­advancing the cause of renewables, the SA Labor government ­recently has ­announced an emer­gency energy package that ­includes the establishment of a state-run new gas power plant and a proposed 100 megawatt battery storage system for renewals.

This may or may not stop blackouts in the state next summer, when ­demand is ­expected to be very high on some days. Meanwhile, at the national level, the Prime Minister has said the commonwealth has plans to expand the Snowy Mountains hydro scheme and he assures Australians that, if necessary, his government will act to ensure that the gas ­industry supplies the domestic market sufficiently.

And so it has come to this. A Coalition prime minister is evoking the concept of a company’s “social licence” to demand the gas industry limits its exports if the domestic market is short of gas. Meanwhile, a Labor premier who barracks for renewables is about to give fossil fuel ­another chance.

Australia’s energy predicament has been brought about by the long campaign against fossil fuel in the cause of the environment in particular and the need to abate global warming in general. Successive governments — Labor and ­Coalition — at the state and federal levels have heavily subsidised renewable energy.

The rapid growth of solar panels and wind turbines put pressure on the coal plants. It coincided with an ­attack by the green left on the fossil fuel industry and those institutions that finance it.

This has led to a situation where business in Australia is ­reluctant to fund new power stations but business in Japan is willing to purchase Australia’s high-quality coal to fuel energy plants. Japan, which, like Australia, has signed up to the Paris Agreement, is in the process of constructing 45 high-energy, low-emission plants. So Australia is ensuring the reliability of the Japanese energy network by exporting high-quality black coal while Australia’s regular supply of energy is anything but assured.

Today some supporters of ­renewables exhibit similar symptoms to Christians of old encountering the Holy Land for the first time. Last month, Fairfax Media’s Peter FitzSimons wrote about viewing wind turbines near Goulburn from a plane. He described the turbines “lazily and gloriously spinning in the afternoon sun”. Really?

It’s not clear if FitzSimons has been up close to the brutal concrete structures that produce wind power. Nor if he has ever had the misfortune to be caught in a lift during an Adelaide blackout.

It is the love affair some Australians have with renewables, along with the opposition of others to the base power provided by the production of coal, gas and uranium, that has brought about a situation where energy-rich Australia has an energy crisis.

Gerard Henderson is executive director of the Sydney Institute. His Media Watch Dog blog can be found at theaustralian.com.au.

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